There’s no single approach to socially responsible and impact investing, however most SRI investors and managers will consider and apply elements of shareholder activism, screening, and community investing as part of their overall SRI strategy.
Screening refers to the practice of selecting companies for investment using social and environmental criteria. Negative screening excludes investing in companies that are engaging in business practices that are not socially responsible. Positive screening selects companies for investment based on their commitment and adherence to socially responsible business practices.
Shareholder Activism & Engagement
Owning shares in a company gives investors a defined path for advocacy, activism and engagement around the issues they care about. Shareholders may file or co-file Shareholder or Proxy Resolutions that serve the purpose of bringing important issues to the attention of company management. This process can affect change at the institutional level, prompting dialogue and agreements between the filers and company management.
Community Impact Investing
Community impact investing is a way to invest locally, where a portion of the investor’s return (often called a “social return”) is earmarked for improving the social environment in which we all live. Toward this end, investors will sometimes choose to invest in Community Development Financial Institutions (CDFIs) that work in low-income or at-risk communities to create jobs, provide affordable housing, finance small business development, or in other ways work to mitigate the effects of poverty in disadvantaged communities.