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Socially conscious investments24 December 2019

Socially Conscious Investment: What Does It Mean in the Modern Investment Context?


The primary objective of investing in securities is to fulfil one’s requirements and lead a financially secure existence. But how about investing for oneself while also displaying a sense of social consciousness at the same time via one’s investment?

In today’s instantaneous world of rapid technological advancement and development in every front, many of us also lead largely individualistic lives that essentially revolve around our little worlds and are limited to the four walls of our homes. However, over the past few years, investors have managed to step out of their cocoons and reflect a sense of social responsibility in their investment decisions, thus giving rise to the concept of “socially conscious investments”. So, what is socially conscious investment, and what are its implications and trends in India as well as from a global perspective? Take a look:

What is the Hullabaloo About Socially Conscious Investment?

Socially conscious investment, also known as Socially Responsible Investment (SRI), is the practice of investing in securities and schemes that contribute, at some level, to social welfare through their products and services. It also includes steering clear of industries in general, and companies in particular, whose products and/or services are perceived as harmful to society in any way.

In its most basic form, the concept of SRI was started in the early 1700s by American pastor John Wesley, who propagated the boycott of products whose manufacturing depended on the exploitative American slave trade. Over the centuries, this practice was adopted by many investors across the world, who began to take into account relevant social causes such as women’s rights and civil rights while investing in major securities like stocks and Exchange Traded Funds. Thorough research of the company offering the particular security, as well as the industry it caters to makes an important difference in arriving  at a socially conscious investment decision. Today, the definition of “socially conscious investment” has expanded to include other significant economic causes, such as affordable housing and home loan provisions.


Socially Conscious Investment and Its Positioning in the Indian Investment World

While socially conscious investments have been steadily gaining recognition in different parts of the world, the terminology is still relatively alien in the Indian investment domain. This oblivion to the concept also stems from the unavailability of sufficient mutual funds investment and index funds schemes that earmark securities based on the social consequences of the products or services offered by their source companies. As a result, an Indian investor inclined towards socially conscious investments may have to personally wade through the different investment schemes and analyse each company’s prospectus and the industry it revolves around before s/he can make an informed decision.
However, while such initiatives are still few and far between, there have been some positive efforts in this direction over the past few years. One of these initiatives is the S&P ESG index, which is a compilation of the 50 best stocks in India, as measured in terms of 3 distinct criteria; namely social, environmental and governance. The NSE website consists of more details on this index.

Conclusion

Human beings are social animals, and it is this sense of collective existence that enables each of us to sustain in this world. An integration of one’s personal investment objectives with the general welfare of the society one inhabits can help investors to take a step towards achieving their dreams while contributing to a better world.

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