SRI Explained

Socially responsible investing (SRI) can enable investors to maintain balanced, diversified investment portfolios while putting their money to work to build a better future.  Green investing, impact investing, ESG. SRI is also known by these other related names, some of which may have slight differences in definition. Yet, they all are essentially the practice of utilizing capital to shape corporate behavior that promotes the public good.

Social investing incorporates three key strategies:

• Screening is the policy and practice of including or excluding companies based on environmental, social and corporate governance (ESG) criteria.
• Shareholder advocacy is a coordinated investor effort to influence corporate behavior through private, direct shareholder/company discussions as well as through public shareholder resolution campaigns.
• Community investments provide targeted capital resources to local organizations, cooperatives and financial institutions which support needed community development in the United States and developing countries.

Through these three strategies, SRI can be a powerful force for global change. By combining our assets as shareholders, we can exert influence over company and industry policies and behavior to promote positive economic, social and environmental change. Moreover, our clients can direct capital toward underserved communities in need of funding for housing, health care and economic development.

The Performance Myth

Many investors believe that socially-screened investments are "outperformed" by non-screened portfolios. This belief is unwarranted based on two points.

1. SRI is not an "asset class" (like "Small Cap Equities") separate from other asset classes. It is merely the evaluation of companies based on financial and ESG criteria. As noted below, this additional level of scrutiny would, by itself, appear to have no negative performance impacts and may very well have a slight positive effect on financial performance.

2. Recent studies by Barclays [1], Morningstar [2] and Morgan Stanley [3] have confirmed earlier research that indicates neutral if not positive performance of socially screened investments when compared to corporations that have lower ESG ratings.

In sum, we believe that corporations that combine positive financial and social performance really do make the best long-term investment.

Investing involves risk. Depending on the different types of investments there may be varying degrees of risk. Socially responsible investing does not guarantee any amount of success. Clients and prospective clients should be prepared to bear investment loss including loss of original principal.