LOL, BRB, OMG, and J/K are popular acronyms and lingo in today’s tech savvy world. But what about SRI and ESG? SRI stands for sustainable, responsible and impact investing (SRI). The strategy is to invest in the advancements of environmental, social and corporate governance (ESG) best practices.
This year, I joined the growing SRI trend. The Forum for Sustainable and Responsible Investing reports that from 2012 to 2014 SRI enjoyed a growth rate of more than 76 percent. In 2014, more than one out of every six dollars under professional management in the United States is involved in SRI. Author and educator, Anna Lappe, is known for her work on food systems and sustainability.
This quote resonates with me. I am empowered to vote with the dollars I spend to create a better world, and I get a say in who controls it. At the sacrifice of potential savings or convenience, I purchase products and services from organizations that operate in the better interest of the world. I am inspired by the term “shared value” from Porter and Kramer’s “Strategy and Society” article, written in 2006. It focuses on companies creating measurable business value by identifying and addressing social problems that intersect with their business.
I purposely make choices in the marketplace that not only fulfill my self-interested, individual material needs and desires, but also consciously consider the public or the public good. With all the energy I put into sizing up the fundamental principles of corporate organizations that I purchase my basic and luxury items with my disposable income, I’ve blindly invested in unethical companies worldwide. My stock portfolio is opposes the way I spend my daily allowance. It canceled out my good intentions.
After much research, consideration and debate among my family and friends I parceled out 10K of savings into different equities using the SRI philosophy. They cautioned that I should expect a 10 percent reduction in growth rate than mixed indexes. My rationale was that I would pay a premium to own a hybrid vehicle or green car because of better ESG practices, why wouldn’t I here? Plus, I am not looking for short-term gains. With retirement far from the horizon, these investments are for the future.
Organizations and companies using the shared value frameworks to guide the core business choices can use it as a source of innovation and competitive advantage. Think about Aldi, a leading global discount supermarket chain, which does not promote itself as an establishment tied to charity working for the greater good. Yet, Aldi’s business model and value proposition at its core is better for the environment. It doesn’t donate millions of dollars to place a band-aid on the global warming. Instead, it operates in a fashion that doesn’t pollute our ecosystem. Aldi should be winning over consumers because of its deep-seeded practices. And those practices are paying off. The core business choices Aldi used is a creating a competitive advantage over the Wal-Mart’s of the world generating high revenues from unethical business management.
In the long run, the companies developed based on a shared value model have an opportunity to prevail. Maybe my SRI will prove to be more prosperous. A company founded at its core to purposely serve society, doesn’t innovate solely for profits but to create a shared value. By not buying shares of those companies that offend my core values I feel like I am more holistically casting my vote with my money.