5 Lessons Learned: Resources
A Guide to Sustainable Investment Sustainable investment is otherwise known as SRI or Socially Responsible Investment. In the past few years, there have been a significant investment for this type of investment. It is deemed as fringe interest and majority catering for small investors only who have strong views on human rights and environment back in the days. From that point onwards, the sum of cash invested in sustainable funds have dramatically increased and many other large and well known financial services companies have started offering clients a sustainable option. The exact definition of socially responsible or sustainable investment is quite hard to pinpoint. Take this for example, there are some investors who are anxious in putting their funds to companies that are manufacturing alcohol, tobacco or arms while others are avoiding companies that are polluting the environment excessively. SRI funds should not just screen out the companies and businesses whose activities are deemed as unsustainable for those people with a more radical mind. It must seek actively for those companies that are breaking new grounds in environmental and social performance. With this being said, the ethical investors are typically advised to look around and read the small prints of literature of fund manager prior to committing any cash to the fund.
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And when talking about the point of view of fund manager, the SRI implies more than the screening out of the undesirable firms and screening in those that are deemed to be sustainable. There are several active fund managers who began playing advocacy role and put pressure on the individual companies to improve their environmental as well as social performance. This may take form of lobbying at the yearly general meetings of the company or private meetings between the company directors and fund managers.
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In most instances, sustainable funds have considerably outperformed the rest of the market. In fact, there are some debates regarding the impressive returns of the funds could be attributed to having sustainable business practices or, whether it’s merely the fact that the sustainable businesses tend to be bigger and equipped with sophisticated and advanced enterprises. What’s more, sustainable investments also outlines the investments that are going to provide a competitive risk adjusted return while offering investment capital to the business that are active in attempting to become more sustainable. It is creating lower exposure to sustainable related risks and even considering financial metrics along with the environmental, governance and social aspects. You must make sure that there is a low sustainability risk exposure, primarily driven by actions towards sustainability, consider strategy analysis and finances for your socially responsible investment.