From Ethical Investing to SRI, ESG, and Sustainable Investment to Engagement

From Ethical Investing to SRI, ESG, and Sustainable Investment to Engagement 

The field of what was once known as ‘ethical investing’ may be poised for its next terminology shift, reports the Financial Times. Ethical investing began as a moral values filter to exclude “sin” stocks such as tobacco and alcohol. Over time, the activity evolved into SRI—socially responsible investing—to indicate a more positive, pro-active approach that searched out profits within better practices.

Most recently, the commonly used terms have been ESG—environmental, social, and governance— and sustainable investing, approaches which include risk mitigation but also treat factors such as values and long-term strategies as material to the bottom line. But at the recent FT conference on sustainable investing in emerging markets, a new term caught on: engagement.

New research shows that interventions by investors on an environmental or social issue resulted in marked outperformance in stock prices. In other words, better business behavior, guided by investors, equaled better returns. I’m John Howell for 3BL Media.