SRI Jargon Buster

An introduction to some common jargon:

Sustainable and Responsible Investment (SRI)An umbrella term for a wide range of investment strategies that focus on ethical, social and environmental issues.   Includes ethical investments, green investment and engagement. The term ‘Responsible Investment’ is also popular and is broadly similar. This area was previously known as Socially Responsible Investment and amended to reflect growing interest in the sustainability agenda and environmental issues rather than focusing on ‘people issues’.

Sustainability – evolved from the term ‘Sustainable Development’ as defined in 1987 Brundtland Report. To paraphrase: ‘…meeting the needs of the present without compromising the ability of future generations to meet their own needs.’  Or in other words perhaps… living, behaving, operating or investing in a way that does not risk damaging our longer term prospects or quality of life.  In terms of investment this broadly means looking for companies that make decisions about environmental and social issues in a way that safeguard the quality of life of those that are (or may be) – directly or indirectly – affected by a their operations (either today or at some time in the future).

Social issues– a term that covers a wide range of issues relating to the people effected by company activities such a employees or local communities

Ethical Investment (EI) – normally understood to relate to funds that apply negative and, or positive ethical screens to help sift investments. These investments often cover a wide range of social, ethical or environmental issues but often focus heavily on issues that relate to ‘personal values ‘or opinions – such as opposition to armaments, tobacco, alcohol, pornography,  gambling or animal testing.

Corporate Social Responsibility (CSR), also referred to as Corporate Responsibility (CR) – is the term used by (investee) companies to describe their ‘responsible’ response to the challenges they face around their social and environmental impacts.

Impact investing – investing in a way that delivers measurable social and/or societal impacts and benefits as well as financial returns. Strategies may combine standard financial thinking philanthropic thinking. This discipline is different from SRI as it is more about measurable social benefits than SRI and ethical funds are – but such investments are nonetheless true investments not charitable donations.

Environmental, Social and Governance investment (ESG) – a common acronym in the pensions arena which refers to investors strategies regarding environmental, social and governance related risks and opportunities. Such issues are sometimes referred to as ‘extra financial’ on ‘non financial’.

Social, Ethical and Environmental (SEE) – a common acronym to describe the entire range of issues covered by SRI, green and or ethical investments. Used in the July 2000 disclosure amendment to the 1995 Pensions Act.

Corporate Governance – a term used to refer to company management issues such as board structure, remuneration, reporting and bribery/corruption issues.

Green Investments – a generic term used to describe investments which focus on environmental issues.

Responsible Engagement – dialogue and voting based activity carried out by fund managers with the companies they invest in that aims to encourage higher standards without (normally) involving a decision to disinvest.

Thematic investing – investments that follow a particular theme. These may be socially driven, environmentally oriented or a combination of the two as with sustainability funds.

Impact Investment / Social impact investment – investments that measure both financial returns and their benefit to society, aiming to achieve a balance between these two objectives.  These investments are often not structured as conventional funds so only a small number of these currently appear on our database.  These are typically only potentially appropriate for wealthier and more experienced investors.



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