Responsible investment is an investment strategy which seeks to generate both financial and sustainable value. It consists of a set of investment approaches that integrate environmental, social and governance (ESG) and ethical issues into financial analysis and decision-making.
Responsible investment goes by many names - it is variously referred to as socially responsible investing (SRI), ethical investing, sustainable investing, triple-bottom-line investing, green investing - but underlying these differing names is a common theme focused on long-term value creation. Value in this context refers not only to economic value, but to the broader values of fairness, justice, and environmental sustainability.
FTSE4Good Index Series (launched in 2001) and Dow Jones Sustainability Indexes (launched in 1999) are stock market sustainability/ CSR (corporate social responsibility) Indices to measure the performance of socially responsible companies that meet globally recognised corporate responsibility standards, and to facilitate investment in those companies.
An example of a responsible investment retail fund is Dexia Asset Management which offers more than 20 SRI products (equities and bonds). SRI products are based on several SRI approaches that address the challenges of sustainable development, namely the following:
- best in class - aiming at selecting the best ESG performing companies in each sector;
- thematic - designed to select the best companies based on specific sustainability themes such as renewable energy, water use and waste management;
- norms-based - checking companies’ and countries' compliance with international conventions such as Human Rights conventions, labour rights (International Labour Organization's convention) or the convention on hazardous chemicals (Rotterdam Convention);
- armament exclusion - exclusion of companies involved in the production and/ or sale of weapons.