Investment styles, vehicles and customer types [!]

Over the past twenty years, SRI practitioners have continuously developed and updated the range of SRI strategies and investment applications such that the industry can now offer products that cater for all investor types with all levels of risk appetite and vehicle preference.

Investment styles

SRI strategies are applied to a range of different investment styles including:

• Active management - Most SRI funds are actively-managed and are based on the premise that sustainability analysis is one factor that can enhance the performance of an active fund manager
• Passive management – funds that track all of the major SRI indices – both screened and thematic – are widely available
• Quantitative management – in spite of the exertions of ratings agencies to promote the concept (and in spite of its extensive discussion in academic research and in the media) very few SRI funds are managed on a quants-basis

(Governance and engagement-based strategies can, of course, be incorporated into all of the above investment styles)

Investment vehicles

The best known SRI funds are those which are offered to retail investors through open-ended mutual funds.  However, SRI strategies can be deployed within almost all investment vehicles:

• Most institutions will run discretionary SRI portfolios for institutional investors
• There are a few closed-ended funds – mainly in the environmental technology area
• ETFs – are available to track both screened indices and thematic ones and are growing in popularity
• Some SRI hedge funds are available – so far as we are aware, most of these use long-short equity strategies and avoid high-levels of leverage
• There are a number of SRI funds of funds and even an SRI hedge fund of funds

Customer segments

The range of products and strategies detailed above now give SRI the flexibility to provide for most investor types including:

• Individuals
  • Individual (retail) investors
  • High-net worth investors
• Institutions
  • Pension funds (for employees from the:
    • Private sector
    • Public sector
    • Third sector
  • Insurance funds
  • Sovereign wealth funds
  • Churches, charities and foundations

This diversity of customer base has the additional advantage of smoothing growth in the overall industry as attention tends to fall on different asset owners at different times.