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The definition of an SRI fund?


History

The term SRI was introduced in the 1990s and originally meant 'Socially Responsible Investing'. It was conceived by fund managers who used ethical screens, to describe activity which went beyond the simple screening of stocks which were unpalatable to investors and as such add value over and above fund managers who were simply applying a screen to the stock market.
The ethical fund managers in those days, companies like Aviva, F&C, Jupiter and Henderson Global Investors, employed teams of people to understand the activities of companies, but with this resource they were able to ‘engage’ with the directors of companies in an attempt to change corporate practices and activities. Thus SRI funds were funds which had ‘ethical’ screens and who acted ‘responsibly’ by engaging with the companies they were invested in. In those days the environmental agenda had not taken off and the UN had not issued their ‘Principles for Responsible Investment’ (launched in 2006).

Today

SRI is still used and understood by many to refer to 'Socially Responsible Investing', indeed Jupiter and Scottish Widows still define SRI in their communications as such, but others in the investment industry have moved on. The environment and the concept of sustainability are buzz issues and words, such that Henderson Global Investors and Aviva have changed their definition of SRI to ‘Sustainable and Responsible Investing'.

And it is not just the investment houses but also UKSIF, which acts as the trade association for the fund managers. UKSIF changed its name from 'UK Social Investment Forum' to the 'UK Sustainable Investment and Finance Association'. This change in definition for a trade body is understandable as it enables UKSIF to capture a much wider group of funds and fund managers making it more relevant to the modern investment industry. As such UKSIF can incorporate under its banner ethical funds, environmental funds, thematic funds and responsible funds.

In Practice

Investment funds which describe themselves as SRI funds in their marketing literature have a history which goes back into the ‘Socially Responsible Investing’ days of the 1990s. As such these funds tend to have ‘ethical’ screens and fulfil the modern definition of ‘responsible’ investing. This is why YourEthicalMoney.com, for example, defines the term simply as 'ethical', which in our opinion is over simplistic.

The term SRI is not understood widely outside the investment industry by the man on the street. Thus it is not a term which new funds are likely to use in their marketing literature as a focal point. Under the more modern definition it is entirely possible that an SRI fund could have no ethical screens. This is unlikely though as SRI is not understood by the public and therefore is a bit redundant as a marketing term.

The terms ‘Sustainable’ and ‘Responsible’ are separate terms used separately in the investment industry, thus SRI is a term likely to live on. However, it is not a useful way for an investor to define what he, or she is looking for. Worldwise Investor enables an investor to find investment funds using themes as a category. It also enables an investor to filter this selection further by applying an ethical screen if an investor deems this relevant.

Fund context:

SRI funds will often fall by virtue of their investment strategy into the multi thematic category – Jupiter, Aviva and Henderson Global Investors fall into this bracket. However this will not always be the case – F&C Stewardship being the current example.

Related funds:

Alliance Trust Sustainable Future Absolute Growth
Alliance Trust Sustainable Future European Growth
Alliance Trust Sustainable Future Global Growth
Alliance Trust Sustainable Future Managed
Alliance Trust Sustainable Future UK Growth
F&C Stewardship Growth
F&C Stewardship Income
F&C Stewardship International
Henderson Global Care Growth
Henderson Inst Global Care Managed
Henderson Global Care UK Income
Henderson Industries of the Future
Jupiter Ecology
Jupiter Green Investment
Jupiter Responsible Income

Useful links:

Worldwise Investor: Guide to Ethical and Green Investing

Worldwise Investor: What is an Ethical Fund?

Worldwise Investor: What is Responsible Investing? 

Worldwise Investor: What is Sustainable Investing?

Worldwise Investor: What is Green Investing?

Worldwise Investor: What is Thematic Investing?

Worldwise Investor: What is an Environmental Fund?


Mindful Money: A Brief History of Socially Responsible Investing (SRI)
SRI Services: SRI Styles – combining issues and approaches

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Mark Hoskin is a Partner at Holden & Partners. Holden & Partners are Chartered Financial Planners who provide financial advice to high net worth clients, the majority of whom have a significant interest in ethical or environmental issues.

Mark Hoskin graduated with a History degree from Keble College, Oxford and went on to become a Chartered Accountant with Price Waterhouse. He cofounded Holden & Partners in 2003 and is a Certified Financial Planner and Chartered Financial Planner. Holden & Partners set up Worldwise Investor to help both advisers and investors understand quickly and easily how they can benefit from ethical and environmental investment in the UK market.


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