Positive screening involves actively looking for good businesses. It lets investors choose businesses whose business practices are in line with their values.
For instance, an investor might decide to put their money into a solar energy company if they are particularly concerned about safeguarding the environment.
Many people believe that investing in businesses that support environmental or social causes necessitates sacrificing performance; however, it appears that the opposite is true. The author of Profitable Socially Responsible Investing, Marc J. Lane, discovered that businesses with the highest scores for social and environmental issues actually had better financial results. In point of fact, Lane claims that during the course of his eight-year research, the stocks of those businesses outperformed the Russell 3000 Index by more than 2.5 percent.
The process of weeding out businesses whose business practices or products or services do not align with social good is known as negative screening. This traditionally included tobacco, firearms, alcohol, gambling, and defense contractors for the majority of SRI investors. However, it has also been expanded to include businesses whose management has failed to promote diversity, equality, environmental responsibility, or employee diversity.
Activism by Shareholders Activism by Shareholders is the process of attempting to influence changes in corporate policies or practices by speaking directly with management or by submitting shareholder resolutions for approval by the company’s shareholders. The annual number of shareholder resolutions filed was less than 20 when the concept of shareholder activism was first introduced. The Social Investment Forum reports that over 200 institutions submitted shareholder proposals between 2008 and 2010, with many of them being adopted.
Through local community banks and lenders, also known as “Community Development Financial Institutions” or “CDFIs,” community investing entails the direct investment of capital in underserved members of communities. If these individuals or businesses applied for loans through conventional commercial banks, they would never have access to credit, equity, or capital from these lenders. Venture capital funding can also be used for community investing.
An investor is more likely to have a greater impact on social good by investing directly in a community. Money invested in a CDFI or venture capital fund directly and immediately promotes underserved communities, whereas purchasing company stocks may or may not promote social good.
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