Social investment, also known as socially responsible investment, refers to investors who align their investment strategies with social or environmental values.
Social investing involves evaluating an investment opportunity with reference to social and environmental factors as well as their growth and profit potential. The main aim of socially responsible investment is to avoid companies which have negative social or or environmental impacts.
Social investors often use the environmental, social and governance (ESG) factors as the core framework for their investment analysis and decision-making.
However, there are many definitions of what is considered an acceptable framework for social investment. Each investor will have their own understanding of what it means to them (for example, mission investing, green investing, ESG-driven investing, impact investing), based on their own take on the notion of social responsibility.
What is a social investor?
Social investors are individuals or institutions who align their investment strategies with their own idea of social responsibility. They are still motivated by the prospect of strong financial returns, but in their analysis of investment opportunities, they seek to avoid companies which have negative social or environmental impacts. For example: a social investor may avoid investments in companies that sell alcohol, tobacco, or guns. This process of ‘negative screening’ which informs the analysis of social investors, differentiates them from ‘impact investors’ who aim to invest in companies which have an active positive impact on the world.
What is a social entrepreneur?
A social entrepreneur is therefore someone who seeks to apply their entrepreneurial skill set to creating practical, innovative and sustainable solutions to social or environmental problems. Their aim is to enact large-scale social change for the benefit of society or specific segments of it.