Common SRI terms

In this sector I will try to give some kind of overview of the terms used within Social Responsible Investments and Corporate Social Responsibility. The list will be updated on a regular basis…

  • SRI (Social Responsible Investments). Term used to describe investments which consider both social and environmental factors as well as economic.
  • Environmental Social Governance (ESG) factors. Reefers to the broad range of factors which can be included in the investment process.
  • CSR (Corporate Social Responsibility). Refers to the umbrella of terms on definitions on business and organizations relationship to their environment. Here are a few…

“The Social Responsibility refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.” (Bowen, 1953:6)

“The Social Responsibility of business is to tame the dragon, that is, to turn a social problem into economic, opportunities and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth.” (Drucker, 1984:62)

“Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” (European Commission, 2010)

“Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that contributes to sustainable development, including health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behaviour; and is integrated throughout the organization and practiced in its relationships” (ISO26000:2010)

  • Sustainability. Reefers to the degree to which a given company business model can be sustained though a longer period of time, in theory indefinitely. This includes not only the marketing or economic aspects of the business but also if the company produce products or have an impact on it surroundings which can be justified.
  • Fait based Investing. SRI were from its origin based on religious groups belief that certain stock and companies are in essence unethical such as alcohol or weapons industries. As time has progressed the investment systems have matured into the three different strategies, Positive screening, negative screening and shareholder activism.
  • Green Investment. Strategies that are based on environmental criteria and is normally focused on companies that engage in environmental friendly energy forms.
  • Program Related Investments (PRI not the UN PRI). PRI is usually related to philanthropically investments above market rates which in essence makes the investments more risky (if you did not know….) or can be considered to be charity giving to companies based on their mission and/or values. For example giving buying shares in companies that have a great environmental friendly mission but would be considered to small or concentrated on a to narrow market to ever make a good return on investment.
  • Double bottom line investing. Investment strategies that strive to create returns in both social and financial terms.
  • Triple bottom line investing. Investments that strive to create returns in terms of environmental, social and financial terms. Some time one will find companies reefer to the triple bottom line in their annual and/or CSR reports.  
  • Social Risk. Social Risk arises when organisational behaviour or the actions of others in its operating environment create vulnerabilities, which stakeholders might identify and apply pressure on in order for it to change its behaviour. An organisation can reduce risk by introducing control and countermeasure systems.