Socially responsible investing (SRI) is evolving into a more proactive investing trend that U.S. Trust calls socially innovative investing, or S2I.
Rather than just screening out companies that have a negative impact, advisors should actively seek companies that have a positive impact on the world, says Jason Baron, U.S. Trust portfolio manager.
U.S. Trust has developed a process for screening companies for such things as human capital engagement. This includes looking at pay gaps between levels of employees, employee ownership, health and wellness and diversity.
In addition, corporations are judged by their environmental stewardship, including use of renewable energy, recycling and sources for materials. An examination also is made of corporate philanthropy and community engagement.
“Socially innovative investing is a leap forward in how we align our portfolios with our beliefs,” Baron said in a webcast Tuesday. “At the same time, when corporations are good corporate citizens, they are in a better competitive position.”
Advisors and corporations need to pay particular attention to women, because socially innovative investing appeals to women more than men and they have become an economic force, Baron says. According to U.S. Trust, 65 percent of women feel considering the social, environmental and political impact of their investments is important, compared with 42 percent of men.
At the same time, women now control 60 percent of the wealth in the U.S. and make $1 trillion in income annually.
“Gender equality is now an economic necessity for corporations,” says Baron. Gender equality is one of the factors taken into consideration in judging a company’s appropriateness for Socially Innovative Investing.
SRI is now a $3.7 trillion market and at least half of companies review their operations taking into consideration the impact of their operations on the environment and society, Baron says.