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The 28th Annual SRI Conference
November 1–3, 2017 | Hotel del Coronado | San Diego, CA
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SUSTAINABLE. RESPONSIBLE. INVESTING FOR IMPACT

Imagine the future you want to see. Maybe it’s fresh air and an inspiring sunrise, or your favorite little girl as CEO of a well-known company. Our collective investment decisions can dramatically influence both the fabric and consciousness of society.

All investing is impact investing. For better or worse, investment capital finances either socially desirable or socially destructive businesses. The companies we invest in may have either a positive or negative impact on people, communities, and our environment.

Fortunately, we can make a conscious choice about how our money works in the world. As responsible investors, we seek to make investment decisions that not only make mone , but that also support and accelerate a crucial shift toward a more economically just and environmentally sustainable future. Many companies have this same focus, as they recognize that their long-term future value is intertwined with the health of people and the planet. These companies will thrive, as will the investors who own them.


A Brief History

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The origin of what we now call Sustainable, Responsible, Impact (SRI) investing dates back centuries.

In biblical times, Jewish law laid down directives about investing ethically. Similarly, the Qur’an and Islamic teachings include guidelines for Halal or Shariah-compliant investing focused on moral values and requiring that investors avoid some types of investments and even interest. In the mid-1700s, the founder of Methodism, John Wesley, considered the use of money as the second most important subject of New Testament teachings.

The modern roots of responsible investing can be traced to the impassioned political climate of the 1960s. A series of themes such as concerns regarding the Vietnam War, civil rights, our natural environment and equality for women served to escalate sensitivities to issues of social responsibility and accountability. This broadened during the 1970s to include labor/management issues and anti-nuclear convictions.

The ranks of responsible investors grew dramatically in the 1980s as millions of people, churches, universities, cities, and states focused investment strategies on dismantling the racist system of apartheid in South Africa. Then, with environmental disasters such as Chernobyl and Exxon Valdez, the environment and energy became prominent issues for investors across the globe.

In recent years, school shootings, human rights, respect for indigenous peoples, gender identity awareness, governance-based corporate scandals, and safe and healthy working conditions in factories that produce goods for U.S. consumption have become rallying points for investors with dual objectives for their investment capital. Most recently, the climate crisis has awakened investors to opportunities inherent in directing investment capital toward a truly sustainable future.


Investors Have a Choice

Today, investors are increasingly embracing the concept that enjoying the financial benefits of stock ownership comes with the ability to make a meaningful difference by consciously directing investment capital toward enterprises that contribute to a clean, healthy environment; treat people fairly; embrace equal opportunity; produce safe and useful products; and support efforts to promote world peace, we take responsibility for the impact of our investments and any profit from them.

Motivated by a sense of empowerment that has financial, social, and ecological dimensions, socially conscious investors understand that investment returns over the lon -term are driven primarily by the performance of innovative, well-managed corporations. More importantly, we know that both the profitability and sustainability of any business depends on the health of the communities they serve. Companies that contribute to the health of people and communities represent attractive investment opportunities – encompassing renewable ener

gy healthy food, clean air, plentiful water, environmentally friendly products, and more.

SRI (Sustainable, Responsible, Impact) investing is an investment approach which reflects the common threads that weave the motivations of many socially conscious investors together: Putting investment capital to work toward creating a truly sustainable future; owning shares of the most responsible companies; while making money and having a positive impact – all at the same time.


$8.72 Trillion

Responsible investing is no longer a fringe idea. The 2016 Report on U.S. Sustainable, Responsible, and Impact Investing Trends * has identified $8.72 trillion in professionally managed portfolios using one or more of the dynamic investment strategies that together define Sustainable, Responsible, Impact investing in the U.S.

In the nineteen years between the first Trends Report in 1995 and the most recent 2016 report, responsibly managed asset pools have grown from $639 billion to over $8.72 trillion *, an increase of 1,265%. Perhaps even more exciting for the industry, responsibly invested assets grew 33% between 2014 and 2016 alone! *

Today, nearly one out of every five dollars under professional management in the United States is involved in some form of sustainable and responsible investing *. That translates to nearly 18% of the $36.8 trillion in total investment assets under professional management in the U.S. as tracked by Cerulli Associates.*

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Three Dynamic Strategies

A sustainable and responsible approach to investing includes both quantitative and qualitative analysis. All investors look for profit potential, but responsible investors also integrate an evaluation of environment, social, and governance (ESG) factors into the investment decision-making process, with a keen eye toward the impact portfolio companies have on our world. ESG factors are the detailed analytics behind the SRI investing approach.

