CEO Responsibilities in Ethical Investing: Consequences to Consider
In recent years, Socially Responsible Investing (SRI) has gained significant popularity, with potentially trillions of dollars worldwide being invested with this mindset. This form of investing takes non-monetary factors into consideration, focusing on societal outcomes desired by its investors, rather than almost exclusively on the amount of investable funds and risk tolerance.
The environmental movement in the 1970s was a major catalyst for the development of SRI. Today, as global affluence and disposable incomes rise, the popularity of SRI is expected to continue increasing. The number of people making a conscious decision to invest in SRI is also expected to rise as concern over social issues continues.
SRI-minded investors are usually accepting of taking a monetary drawback in exchange for achieving their goals. This approach is based on the idea that by compromising some profits, a societal good can be achieved. However, SRI funds have higher volatility in either direction due to concentrating investments into certain industries.
Technology has been beneficial for SRI, making SRI-themed investment vehicles more accessible to the public. This increased accessibility is expected to lead to more people participating in the trend.
Many CEOs have changed their operations to show awareness of social issues and support for social causes. Some have allocated funds for social causes, such as funding local sports teams or cancer awareness events. Businesses are increasingly taking non-financial factors into account due to the growing number of SRI-minded investors.
However, it's important to note that SRI generally has higher fees due to its more complex management requirements. In 2021, several US companies adopted socially responsible investment strategies, often linked to ESG (Environmental, Social, Governance) criteria. For example, RWE, a German energy company active in the US bond market, issued green bonds to fund renewable energy projects, reflecting such strategies. Companies like Ceconomy integrated ESG-linked credit lines focusing on emission reductions, product refurbishment, and diversity.
While a detailed list of predominant US companies specifically recognised for social responsibility in 2021 is not directly available, it's clear that SRI is becoming a more common practice among businesses. As technology continues to advance and social issues remain at the forefront of global conversation, it's likely that the trend towards SRI will continue to grow.
