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Socially Responsible Investing (SRI) and Environmental, Social, and Governance (ESG)

ESG Concepts on Environment, Society and Governance on technology palm with icon on blue background ESG Social Environment Press a button on the screen.

Socially Responsible Investing (SRI) and Environmental, Social, and Governance (ESG) investing are both approaches that consider non-financial factors when making investment decisions. While they share some similarities, there are key differences between the two.

Socially Responsible Investing (SRI) is an investment strategy that aims to generate financial returns while positively impacting society and the environment. SRI considers a broad range of social and environmental issues when selecting investments. It typically involves avoiding investments in industries or companies that are deemed harmful, such as tobacco, weapons, or fossil fuels. Instead, SRI focuses on investing in companies that align with specific values or have a positive social impact, such as renewable energy, healthcare, or fair trade.

SRI investing aims to generate financial returns while also benefitting the environment and society as a whole/
Source: iStock

On the other hand, ESG investing incorporates a narrower set of criteria—Environmental, Social, and Governance factors—when evaluating investment opportunities. ESG factors are used to assess a company’s sustainability and societal impact. Environmental factors consider a company’s environmental impact, such as carbon emissions or resource usage. Social factors examine how a company manages relationships with its employees, customers, communities, and suppliers. Governance factors assess the company’s leadership, executive compensation, shareholder rights, and corporate governance practices.

ESG investing is a more data-driven and quantifiable approach than SRI, as it focuses on specific metrics and performance indicators related to environmental, social, and governance aspects. ESG investing aims to integrate these factors into investment analysis to identify companies that demonstrate strong ESG performance or have the potential to improve in these areas.

ESG is more data-driven and quantifiable for companies that want to invest.
Source: iStock

While SRI and ESG investing overlap to some extent, the main difference lies in their scope and approach. SRI is a broader concept considering a more comprehensive range of ethical and social issues. At the same time, ESG investing is a more specific framework that assesses a company’s environmental, social, and governance performance. However, the terms are sometimes used interchangeably in practice, and different investors or financial institutions may have varying definitions or interpretations of these concepts.

Let FSG Smart Buildings help you with your ESG or SRI investing. Contact us and find out how we can deliver success for your organization today.

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