Throughout the 1970s and 1990s, companies, pension funds, and individuals around the world stopped investing in South Africa. Since 1948, South Africa had been under Apartheid, a system of legal racial segregation enforced by the ruling National Party. Apartheid encouraged other human-rights violations such as torture, censorship, political repression, exile, and detention without trial.
To bring about change, outsiders divested their financial interests in the country. This forced financially struggling South African–based businesses (more than 75 per cent of all that country’s businesses), to negotiate for the dismantling of apartheid in 1994. In this case, socially responsible investing (SRI) was used as a tool to create significant change in society, business, environment, and government.
SRI has existed since the 1700s when religious organizations avoided “sinful” investments; for groups like the Quakers this meant insisting their members didn’t participate in the slave trade.
Modern ethical investing has become more complex as there are hundreds of investment products and fund managers directing their interests at a wide spectrum of social issues.
That’s where the new trends in socially responsible ETF investing fits in with the recent launch of notable ETFs with the tickers HERS, SHE, CARS, HACK and CYBR. These style of funds make it easy to put your money into professionally managed SRI portfolios that are focused on gender-diversity, clean and safe car technology and cyber security. Other trends that check the box of modern SRI are alternative medicines and equitable trade.
The best part, however, is these kinds of investments make money because they are focused on the future rather than being stuck in the past.
SRI comes down where you feel your money is most useful. Although Apartheid is a thing of the past, many other despicable social structures and issues thrive today. You have the power to create significant change using ethical guidelines to invest your money.
How to Vote With Your Investments
The global SRI market has grown significantly over the past decade and now represents $1 out of every $5 of assets under management in North America. SRI involves the formal integration of environmental, social, and governance (ESG) considerations into the investment selection and management process, providing a way for individuals to incorporate their concerns about important human and environment issues into their investment portfolios.
SRI encompasses the protection of people, health, environment, and human rights. There are three approaches to SRI: divest your interests out of an unethical situation; screen out certain investments and avoid including them in your portfolio altogether; and/or become a shareholder activist to produce change through advocacy and shareholder voting rights.
Most professionally managed SRI’s are based on screening out ‘negative’ values associated with ‘irresponsible’ corporations. This typically means avoiding investing in companies involved in environmental degradation, endangering public health, and human rights abuses. And on the top of the “naughty list” of business lines that are avoided are tobacco, alcohol, gambling and the development of weaponry.
The case for SRI is simple; If firms are measured on their contribution to innovation, which ultimately protects the environment and human health, investors will have greater bottom line performance — comparable to mainstream investments.