Glossary: Socially responsible investing

An investment strategy that seeks to maximise both financial return and social good. In general, socially responsible investors favour corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. Some (but not all) avoid businesses involved in alcohol, tobacco, gambling, weapons, and the military. Ethical investment reduces the number of shares, securities or funds available to the investor and it tends to increase the volatility of a portfolio and therefore the risk profile. Also, because of the time-consuming ethical screening, ethical funds charge slightly higher fees.

Relevant to: First-time investor

More about