The popularity of Socially Responsible Investing (SRI) has increased greatly in recent years as more investors are compelled by the desire to partake in "impact investing" – investing money in ways that favourably impact the environment and society while still achieving market-rate returns.
However, despite the fact that SRI continues to grow at double-digit rates as an asset class, there still exists a large amount of confusion around the approach. Just ask 10 investment managers to define SRI and you'd likely end up with differing explanations and interpretations of this ever-evolving investment strategy.
Discussions on SRI often revolve around easily understandable and recognisable mainstream "do-good" projects like solar or wind farm, but, according to Geneva Capital Principal, R Scott Arnell: "The real SRI opportunities in the next 10 years lie in infrastructure investments in emerging and frontier markets, which are less trendy to discuss due to an overarching lack of awareness and understanding.”
Arnell, an authority on SRI and with a specialised expertise in EM/FM, adds: "New SRI opportunities abound as a result of exploding middle classes in many rapidly growing economies that still have massively un-met needs and little or no legacy infrastructure. The comprehensive and sustained foundational development in these regions is vastly under-reported in the media, at least from an investor's point of view, which is unfortunate since opportunities in this sector can deliver triple-digit returns for equity investors."
What's driving this growth? According to MarketWatch: "Investor demand. Clients, individuals and institutions alike, are increasingly asking for sustainable investing products across all asset classes. In fact, 80% of money managers in the US SIF report cited client demand as the primary motivation for incorporating environmental, social and governance criteria in their strategies." A similar pattern is occurring all over Europe where the Continents policies, strategies, and implementation for Socially Conscious Investing is ahead of US regulations.