From SRI to ESG: The Origins of Socially Responsible and Sustainable Investing

Socially responsible investing. It is a well-worn term that grew in prominence during the 1980s and 1990s, but its roots trace back two millennia, shaped by civil-rights-era thinkers, faith-based organizations, and women. The modern SRI process stands on three pillars: 1. Values-based avoidance screens 2. Proactive sustainability-focused analytics—colloquially referred to as “ESG investing” and 3. Corporate engagement and impact investing. In this article, we focus on the origins and continued evolution of the first two pillars, the traditional North American model for socially responsible investing, and ESG, which first took hold in Europe. TOPICS:ESG investing, portfolio theory, portfolio construction, style investing Key Findings • SRI and ESG have roots in not only faith-based investing, but also in the civil rights, antiwar, and environmental movements of the 1960s and 1970s. • The investment risks posed by climate change and poor corporate governance provided a huge catalyst in the growth of ESG investing. • ESG data is now much more widely available than even 10 years ago, making ESG investing much more viable.