As the world begins to deal with the larger implications of irresponsible and unsustainable practices and the impact they’re having on our planet and our population, consumers are migrating to responsibly investing their savings in green, sustainable enterprises. The focus of financial investments is no longer solely on returns, as investors increasingly seek out investment opportunities that also deliver positive social and environmental impact. In a recent article by the Express it was reported that:

Sales of ethical and sustainable investment funds have tripled over the past year, with savers investing in fast-growing, clean and renewable energy companies. Last year fund sales trebled to £10billion, thanks to people worried about Covid and the planet.

The boom in green investment is not only here to stay, it’s here to forcibly change the way that we operate and do businesses across the globe, for the betterment of all mankind.

What is the difference between ESG and SRI?

Responsible investing, SRI and ESG in particular, are now buzzwords and growing in popularity across most industries. We look at the difference between these two terms below, but in essence, SRI is responsible investing and ESG is how the impact of those investments are measured.

What is SRI?

According to Investopedia,

socially responsible investing (SRI), is an investment that is considered socially responsible due to the nature of the business the company conducts.

Those that focus on socially responsible, ethical investing are looking for positive, social change from their investment. They look to businesses that give back to communities, providing support and development for all.

What is ESG?

Environmental, Social, and Corporate Governance (ESG) refer to the three central factors used by socially conscious investors to measure the sustainability and societal impact of a potential investment. ESG as defined by Investopedia:

Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

Why is an ESG / SRI model important for businesses and financial institutions?

Born into the digital age, millennials (defined as born between 1980 and 1996) are inherently aware of the devastating impact that consumerism has across the planet. With access to immediate information and the ability to read personal experiences from their peers in the form of business reviews, having sustainable models of Environmental, Social, and Corporate Governance is paramount for the future of every business. Simply put, if businesses are to achieve their investment and growth goals, they will need to invest in the future by realigning their models and practices with the mindset of their younger, socially conscious audiences. Furthermore, if we are to have a future at all, businesses must raise the bar with socially and environmentally responsible, sustainable practices.

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