As SRI has grown in size and sophistication, it has expanded to encompass more asset classes.
Equity
SRI was initially developed as an equity-focussed style of investment – and the vast majority of funds currently available are still invested in quoted equities.
Recently, SRI principles have been extended beyond quoted equities to incorporate:
- Venture Capital: through the growth of clean tech venture capital
- Private Equity: under the auspices of a work stream of the UN PRI that seeks to raise awareness and support implementation of SRI practices within this asset class
Bonds
Initially SRI strategies for bonds focussed on corporate bonds and deployed the same screening methodologies as are applied to equities. Recently more sophisticated techniques for screening governments and sovereign bond issues have been developed – initially by asset managers and then by SRI agencies.
At the same time issuers are experimenting with new bonds where the capital is hypothecated towards socially or environmentally beneficial projects – such as microfinance, vaccines or environmental / climate change projects. These bonds provide opportunity for positive screening funds.
Property
The impact of property on CO2 emissions and the potential social impact of property development has forms the basis for greater SRI activity by property investors. So far as we are aware, this interest has largely been channelled into making improvements to mainstream property investment processes and few discrete funds have been launched.
Cash
A number of SRI ‘cash’ funds have been launched – particularly in France. However, we have to confess that we struggle to understand the difference between an SRI cash fund and a non-SRI cash fund. We would be intrigued to hear from anyone who can explain it.
Commodities
The emergence of carbon markets (even though they are currently small and do not permit much diversification) have enabled some experimentation with sustainable commodities investment.
Other
Some investors are exploring how to apply SRI principles to the asset classes of forestry/timber and agriculture/land. In particular, they are exploring the synergies between these classes and their interest in climate change.
