Responsible Investment

History of Responsible Investment

Responsible investment was originally designed to avoid investing in ‘evil stocks’, where investors made moral judgments about which assets should be excluded from the investment portfolio. As the market’s understanding deepens, the initial negative screening is expanding to various forms of responsible investment.

United Nations Principles for Responsible Investment were established in 2006 with the aim of creating an efficient and sustainable financial system. UNPRI encourages investors to incorporate environmental and social factors into their investment decisions in order to have a positive impact. The signatories of UNPRI have exceeded 4000.

Responsible Investment Methods

According to Global Sustainable Investment Alliance, responsible investment can usually be divided into: ESG integration, negative screening, positive screening, normal screening, impact investment, thematic investment, and company engagement. ESG integration is the most widely used method for responsible investment.

There are many reasons why investors apply responsible investment. Some investors believe that it can reduce investment risks, some believe that it can improve investment returns, and some believe that they can fulfill their entrusted responsibilities.

Responsible Investment Future

There is no universal standard for responsible investment, and different investors may adopt different methods based on their investment preferences. For example, asset owners have a stronger motivation to implement responsible investment than asset managers. This has been validated in some investment documents of central banks.

Some financial institutions are promoting standardization of information on responsible investment. For example, UNPRI, the Global Sustainable Investment Alliance, and the CFA Institute have released definitions of key terms for responsible investment to assist market participants in communication.