Socially responsible investing

Socially responsible investing (SRI) is an investment process that considers

the social and environmental consequences of investments, both positive

and negative. Consideration of the consequences takes place within the

framework of rigorous financial analysis. SRI involves both nonprofit and for-

profit organizations through different arrangements.

 SRI is often referred to as a holistic approach to investing because it takes

account of financial, social, environmental, and ethical criteria when choosing

investments.

What does SRI have to do with social entrepreneurship? As a social entrepre-

neur, you stand to benefit from SRI in two ways:

 ✓ Some investors seeking responsible investments donate their money

to venture philanthropic organizations. Individual philanthropic ven-

ture capitalists are, by definition, engaging in SRI. For example, the

Investor Education Fund lists “community investment” as a method

of social investment. In this case, a person invests money in commu-

nity development or micro-enterprise initiatives that contribute to the

growth and well being of specific communities. Your enterprise could

become the object of such investment.

 ✓ Your enterprise may want to invest money that’s not immediately

needed for operations or not eligible for support of operations.

Investing using SRI is a perfectly legitimate process for nonprofit organi-

zations of all kinds.

 When a nonprofit enterprise hires a new financial advisor or new manager

of its investment portfolio, the board of directors has to make sure that the

person is qualified and that she’s serving your enterprise well. When consider-

ing any financial expert:

 ✓ Make sure you understand all the risks associated with any investment

made by you and your enterprise.

 ✓ Never turn over money to a manager whom you believe lacks experi-

ence, appears incompetent, or is known to be unethical.

 ✓ Always assess on your own each investment made by your enterprise

and the manager of your enterprise’s portfolio. This rule is especially

important when she’s still new on the job.

 Your enterprise, when and if you eventually turn it into a business, won’t ever

be a typical for-profit corporation. It has an important public mission, and this

mission may well be expected by the public to influence its investment deci-

sions. Therefore, always consider socially responsible investing as it relates to

that mission.