While the assets under SRI continue to grow, the fact is that not all responsible investors agree on what is “responsible.” Their goals can differ significantly. In Investing for Change, we divide investors into three stylized color categories based on their motives. (In reality, all investors are a mixture of these categories with regard to specific values and causes.) These categories are structured according to two key questions: What are your beliefs, and how much are you willing to pay for them?
• YELLOW investors feel morally obliged to avoid companies that are incompatible with some of their values. They consider that doing otherwise would be immoral. Their decision to invest responsibly is quite insensitive to the cost for them to do so and to the impact on companies’ behavior. They often avoid “sin industries,” such as tobacco or gambling.
• RED investors are at the other end of the SRI spectrum, as they are not motivated by moral concerns. Instead, they will not tolerate investment strategies that negatively impact performance in any way. They believe there are profits to be made from investing in responsible companies because they will outperform their peers in the coming years.
• BLUE investors are pragmatic. They are only interested in being responsible investors if they are convinced that it can change the world in the direction of their values and that the financial cost is small.
Investing for Change: Profit from Socially Responsible Investment
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