Wednesday, November 3, 2010

Trends in Socially Responsible Investing (Part I/IV)

Part I

There’s a revolution, and it’s sprouting from a “grass-roots” movement.  In a very real sense SRI is igniting, as well as reacting, to the “greening of America.”  According to Social Investment Forum’s website 2007 report entitled Socially Investing Trends, in the U.S., between 2005 and 2007, SRI assets under management (“AUM”) increased more than 18%.  This compares with overall AUM, which grew less than 3%.  SRI assets are estimated at $2.71 trillion, and I expect the next report to show continued significant levels of growth.

Their upcoming report, for the 2009 data period, will be released by December 2010.  My confidence for continued growth is predicated on the consumer side (e.g., higher awareness), and the easy entrance into the SRI niche via new investment vehicles such as Exchange-Trade-Funds (“ETFs”).

Consumers have become very aware of green and sustainable products, which are translating into all aspects of their lives.  According to an April’09 report by GMA-Deloitte website, 54% of shoppers actively consider environmental sustainability characteristics when choosing products.  Can you recall the last time this happened to you?

The more commonly used term, the “Green Consumer Market”, at $200Bn in the U.S., is expected to grow 15% annually.  The Obama Administration’s $787Bn Stimulus Plan also includes several ways of boosting the “clean energy economy”, which by example, will be starting from Obama’s “home” with a solar installation.

There are five trends within the Socially Responsible Investing realm.  They are:

1.    The movement away from Negative Screening, towards Positive Screening,

2.    The popularity of Shareholder Activism,

3.    Transition from the traditional individual investor towards the Institutional Investor,

4.    Growth of Exchange-Traded-Funds (“ETFs”) and,

5.    Community Investing

This article is being presented in five parts, so that I can present to readers a more detailed view of the above trends.