There are three fundamental motives for 'Sustainable and Responsible Investment':

  • To avoid investor ‘complicity’ with activities that they object to
  • To encourage / incentivise companies to improve their impact on society, the environment or the economy
  • To generate investment outperformance

While the first of these provided the original motivation for SRI, the second two have become increasingly important in recent years and are now the primary motivation for many SRI investors.

Of course, a fourth motive drives investment institutions themselves: the motive of making money.  Many investment institutions develop SRI / ESG capabilities to meet client demand – even if they do not share any of the fundamental motives outlined above.

More recently, regulators and disclosure regimes are requiring companies and investors to pay more attention to sustainability issues.

Different SRI strategies are selected to respond to each different motive – and each delivers a different outcome.  However, some trace of each motive can be found in every strategy.