Evolution of Responsible Investing
Socially responsible investing in the United States dates back to the 18th century, but now encompasses $8.4 trillion in stocks, bonds, mutual funds and ETFs and community and impact investing.
Sustainable Investing Guide
Socially responsible investing in the United States dates back to the 18th century, but now encompasses $8.4 trillion in stocks, bonds, mutual funds and ETFs and community and impact investing.
Responsible investing is not a new phenomenon
The idea that how we deploy or invest wealth has ethical considerations has Biblical roots, with both Judaism and Islam establishing principles forbidding investments in immoral companies that do harm. Indigenous Peoples have historically applied social and environmental values to their economic and investment decisions.
US Methodists have resisted investments in companies involved with the slave trade, smuggling, liquor, tobacco, or gambling for more than 200 years. The Quakers also forbade investments in slavery and war, and by 1928 established the first socially responsible fund called the Pioneer Fund.
The modern era of responsible investing in the US grew out of the 1960s social movements. Vietnam War protesters demanded that university endowments divest from defense contractors, and in the 1980s, a broad movement developed to demand divestment from companies doing business with the apartheid regime in South Africa. Due in part to this movement, apartheid was officially abolished in 1991 and Nelson Mandela was elected president in 1994.
Responsible investing today
In 1990, Amy Domini launched the first socially responsible index fund, the Domini 400 Social Index, now called the MSCI KLD 400. Today there are literally thousands of socially responsible mutual funds and exchange-traded funds, as well as opportunities for community and impact investing.
In 2004, the term ESG first made an appearance in a United Nations Global Compact report called "Who Cares Wins." The report, endorsed by 23 financial institutions, explained how capital market stakeholders could integrate environmental, social, and governance factors into investment decisions. In 2006, the United Nations Principles for Responsible Investment was launched, establishing guidelines for mainstream investors to incorporate ESG into their investing practices.
Responsible investing now encompasses stocks, mutual funds and ETFs, community and impact investing, and more. Sustainable investing performs as well or better than conventional investing, and has grown to $6.5 trillion explicitly marketed as ESG or sustainability-focused investments.
Read more about the history of ESG here. Read more about the history of impact investing here.
How does responsible investing work in practice? Learn about ESG investing, screening, and more.
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