For America's money managers, it's becoming less fashionable to focus solely on returns. According to a new report from the Social Investment Forum Foundation, a significant and growing portion of U.S. investments are "socially responsible."
Nearly one in every eight dollars professionally invested in the U.S. adheres to Socially Responsible Investing (SRI) practices, says the report, principally authored by Joshua Humphreys, who serves as director of the Center for Social Philanthropy in Boston.
Of the $25.2 trillion in assets under management in the U.S. (according to Thomson Reuters), about $3.07 trillion, or 12.2 percent, pass the SRI test. Back in 1995, when SRI assets totaled only $639 billion, according to the report, they made up just 9.1 percent of total U.S. assets.
"I think there's been a growing awareness among investors over several years about the importance of environmental, social and governance issues," Meg Voorhes, a co-author of the report and research director at Social Investment Forum, told HuffPost.
Most basically, investment practices are "SRI" when they take the welfare of the rest of the world -- not just the investors -- into account. The report breaks SRI down into three broad categories: "ESG incorporation," which means the consideration of "environmental, social and governance factors"; "shareholder advocacy," which involves supporting shareholder rights and corporate accountability; and "community investing," which is designed to help low-income people and neighborhoods.
Voorhes acknowledged that defining "SRI" isn't simple. "It's hard to pinpoint a single factor," she told HuffPost. "I think there are a number of different influences that are coming together."
Investors who use SRI don't have to compromise their returns. As Voorhes emphasized, SRI practices can ensure greater returns in the long term. Companies that try to curtail their impact on the environment, for instance, make for good investments. BP, Voorhes noted, is the ultimate negative example.
What's more, a full 16 percent of asset managers in the study said they adopted SRI practices in order to maximize returns.
"People don't see the consideration of ESG and financial return as being in opposition to one another," Voorhes said. "The reason for socially responsible and sustainable investing is to generate long-term competitive financial returns and positive societal impact."
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