Sustainable and responsible investments favour companies who take care to ensure that their processes are environmentally sustainable, promoting corporate social responsibility at the same time.

Industry buzzwords include Socially Responsible Investment (SRI) and sustainable investment. This means that the financial return on the investment is not the only thing considered, but also its potential social and environmental consequences. Investors then select companies whose success could lead to positive social change.

There’s also a subset of SRIs known as “impact investments”, via which investors knowingly attempt to trigger positive social change through investments. 

What do responsible investments promote?

Generally speaking, socially responsible investors encourage corporate practices that they believe help to protect the environment, consumers, human rights and racial or gender diversity. 

Some SRIs avoid companies that lead to negative social effects, such as alcohol, tobacco, fast food, gambling, pornography, weapons and fossil fuel production. The focus areas of SRI professionals can be summed up by the acronym ESG: environmental, social and governance.

Sustainable investments are one of many related concepts and approaches that influence and – in some cases – regulate the way in which asset managers invest their portfolios. Sometimes, the term refers strictly to practices which try to avoid causing harm by screening companies included in an investment portfolio. In other cases, it’s used more broadly, to include more pro-active practices such as impact investments, shareholder protection and community investments. 

The benefits of sustainable investments for companies

The impact of sustainable investments extends to various sectors, from renewable energy to health, safety and community development.

In recent years, investors have used positive screening to identify ESG risk factors, in order to create a modern, “best-in-class” investment approach which generates performance in line with market benchmarks.

This move towards the outperformance of the market in numerous sustainable investment products has contributed to the increase in demand for them, as asset managers try to serve their clients not just by generating revenue, but also by assessing the impact of this on communities.

Offering sustainable investment opportunities not only allows companies to obtain financial returns for their clients, but also to deliver intrinsic social benefits which cannot be replicated by investment strategies which fail to consider these factors. It’s these benefits that lead to a deeper connection between clients and their investment habits, creating more attractive long-term returns for them.

(For more information on the Tendercapital Real Assets Fund, click on the link).