Socially responsible investing
Your final research paper for this course is based on the Issues for Debate in Sociology textbook. You are
required to read and participate in discussion questions for 4 of the 17 chapters in the Issues for Debate
in Sociology textbook. Choose one of the other 13 chapters from the book (Celebrity Culture, Teaching
Values, Closing Guantanamo, Middle-Class Squeeze, Debating Hip-Hop, Women’s Rights, Future of
Marriage, Religious Fundamentalism, The Obama Presidency, HPV Vaccine, Declining Birthrates, Rapid
Urbanization, or Socially Responsible Investing) and use that chapter as your final research paper topic.
You can choose to write about any topic that is discussed in the chapter that you choose. The final
research paper should be double spaced and between three and four pages (750-1000 words) in length,
not including the title page and references page, using APA writing style. You must use a minimum of 4
references in this paper. The research paper is due by the end of Module 7 and is worth 25% of your
overall grade for this course.
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Socially responsible investing
Introduction
Socially responsible investing is all about considering ethical, governance,
environmental, and social issues when making decisions related to investment. It is worth
pointing out that this process varies from the normal management and investment selection
process, where the focus is on financial risk and performance. On the other hand, socially
responsible investments may constitute of a complete investment portfolio or they may be used
as a proportion or in addition to existing portfolios.
Thesis
Regardless of the potentials created by SRI, there are a number of issues that need to be
addressed for it to be useful in markets, particularly in South Africa.
Argument
During the last decade, there has been a rise is global environmental issues awareness.
Based on this awareness, SRI (socially responsible investing) has become more structures and
visible as a form of investment. Its underlying rationale is the maximization of financial returns,
in addition to promoting environmentally and socially sustainable growth and development. SRI
is also referred to as ethical or value-based investing, and it is an investment approach that takes
into consideration both the negative and positive environmental and social implications, within
the securities and investment analysis’ context. Asset managers dealing with SRI portfolios
normally utilize customary quantitative analysis methods in addition to environmental and social
analysis tools when faced with investment decisions (Ethical Markets Media., Films for the
Humanities & Sciences (Firm) & Films Media Group, 2007).
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SRI came up during the eighteenth century following the opposition of particular
religious groups to make investments into firms that linked to or involved with tobacco, alcohol,
and weapon production. Over the years, there was a shift of focus where between 1960- 1970,
the focus became human rights, equality, and environmental protection. During the 1980s, a lot
of emphasis was on the South Africa’s apartheid, and numerous European and North American
investors ceased investing in South Africa market. During the 1990s, there was the emphasis on
anti-tobacco investing as well as the poor workers’ treatment (Issues for debate in sociology:
Selections from CQ researcher, 2010). Within the previous decade, the carbon footprinting
concept and environmental issues garnered a lot of attention.
Speaking broadly, the two major forms of SRI approaches used for achieving maximum
financial return, while achieving and promoting social good are the broad and core strategy. Core
SRI is all about detail analysis and screening on the basis of religious, ethical and personal
values. The investors in this case include NGOs, religious groups, and individuals with strong
feelings about particular beliefs and practices. On the other hand, broad based SRI entails of a
more simplistic strategy, encompassing of norms-base integration, engagement, and screening.
Considering that institutional investors are considered the major investors in this form of
investing, it has traditionally attracted far bigger volumes compared to core SRI.
The foregoing discussion basically gives highlights on how important SRI can be,
particularly in relation to the environment and meeting the different interests of all investors.
However, in addition to the fact that SRI has become considerably prominent in worldwide
investment environments, there are a number of impediments which stand in the path of
furthering innovation and growth of these kinds of investments (Downing, 2005). This is more
so in South Africa. One of the universal challenges is that despite the fact that SRI has been
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under exploration for a considerably long period, there is still no formal average definition.
There is the need for an official definition in South Africa, especially in the manner in which it
would be understood in relation to the broad-based BEE as it became prominent first as the
apartheid era was ongoing. During this period, trade unions denied investing the members’
contributions of pensions into companies which stood with the apartheid regime, in addition to
those that were practicing poor industrial relations. Basically, the major focus of the early SRI
channels then was issues connected to empowering people that had previously been
disadvantaged, and enhancing and improving their living standard, in addition to the
opportunities they had. For this legacy to be continues, there is a great need for a clear SRI
definition.
The second issue which should be addressed relates to the use of short-term performance
benchmarks in SRI markets. This leads to a fundamental challenge based on the fact that
numerous investors prefer saving for retirement. Hence, their investment horizons are long-term.
Measuring a SRI fund’s performance is very hard in the absence of a benchmark which is
fashioned based on similar standards as the fund. Other factors preventing the SRI market
expansion globally and in South Africa include lack of understanding about SRI’s investment
sphere and skill. There also lacks connection between compliance, monitoring, and the asset
managers dealing with SRI stocks investment (Cuseo & Thompson, 2010).
Conclusion
The foregoing discussion has established that SRI involves making governance, social,
environmental, and ethical considerations when making decisions about investment. Despite the
fact that SRI can create numerous benefits for companies, there are a number of issues that need
to be addressed for it to be wholly useful, particularly in South Africa.
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References
Cuseo, J. B., & Thompson, A. (2010). Humanity diversity and the liberal arts: Foundation of a
college education. Dubuque: Kendall Hunt Publishing Company.
Downing, S. (2005). On course: Strategies for creating success in college and in life. Boston:
Houghton Mifflin Co.
Ethical Markets Media., Films for the Humanities & Sciences (Firm), & Films Media Group.
(2007). Socially responsible investing. New York, N.Y: Films Media Group.
Issues for debate in sociology: Selections from CQ researcher. (2010). Thousand Oaks, Calif:
Pine Forge.
