RI Video Series [2]: What is Responsive Investing?

What began in the 60s and 70s as socially responsible investing has since evolved into the umbrella term "Responsive Investing" or RI. This term encompasses a wide range of environmental, social, governance, and impact investment strategies in which investors seek both financial and social return, or a "double bottom line."

FEG Managing Director Gary Price explains the basics of Responsive Investing, the different types of approaches, and how FEG supports clients in pursuing these strategies.

Responsive investing, or RI, can be described as aligning your investments with your values. We often refer to this as a double bottom line where an investor considers both financial and social return criteria which can include environmental interests, moral values, and investing for the common good. At FEG, we define the philosophy as responsive because we know from our experience that investors often have their own uniquely defined values and principles. The social criteria can vary based upon their own values. However, there are several generally accepted categories of RI which I'll go over in more depth.

Socially responsible investing, or SRI, can be considered a forerunner to today's commonly used ESG and faith-based terminology. This approach most often utilizes negative screening. For example, excluding sin stocks or tobacco stocks in a portfolio coupled with a desire for generating market rate returns.

I mentioned ESG, which stands for Environmental Social and Governance. This is a commonly used term focused on these three aspects in a company which are often viewed relative to the United Nations 17 different Sustainable Development Goals.

There's also faith-based, or what is known as faith-driven investing, where investors seek to integrate and promote specific values of their faith group. We also see some faith groups continue to utilize socially responsible to broadly define their philosophy.

Impact investing is another term you may have heard, which can be either a market rate or below market rate investment that supports an investor's mission by generating a positive social or environmental impact.

Program-related investing, or PRI, is a mission-aligned investment that serves as a component to an organization's grant-making.

Yet another term is sustainable investing, which is an investment discipline that considers sustainability factors for companies. A primary example of this type of investment is renewable energy.

FEG has deep experience guiding clients and building and maintaining successful investment portfolios for decades through traditional consulting and OCIO relationships.

We have developed RISE, or Responsive Investing Solutions Exchange, as a partnership with our clients to provide investors a clear opportunity to align their investment portfolios with their own unique responsive investing goals. Through RISE, we focus on your organization's unique mission, facilitate discussion and decision making, provide dedicated market and manager research, along with ongoing education on responsive investing opportunities.

This is an exciting time for those interested in aligning their values with their investments. We look forward to sharing our ideas and solutions with you.