An Introduction to Sustainable and Responsible Investing

Socially Responsible Investing (SRI) is an investment strategy that integrates social, environmental and governance criteria into financial analysis. To learn more about Calvert's expanded approach to SRI, click here.

With approximately $2.29 trillion in assets in the United States as of 2005¹, SRI is catching on with many individual and institutional investors who seek to:

• Align their investment portfolio with their personal values by avoiding companies that do not meet certain standards.
  
• Encourage corporations to improve their social, environmental and governance performance through an active investment strategy.
  
• Identify companies with better long-term financial performance through the analysis of social, governance, environmental factors.

SRI was first formally practiced by religious investors who, nearly 100 years ago, avoided companies involved in tobacco, alcohol, and gambling. More recently, however, SRI has evolved to include the following four aspects:

1) Social Research. Examining the environmental, social, and governance records of companies to determine which companies to include or exclude in an investment portfolio. Most social investors have certain established criteria they use to identify which companies "make the grade." Increasingly, social research is seen as a way to identify companies with better management and lower risk. For example, Calvert's unique Double Diligence^® research process combines a rigorous review of financial performance with a thorough assessment of corporate integrity. Only when a company meets our standards for both do we invest.

2) Shareholder Advocacy. Using one's position as an owner in a company to actively encourage a company to improve. Shareholder advocacy can take many forms, from something as simple as a phone call or writing a letter, to filing a formal shareholder resolution calling for a company to take a particular action (which can ultimately come to a vote in front of all shareholders). Advocacy also includes proxy voting, or simply casting one's vote as a company shareholder.

3) Social Venture Capital. Seeking out early-stage investments in companies that have identified profitable ways to meet societal needs (such as alternative energy companies), before they are publicly traded. This early-stage investing can help these companies secure necessary funding to grow and may lead to healthy returns for shareholders.

4) Community Investing. Channeling affordable credit to communities underserved by traditional credit markets to create jobs, build homes, and finance community facilities. Some investors are willing to accept slightly below-market rates of return to encourage investments that can build or rebuild communities.