Sustainable
and Responsible Investing (SRI) focused asset managers are facing many
challenges these days. Their main task is to screen socially responsible
companies by doing extensive research. They are also entrusted with the task of
identifying companies that have superior ESG practices in comparison to the
other companies. When it comes to the roles and responsibilities, the SRI
focused asset managers have to generate good returns while investing in firms
that amalgamate aspects of social and environmental responsibility and
corporate governance.
For
Sustainable and Responsible Investing research tasks, asset managers generally
rely on consulting companies. These consultant companies adopt stringent
processes for company analysis and help in identifying the right data sources
for various ESG parameters. These companies perform extensive research across
multiple information sources and generally follow the three-level quality
process.
Hiring a
multilingual consultant company is always a good idea because such companies
can hunt through local media when they are evaluating the most lucrative
emerging markets. Most research companies will provide you with highly
qualified professionals, but you will have to consider the turnaround time
(TAT) as well. Most research companies will commit a few days for extensive
research on the various companies.
Many people
are not aware of the transition of responsible and sustainable investing, which actually was an offshoot of socially
responsible investing. The former was an approach that generally included
owning certain types of assets. There were some region-influenced socially
responsible investing ideologies that refrained for buying sin stocks (those of
pornography distributors, distilleries, casinos, tobacco producers etc.)
Most
financial experts will tell you that socially responsible investing is now a
subsector of sustainable and responsible investing—which still excludes owning
some categories of assets. Today, fund managers who are involved in SRI search
for companies that are looking to minimize the carbon footprint. The synonyms
used for sustainable and responsible investing are ethical investing, green
investing and impact investing.
There are
innumerous investment opportunities for SRI investors. In fact, there are
hundreds of SRI mutual and exchange traded funds that are offering the vivid
investor fantastic investment opportunities in different areas of the market.
It is important to have a deep understanding of SRI funds before investing in
them. These funds generally invest in two types of stocks—growth stocks and
value stocks. The main categories of SRI funds are large, small and mid-cap SRI
funds. In addition to these, you will also find categories of domestic, foreign
and global SRI funds.
SRI managers
are an elite class of fund managers who believe in avoiding companies that
don’t have potential to effect change. There are many investing companies that
have SRI focused funds—in which you can invest. Before you get enthralled by
the idea of investing in SRI funds, you will have to perform negative screening
and perform an ESG indicators analysis. This involves in-depth screening of
firms on different ESG parameters or criteria. You may have to also look at some
growing trends in the European markets if you want to invest in the European
firms.
