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In the last 15-20 years the concept of Socially Responsible Investing (SRI) has grown from an abstract investment concept to a mainstream practice.  According to the Social Investment Forum’s 2007 report on SRI Trends, over $2.71 trillion in total assets are being managed using one or more of the three core SRI investing strategies. This represents one in nine invested dollars. Increasingly individual and institutional investors want to see their investments generate not only a positive financial return but a positive social return as well.  In this context, thinking strategically about how your organization demonstrates social responsibility is an important planning tool when considering growth.  How is it that your organization demonstrates social responsibility?  Before that question can be approached, it might be useful to briefly consider the core SRI strategies.  These include:

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Social Screening: SRI first and foremost considers screening of investments according to some pre-defined criteria.  Investments that fail to meet the criteria are screened out.  As examples, some common screening criteria may relate to a) the potential harm inherent in the product or service where defense contractors, alcohol, tobacco, and gaming industries might be excluded; b) negative environmental impacts where petroleum, nuclear, or chemical industries might be excluded, c) worker or human rights where industries negative diversity policies, geopolitical location or worker organizing practices might be considerations for exclusion.  Conversely, profitable companies that demonstrate exemplary practices related to product benefit, sustainable environmental practices or supportive worker practices are eagerly sought as  included investments.

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Shareholder Advocacy: Using shareholder proxy voting power and other vested powers (e.g., board representation) to push for positive policies or to advocate for change is a second dimension SRI.  In essence, shareholder advocacy asserts pressure to steer companies towards change that is consistent with the Social Screening framework.  Conversely, shareholder advocacy can reinforce companies’ commitments to both profitability and social responsibility.

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Community Investing: The third SRI strategy is community investing, While this is the least commonly used strategy  the concept behind community investing is to make capital accessible at the local level.  Examples of this strategy includes investing in regional banks and institutions that provide capital (i.e., loans) to smaller local businesses or investing in the development of affordable housing.

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Taken together these three strategies suggest that a growing number of investors are interested in the double (people and profit) or triple bottom line (people, profit and planet).  These investors are driven by specific causes, are interested in being actively involved and demand local impact.  So businesses increasingly need to think strategically about positioning their companies in the context of the double or triple bottom line. Nonprofit organizations also need to pay attention to SRI strategies because there is a parallel trend in philanthropy that combines cause with active involvement and a focus on local impact.  One only needs to look at social venture philanthropy and giving circles as examples of  SRI approaches to philanthropy.

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So, applying this concept back to strategic planning, it becomes clear that organizations need to position themselves as “model citizens.”  Again, while many organizations “zoom in” on the immediate context of growing or sustaining their ventures, it is equally important to “zoom out” and consider the larger systemic view of how capital is changing.  Strategic questions start with the three principles.  How are we meeting a positive social need?  How are we engaging our “investors” as they advocate for change?  How are we demonstrating a clear and definitive local return on investment?

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From the answers to these strategic questions come operational strategies, such as a) assuring that your marketing messages are clear and focused on social responsibility, b) creating opportunities for our “investors” to engage with with in social change and being willing to respond to their advocacy, c) ensuring that you are measuring performance in a way that demonstrates your local impact.
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We live in a new era that is described as post-industrial, networked, empowered and localized.  Engagement is on the rise and can be seen in such trends as the growth of SRI. Engaged Investors are here to stay and it is up to organizations to measure themselves against this new standard. Organizations strategically considering this new context will thrive by investing the time and energy to develop a socially responsible mission and operating framework.

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Further Reading

Socially responsible Investing Primer

Social Investment Forum’s 2007 Report on Socially Responsible Investing Trends

Social Venture Partners Portland

The Impact of Giving Together

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