"Trends in the Study of Socially Responsible Investment"
last update: 20151223
Trends in the Study of Socially Responsible Investment
This note offers a brief introduction to Socially Responsible Investment (SRI). SRI is investment whose goal
is not only to pursue long term earnings, but also to maximize public interest in the context of the market
economy. SRI recently commans more and more public attention, and the amount invested has rapidly
increased in the last 10 years, because it is expected to reduce some negative aspects of the economic system,
such as environmental pollution, unemployment, sweatshops and other negative externalities.
Three aspects of SRI are presented. First, social screening, which is used to estimate management and to
capitalize on companies that play important roles relative to profits and public interests. Investors estimate the
company's income and its contributions to society. Second, stockholder activism, which pressures boards of
directors to pursue greater public interests. Third, community development investment and low interest
personal loans, which encourage economic self-reliance.
The note points out some problems with SRI. SRI fund managers face a dilemma concerning their fiduciary
duty. According to trust law, a fund manager has to pursue the best income from investment, however, they are
also expected to achieve more effective public interest by SRI investors.
Keywords: Social responsible investment, SRI, Business Ethics, Stakeholders, Sustainable Development