What it is:
Socially responsible investment (SRI) is an investment strategy that seeks both financial return and social good.
How it works (Example):
Investment strategies are usually focused on returns on investment, seeking to maximize the profits for the investor. In pursuing a profit-driven strategy, investors seek the highest returns, irrespective of what the company does. Some investors weigh the social costs of their investments along with profits. Issues, such as environment, consumer protection, human rights, fair trade and diversity, are important guides for socially responsible investors.
Socially responsible investment also includes investments by pension funds in projects that are important to their members. For example, an SRI for a union pension fund might include projects that only invest in union-built projects or in companies with fair labor practices. SRIs also comprise a growing niche among community banks, including certified community development financial institutions (CDFI), taking local deposits and making local loans.
SRIs have become popular for mutual fund managers, growing from niche funds for many investors to become a predominate investment vehicle for education and retirement funds.