Socially responsible investing definitions

You will hear the terms Environmental, Social and Governance (ESG) used a lot and whilst this is one of the frameworks for viewing Socially Responsible Investing, you will also come across many different terms.

• Environmental ,Social and Governance (ESG) Integration: The inclusion of material ESG factors into investment analysis and all investment decisions.
• Exclusions: Exclusions prohibit specifically listed investments. Examples include: excluding companies involved in weapons, tobacco or alcohol, non renewable energy such as coal, other personal values based or religious exclusions.
• Socially Responsible Investing (SRI): Often an approach selecting a broad range of investments, but excluding some companies or industries based on the impact they have on the world.
• Screening: A strategy that selects from a universe of investments meeting a set criteria, either with exclusions as detailed above, or including or overweighting companies that score highly on measures set.
• Sustainability Focus: Investment approaches that select and include investments on the basis of their fulfilling certain sustainability criteria and/or delivering on specific and measurable sustainability outcomes. For example, reducing greenhouse gas emissions.
• Impact Investing: Investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Examples include: social bond funds, private impact investing.
• Stewardship: Stewardship is the responsible allocation of investors capital to create long term value for them and sustainable benefits for the economy, the environment and society. Examples include: engaging with the company`s management on issues of concern or voting for or against certain resolutions.
• Advocacy or Active Ownership: Use of internal or external resources to positively influence corporate behaviour, for example voting or engaging with companies on specific issues, see Stewardship above.
• Ethical Investing: One of the original terms used, usually referring to either selecting investments on their potential impact, or avoid companies by exclusions, as detailed above.
• Own Philanthropy: this is making charitable donations yourself focused on your own beliefs and where you would like to provide support, either during your lifetime or through you will.

We believe that Environmental, Social and Governance “integration” is considering ESG issues, but with the financials impact as the main priority. Socially Responsible Investing or impact investing is putting impact or exclusions first then the financial considerations.

Part of the difficulty is that some of these terms mean different things to different people and as there is not a common agreement. they can be implemented in different ways.

We believe this is where advice is essential, to try and guide you through all of this inline with your own personal priorities.

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