Why is it Important to be Positive When Doing Responsible Investing?

A value-based approach to constructing investment portfolios, with roots back to the 1500’s, became known in the 1960’s as Socially Responsible Investing (SRI). Initially, such portfolios were mostly constructed using a negative screen to exclude companies that were inconsistent with a particular set of values, such as religious, social, ethical or environmental issues.

In the early 2000s, based on the perceived underperformance of SRI, there was a new emphasis on risk and return. A United Nations task force researched the effect of environmental, social and corporate governance (ESG) issues on security valuation. After finding that these issues positively affected long term shareholder value, the six Principles of Responsible Investing (PRI) was launched in 2006.

Now Responsible Investing is used as an umbrella term to describe all investments where a value-based screen is included in the process of portfolio construction. With each passing year there is greater insight into the ability of Responsible Investing to deliver performance comparable to, or perhaps even better than, traditional approaches. Our recent whitepaper codified the emerging best practices in building portfolios using Responsible Investing:

  • Positively screen for adherence to frameworks;
  • Emphasize strong corporate governance within the frameworks; and
  • Actively manage the portfolio by rewarding improvements in adherence.

Positive screens and their impact on portfolios has been studied by organizations such as Deutsche Bank, State Street Global Advisors and MSCI. At Magni Global Asset Management, we have recently published a whitepaper that consolidates the insights from these studies. We invite you to download it, using the link below.

Looking for more perspective on sustainable investing? Download our whitepaper:  “Country Selection – An Important Addition to Responsible Investing.” Follow Magni Global Asset Management on LinkedIn and Twitter @MagniGlobal, #CountriesMatter.