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Are you interested in social innovation? Whether you’re a student, non-profit professional, entrepreneur, philanthropist, or simply consider yourself a change-maker, socially responsible investing is an increasingly important topic in the world of social innovation. 

Here, we’re giving you a crash-course in socially responsible investing: what it is, why it matters, and where to find out more.

First things first: what’s up with all the names for “socially responsible investing”?

It may also be called impact, mission, triple bottom line, sustainable or ethical investing—though some maintain that each term has a distinct definition. Still others use this catchy “formula”: HIP = Human Impact + Profit:

(In the above tweet, “SRI” refers to socially responsible investing and “#impinv” refers to impact investing.)

While there isn’t universal consensus on a single term, we’ll use “socially responsible investing” here. The term suggests being socially responsible (which is somewhat clearer than “ethical” or “impact” investing). It’s also a fairly common term in the world of social innovation, so we’ll stick with it. We’ll refer to it as “SRI” from here on out.

What is socially responsible investing?

Our ever-so-short defintion? SRI maximizes financial return while also maximizing social and/or environmental good. 

Here are a few more in-depth definitions from leaders in the SRI space: 

From The Forum for Sustainable and Responsible Investment:

SRI recognizes that corporate responsibility and societal concerns are valid parts of investment decisions…[and] considers both the investor’s financial needs and an investment’s impact on society. SRI investors encourage corporations to improve their practices on environmental, social, and governance issues.

From a story on the Stanford Social Innovation Review: 

Mission investing, often referred to as impact investing, refers to investments in revenue-generating nonprofit and for-profit organizations whose work is consistent with an investor’s charitable purpose and goals.

And from Wikipedia: 

SRI describes an investment strategy which seeks to maximize both financial return and social good. In general, socially responsible investors favor corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity.  

You’ve likely noticed the golden thread in these definitions: SRI is a type of investing that requires a balanced blend of financial and social return.

So, how is SRI regulated?

The UN’s Principles for Responsible Investment (PRI) is a set of principles were crafted in 2006 by a group of some of the world’s largest institutional investors. The PRI are meant to guide investors in understanding how environmental, social and corporate governance issues can affect investments. Basically, the PRI are a set of guiding ideas to help people invest responsibly. As of this month, more than 915 investment institutions have signed on to uphold these principles.

But the UN PRI isn’t the only governing body for responsible investing (though it’s the largest global initiative). The Global Impact Investing Network also works to increase the effectiveness of impact investing. And individual countries and regions have trade organizations as well, including:

• United States Social Investment Forum (SIF) 
• Africa SIF 
• Euro SIF 
• Social Investment Organization in Canada 
• Association for Sustainable and Responsible Investment in Asia 
• Responsible Investment Association of Australasia 

Why does SRI matter?

You don’t have to be an investment professional in order for SRI to be relevant. SRI is impacting all corners of social innovation, in both the for-profit and not-for-profit sectors. This kind of investing has an impact on entire nations. Even some foundations are moving from grants to investments.

As the economy continues to shape-shift and evolve, investment that focuses on long-term sustainability will become increasingly important. Our prediction is that SRI will become more and more common for non-profits, foundations and social entrepreneurs, rivaling grants, donations and more traditional investing.

And really, there’s hope that everyone can become a social investor. 

Want to explore SRI further?

In addition to the articles linked to throughout this post, check out:

• SRI facts 
• #impinv hashtag on Twitter (no need to have a Twitter account to see this stream of info!) 
• This excellent article: “Hype or Promise“

Image via leodelrosa… under Creative Commons license