Well, it depends. Like most things that become fashionable and grab the headlines, many are keen to explore, learn and invest in this emerging area. However, what people think they’re investing in isn’t always where their hard-earned savings are going.  

    Socially Responsible Investing (SRI) is an investment approach that looks to invest in an ethical way by considering Environmental, Social & Governance (ESG) factors. In addition to ESG factors it’s also critical to understand what a company is doing to generate its revenue and where it’s spending its capital.  

    The ‘E’ is extremely topical and high on the governmental agenda where climate change and carbon reduction targets are discussed in many walks of life.  

    The ‘S’ demonstrates how the world has evolved from a shareholder-only focus to a great social focus where companies are judged on how they treat their employees, suppliers, and communities, and often with the same consideration of the shareholders.  

    Finally, the ‘G’ demands high standards of accountability and transparency from management to ensure revenue and profit is generated in the appropriate way, as is its decision making. It’s then only fair to conclude that investors now look beyond purely financial elements when thinking about their investment portfolio.  

    For me, this is a great thing and will be an accelerant to change within the capital markets. However, as attributed to Disraeli, there are “lies, dammed lies, and statistics” so care and detailed research must be taken to ensure an investor’s objectives truly align to what is being purchased.  


    Let’s take an example: a well-known FTSE 100 listed company scores highly and is accepted and included in many ethical funds as it has a Water Reduction Policy, Environment Management Team, a committed emission reduction target and designs environmental products. This company also generated £10.5 billion of profit in 2021 through its oil production operation.  

    You’ll know this company as BP. I couldn’t ever honestly allocate funds to BP if my headline objective was to be investing in a socially responsible fashion. BP are an excellent example of ‘greenwashing’.

    Greenwashing is where facts, figures and reporting create a misleading impression a company is ‘green’. The risk of greenwashing is that it could ultimately mean that to make a product or investment look environmentally sound the information is presented in a misleading way to an investor.  

    Greenwashing is now coming into focus of both clients and the regulator. Given the demand and awareness of SRI many investment firms have sought to create products that can offer clients a solution. Once again, this is a good thing and demonstrates the nimbleness of the investment world and how clients’ needs are at the front and centre of the profession.  

    However, without the right tools and team there is a giant trap that investors can fall into where they rely on reporting and marketing when making an investment decision. Simon Sinek encourages thinkers to ‘Start with why’ when trying to understand an objective, for me the next step is then asking; “What does a company do?”

    Coming back to BP, I applaud their efforts in investing in renewable energy sources. I also recognise they have a balance sheet that gives them the flexibility to spend for the future. Although they generated £10.5 billion in profit from oil, their overall profit was £7.5bn meaning £3bn supported other activity with a portion of that being investment in alternative energy sources.  

    BP’s management regularly update investors about their carbon transition and what other activities they are pursuing to help themselves and the energy industry decarbonise. Ultimately, BP is a well-managed and profitable business which would be well placed in an investment portfolio. However, it produces oil and therefore is not a socially responsible investment.   

    At O-IM, we exclude companies where their main businesses are fossil fuels, gambling, alcohol, tobacco, weapon manufacturing or adult entertainment. Additionally, we restrict investments in companies where there is animal testing for non-healthcare related companies. We do this to give our clients a clear definition on how our portfolios are constructed and what they seek to achieve.

    This approach allows us to navigate the greenwashing risk as effectively as we can but requires us to really integrate what the business does to generate revenue and can any ESG claims stand up to scrutiny. We design all our investment portfolios with ESG principles in mind but also created three specific SRI portfolios where the objective and purpose of that portfolio can be clearly measured and understood by our clients.  

    SRI does exist and is likely to exist beyond a fashionable trend; those who do it right should also reap the long-term benefits of a more ethical capitalism.  

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