Socially responsible funds: all about ethical investments

Finance with an eye to social, environmental and sustainability issues is increasingly convincing. But what are ethical funds and how do they differ from others, or for example from ESG funds?

We can know them as ethical funds, therefore by their shorter name, or as Socially Responsible Investment Funds (in this second case the acronym SRI, from the English Socially Responsible Investment, is often used).

They have been available in our country since the 1990s and in recent years their importance has grown exponentially, in step with the new attention towards the environment, society and sustainability.

What are SRI funds?

A Socially Responsible Investment fund is a mutual fund that also applies moral principles to its investment choices to achieve its economic-financial objectives. And these moral principles are also shared by the fund’s subscribers, who believe it is important to go beyond mere profit.

Therefore, ethical funds are those investment funds that focus on specific assets (for example those particularly attentive to sustainability or the green economy) and avoid others.

Such as those companies that have created a scandal for the exploitation of children, underpaid work, pollution. In short, those companies that do not work ethically for the good of the planet and society.

The difference between ESG and SRI investing

In recent years we have also seen a strong growth in ESG investments. But how are they different from SRI? The answer is simple.

These are two similar types, but the acronym ESG means “Environmental, Social, Governance” and refers to all those environmental, social and governance spheres of the company to choose the best securities with these parameters.

SRI, on the other hand, is an even more selective concept, because on the basis of these criteria it is possible to exclude companies that produce alcohol, tobacco or weapons, considered unethical due to the business itself.

But probably in line with ESG principles because they operate correctly and they do not cause damage from an environmental, social or governance perspective.

What are the types of ethical investment?

There are several ethical assets that can be purchased by investors. Shares, bonds, investment funds, but also ETFs. The latter have increased significantly in recent years, as have investment funds, which are often focused on the fight against poverty, the protection of the environment or the integration and development of specific social groups.

Bonds, on the other hand, are issued with the aim of financing certain projects with ethical purposes. Such as green bonds, and the issuing company undertakes to regularly report on the sustainable development objectives achieved.

The same applies to shares as regards bonds. The capital raised from the placement on the market is used to support ethical and social projects.

Lastly, it is always possible to invest directly in the capital of a company or startup that has sustainable development at the center of its business model. There are ways and guarantees too, which is why SRI topics are increasingly liked by the financial community.

Read also: All about GreenVesting: the best opportunities for investing in the green economy

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