This chapter explains how socially responsible investing (SRI) has evolved in the last few decades and sheds light on its latest developments. It describes different forms of SRI in the financial markets and deliberates on the rationale for the utilisation of positive and negative screenings of listed businesses and public organisations. It also presents key theoretical underpinnings on the subject and reports that the market for the responsible investments has recently led to an increase in contractors, non-governmental organisations (NGOs), and research firms who are involved in the scrutinisation of the enterprises' environmental, social, and governance (ESG) credentials. This contribution raises awareness on the screenings of positive impact and sustainable investments. It puts forward future research avenues in this promising field of study.
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The investors are attracted to the businesses that yield a return on their investments. Yet, a growing segment of the population, including entrepreneurs, are increasingly integrating their personal values into all aspects of their life, including financial investing (Sparkes, 2017; Schueth, 2003). Many individuals are intrigued to incorporate social and environmental goals into their investment decisions (Epstein, 2018; Humphrey, Warren and Boon, 2016; Sparkes and Cowton, 2004; Schueth, 2003). Therefore, they decide to invest their funds in businesses that promote social responsibility and stakeholder engagement (Majoch, Hoepner, and Hebb, 2017; Mair and Milligan, 2012; Guay, Doh and Sinclair, 2004). The rationale behind socially responsible investing (SRI) is that such investments address societal and community deficits (Camilleri, 2015a; Martí-Ballester, 2015; Nilsson, 2009; Ogrizek, 2002). Therefore, some forms of SRI, including; impact investing, sustainability investing and community investing, among other nomenclatures, support the environmental issues, human rights, fair labour practices, sustainable consumption and community involvement (Ooi and Lajbcygier 2013; Capelle‐Blancard and Monjon, 2012; Sparkes, 2017; Aras and Crowther, 2009; Friedman and Miles, 2001).
Several investors may usually be interested in allocating their financial capital toward laudable projects, as they try to avoid negative externalities, for the benefit of society and the environment (Renneboog, Ter Horst and Zhang, 2008). Hence, SRI portfolios are regularly screened by specialized contractors in order to evaluate their environmental, social, and governance (ESG) credentials (Camilleri, 2015a, 2015b; Renneboog et al., 2008). Many stakeholders, including investors, are well aware that there are numerous instances where big businesses were accused and found guilty of accounting fraud, bribery, money laundering and/or where they were involved in some corporate scandals, like environmental disasters. Therefore, financial investors should be cautious with their portfolios. Notwithstanding, the SRI investors are looking for more than just decent returns on their investments, as they may be genuinely interested in making a positive impact in their society and/or in the natural environment (Nilsson, 2009). They may be concerned about social justice, human rights, anti-corruption, bribery issues, and diversity in the corporations’ boards (Camilleri, 2015a, 2017b).
In this light, this descriptive contribution reviews the foundations of SRI and provides a factual summary of its evolution. It adds value to our academic knowledge as it explains the contemporary developments in the SRI market. Moreover, it reveals how the financial services industry is setting responsible investment screens on all types of businesses hailing from diverse sectors. Afterward, it presents the opportunities and challenges that are affecting the growth or demise of SRI. In conclusion, this contribution suggests future research avenues in this promising field of study.