A triple bottom line (people, planet, profit) analysis provides the basis for designing investment portfolios aligned with personal values and social priorities, while delivering the returns needed to achieve an investor’s financial goals. It’s a rigorous financial process that considers the impact of an investment on all stakeholders.

ESG Integration. Management of ESG issues can have a material influence on company profitability, value, and share price. Qualitative ESG analysis offers valuable insights into corporate policies, practices, culture, and impacts. Analysis of ESG factors can help illuminate corporate character and identify better-managed companies.

Shareowner Engagement includes voting proxies, dialoguing with companies and filing proxy resolutions to encourage more responsible corporate citizenship and more positive impact on society at large. Efforts are focused on improving financial performance over time and enhancing the well-being of all stakeholders – customers, employees, vendors, shareowners, communities, and the natural environment.

Community Impact Investing directs capital to people in low-income, at-risk communities where it is often difficult to access financing through conventional channels. Many socially conscious investors earmark a percentage of their investment portfolios to community development financial institutions (CDFIs) that work to alleviate poverty, create jobs, provide affordable housing, and finance small business development in disadvantaged communities.


What is Fueling the Growth?

Increased Data and Information. Investors are significantly better educated and informed today. ESG research organizations provide higher quality information than ever before. The better informed investors are, the more responsible our actions tend to be.

Performance. An impressive body of academic evidence plus real world results effectively dispels the myth that investing in a more thoughtful, responsible manner will automatically result in underperformance. Investors are realizing that responsibility can walk hand-in-hand with prosperity.

Availability. Responsible investment options are increasingly being offered within investment portfolios and retirement plans, and a socially conscious investor can now choose from among hundreds of funds and investment managers to populate a long-term investment portfolio – regardless of size.

Values and Authenticity. A large and growing segment of the investing public is seeking to reflect their personal, moral, ethical values in all aspects of their lives. Responsible investors are recognizing that money has impact, and consciously making consumer purchase and investment decisions that enhance the common good.

Climate Change. As consumers and investors are becoming increasingly aware of both the dangers and business opportunities embodied in the climate crisis, more and more are looking to avoid companies contributing to the problem and invest in those creating solutions.

Women. As women are increasingly breadwinners, distinguished graduates with advanced business legal, and technical education, and leaders in corporations, their potential to impact corporate practices is formidable. They are also part of the great wealth transfer that is beginning to occur and are the recipients of large inheritances. Women are shown to have an affinity for integrating a more values-based approach to investing.

Millennials. Born between the early 1980s and the early 2000s, the millennial generation is the largest in American history at 85 million strong. More than any generation prior, Millennials seek to make a difference in society through the jobs they hold, the products they buy, and the investments they make. Millennials are poised to inherit trillions of dollars from Baby Boomers – and their influence as impact-oriented investors is starting to be felt.

Corporate Scandals and Lawsuits. Numerous recent governance-related instances of fraud and other manipulation have eroded trust in company leadership. Many investors are attracted to an investment process based on research that goes deeper into corporate behaviors and impacts.


Investing for a Better World

If we are going to manage and mitigate many of their issues that threaten our quality of life, business must shoulder more responsibility for both remedy and prevention. Consciously or not, people are casting a ballot with every consumer purchase and investment decision. When it is perceived that a company is exploiting workers in unsafe foreign factories, for example, informed consumers often stop buying that company’s product, and informed investors push management for changes in business practices.

All investors, no matter how large or small, can consciously choose to invest in ways that enhance the common good.

Working with an investment professional who can help you plan and implement investment strategies designed to achieve your financial goals is always advisable. Many SRI Conference sponsors offer high quality investment services and advice designed specifically to serve the needs of socially conscious investors.

The author, Steve Schueth, is President of First Affirmative Financial Network, LLC (SEC File #801-56587) and Producer of The SRI Conference.

Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future investment results.

“SRI” in an acronym for Sustainable, Responsible, Impact and reflects the common threads that weave the motivations of many socially conscious investors together: Putting investment capital to work toward creating a truly sustainable future; owning shares of the most responsible companies; while making money and having a positive impact – all at the same time.

*Report on Sustainable, Responsible and Impact Investing Trends in the United States 2016 . US SIF: The Forum for Sustainable and Responsible Investment is the nonprofit membership association for the responsible investment industry in the U.S. ( www.ussif.org).

More and more investors are beginning to understand that all investments have impact. The ways we spend and invest can dramatically influence both the fabric and consciousness of society.

Investment capital can finance either socially desirable or socially destructive businesses. Corporations may have either a positive or negative impact on people, communities, and our natural environment. Responsible investors, we seek to make money while using our money to catalyze a shift toward a more economically just and environmentally sustainable future.

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