How to Differentiate Between Sri Investing and ESG?

Investing in a socially responsible way has become increasingly popular in recent years. Two approaches tosustainable investingare Sri investing and ESG investing. What is the difference between the two? In this article, we will explore the definitions, methods, and benefits of Sri investing and ESG investing.

What is Sri investing?

Sri investing stands forsocially responsible investing. It involves investing in companies that have a positive social impact or avoid investing in companies that have a negative impact on society. Sri investors typically avoid companies that are involved in industries such as tobacco, weapons, or gambling. Instead, they invest in companies that prioritizeenvironmental sustainability, social responsibility, and ethical business practices.

One of the main methods that Sri investors use is negative screening. This involves excluding companies that do not meet certain ethical criteria. Sri investors may also use positive screening, which involves actively seeking out companies that have a positive impact on society.

What is ESG investing?

ESG investing stands for environmental, social, and governance investing. It involves investing in companies that have high ESG scores, which are determined based on their environmental impact, social responsibility, and corporate governance. ESG investors believe that companies that prioritize ESG considerations are more likely to be successful in the long run.

ESG investors use a variety of methods to evaluate a company's ESG performance. This may include analyzing a company's carbon emissions, employee diversity, or board composition. ESG investors may also engage with companies to encourage them to improve their ESG performance.

What are the benefits of Sri and ESG investing?

Both Sri and ESG investing offer a number of benefits for investors. First, they allow investors to align their investments with their values. This can provide a sense of satisfaction and fulfillment for investors who want to make a positive impact on society.

Second, Sri and ESG investing can help reduce investment risk. Companies that prioritize environmental sustainability, social responsibility, and ethical business practices are less likely to face legal or reputational issues that can harm their stock prices.

Finally, Sri and ESG investing can provide financial returns that are comparable to traditional investing. In fact, some studies have shown that companies with high ESG scores tend to outperform their peers over the long term.

In conclusion, Sri investing and ESG investing are two approaches to sustainable investing that prioritize social responsibility and environmental sustainability. While Sri investing involves screening out companies that do not meet certain ethical criteria, ESG investing involves investing in companies that have high ESG scores. Both approaches offer a number of benefits for investors, including aligning investments with values, reducing investment risk, and providing financial returns. As sustainable investing continues to grow in popularity, Sri and ESG investing are likely to become increasingly important strategies for investors who want to make a positive impact on society.