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Socially Responsible Investing – What is it?

Socially Responsible Investing means investing (via debt or equity) in corporations that incorporate good social justice and environmental policies into their operations.

It is sometimes referred to as “sustainable”, “ethical”, “conscious”, “responsible” or “green” investing.

The purpose of socially responsible investing is twofold:

  • First, it is to invest in corporations that incorporate policies for the protection of human rights and the environment into their organisations; and

  • Second, it is to encourage other corporations to include such policies.

Socially Responsible Investing is a process of investment selection where the underlying investments (eg global corporations) are measured against their Environmental, Social Justice and Corporate Governance (“ESG”) practices.

These include, for example, climate change, human rights, labour rights of employees and contractors, corporate management practices, gender diversity/equality and data security.

When you select a Simplewealth Socially Responsible Portfolio, you will be invested in ETFs that are created with the ESG criteria in mind.

The managers of the ETFs that we use research and consider a corporation’s integration of ESG policies, their ESG values, and the impact of a corporation’s ESG practices when considering their inclusion (or proportional inclusion) in the relevant index.

The Factsheets for the ETFs that we use state that each ETF "generally invests in companies contained in the relevant MSCI Socially Responsible Index" for their region (eg Europe, the US, Asia, Japan).

Furthermore, each MSCI Socially Responsible Index is meant to include "only companies with Environmental, Social and Governance (ESG) ratings relative to their sector peers, to ensure the inclusion of the best-of-class from an ESG perspective”.

Simplewealth has also started working with a Swiss Research Company that focuses on socially responsible and ESG criteria. We are hoping to further improve our Socially Responsible Portfolios. More on this later in 2019!