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Socially responsible investing (SRI), also known as sustainable, socially conscious, "green," or ethical investing, is any investment strategy which seeks to consider both financial return and social good.

In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. One approach to determining whether or not a company should be invested in is employing the use of screening techniques. Businesses that are negatively screened, such as those involved in industries dealing with alcohol, tobacco, gambling, pornography, weapons, and/or the military, may be excluded at the discretion of the investor. While these screens are common, no explicit criteria exist to determine what it takes for a fund to be defined as “socially responsible.” The Forum for Sustainable and Responsible Investment provides general guidelines for the practice, suggesting that socially responsible activities “encourage corporations to improve their practices on environmental, social, and governance issues.”

The term "socially responsible investing" sometimes narrowly refers to practices that exclude negatively screened companies. However, the term is also used more broadly to include more proactive practices such as shareholder advocacy and community investing. Amy Domini, a prominent member of the socially responsible investing community and the founder of Domini Social Investments, has stated that shareholder advocacy and community investing are pillars of socially responsible investing and that doing only negative screening is "not what I would consider adequate."

Demographics
Investors in socially responsible investments are clearly defined in two separate groups; institutions and private individuals. Approximately 91% of investors in SRIs are financial institutions that act as intermediaries to manage capital for their clients. Investing institutions include, but are not limited to organizations such as investment banks, brokerage firms, insurance companies, pension funds, hedge funds, and mutual funds. These investors make decisions about where to invest on behalf of their clients. Historically, institutional investors only invest a small share of their assets in SRIs. However, due to the size of the companies, and the high amounts of assets under management, institutions are the fastest growing group of investors.

Other investors in SRIs are considered private individuals. These individuals make their own investment decisions, without advisory from a paid consultant. They tend to be of a younger generation and have higher levels of education. Typically, private investors have a greater concern for social and environmental causes. As such, they are likely to be involved with shareholder activism and community investment practices. Private investors often maintain mixed portfolios of SRIs and conventional investments (any investment not deemed to be “socially responsible”).

Attitudes and motivations
Both institutional and private investors share the belief that financial risk is reduced with socially responsible investments, as opposed to conventional investments. This is because companies positively screened for socially responsible investments, as well as the portfolio managers behind socially responsible funds, typically have strong management principles in place. There is a strong link between responsible and ethical practices and good financial performance.

Most investors believe that long-term financial returns of socially responsible investments are higher than those of conventional investments, but that in the short-term, these do not vary significantly.

Institutional investors select their investment portfolios with certain levels of risk in mind. They are indifferent to the specific investments in their portfolios (ie. whether or not they are responsible), and focus primarily on the financial returns that will yield. Rewards for these institutional investors are based on the financial performance of their funds. Social and ethical responsibility is not incentivized, and thus it is not traditionally practiced.

Institutional investors often underestimate the importance of environmental and social issues for their clients, and overestimate the importance of financial returns. If the clients of institutional investors specifically ask that their capital be invested in SRIs, the investors will ensure that this happens. In most cases though, clients do not speak up, and the institutions assume that the only returns they care about are financial ones.

Private investors in SRIs make their investment decisions with limited concern for financial risks. Though they want to make a monetary return on their investments, the primary goal of most individual investors is to make a positive impact on society and the environment. [46] Private investors want to promote social responsibility and discourage negative corporate actions through their investments. Still, most individuals try to play it safe and diversify their risk by maintaining mixed portfolios of SRIs and conventional investments.