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The idea of sustainable investing is not new, and many investors relate the term to socially responsible investing (SRI), which is an investment strategy that excludes companies and industries on a basis of moral values (e.g. alcohol consumption, gambling). This type of strategy still exists, but it is important to note that sustainable investing has evolved beyond exclusionary screening based on a narrow range of criteria. Today, greater emphasis is placed on which companies to include, rather than exclude, from a portfolio, giving rise to a range of complementary approaches that can be used to implement sustainable investment strategies. These strategies are ordered by the level of intensity of the ESG (environmental, social, governance) factor consideration in the overall investment process.
Source: LPL Research, CFA Institute, “Environmental, Social and Governance Issues in Investing: A Guide for Investment Professionals,” 2015.
Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.
If you are not sure what all the "buzz" is about ESG is, here is a quick ESG primer.