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
What is the Hullabaloo About 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.
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.