Qualifying investor alternative investment fund (QIAIF)
Qualifying Investor Alternative Investment Fund or QIAIF is a Central Bank of Ireland regulatory classification established in 2013 for Ireland's five tax-free legal structures for holding assets. The Irish Collective Asset-management Vehicle or ICAV is the most popular of the five Irish QIAIF structures, was designed in 2014 to rival the Cayman Island SPC. In 2018, the Central Bank of Ireland expanded the Loan Originating QIAIF or L–QIAIF regime which enables the five tax-free structures to be used for closed-end debt instruments; the L–QIAIF is Ireland's main Debt–based BEPS tool as it overcomes the lack of confidentiality and tax secrecy of the Section 110 SPV. It is asserted that many assets in QIAIFs and LQIAIFs are Irish assets being shielded from Irish taxation. Irish QIAIFs and LQIAIFs can be integrated with Irish corporate base erosion and profit shifting tax tools to create confidential routes out of the Irish tax system to Ireland's main Sink OFC, Luxembourg. In March 2019, the UN formally identified Ireland's "preferential tax regimes" for foreign funds on Irish assets as affecting the human rights of tenants in Ireland.
Irish QIAIFs are subject to the EU Alternative Investment Fund Managers Directive 2011 which lays out detailed rules on the process of constructing and marketing of QIAIFs in Europe. However, the following are considered the most important features specific to Irish QIAIFs: As at 2016, €435 billion in alternative assets were held in Irish QIAIFs. Ireland is the 4th largest domicile for Alternative Investment Funds in the EU with 9.9% of the €4.4 trillion EU AIF market, behind Germany and Luxembourg. It is asserted that a material amount of QIAIF assets are Irish assets being shielded from Irish taxation; each of the five QIAIF legal wrappers have attributes designed for different uses. However, outside of entities that need the specific attributes of a trust law, or can only use a full company structure, the ICAV is expected to be the dominant QIAIF wrapper. ICAV. Launched in 2014 for U. S. investors to avoid both U. S. tax and Irish tax on Irish investments. S. “check-the-box” entity criteria. Variable Capital Company.
An Irish company subject to Irish and EU company law. S. investors. Unit Trust. Dates from 1990 and offers similar features to the ICAV. Common Contractual Fund. Established in 2003 for pensions funds to comingle, or pool, assets but maintain full legal segregation of the assets. Investment Limited Partnership. Aimed at private equity–type structures with a General Partner /Limited Partner system. Ireland is considered a major tax haven, offshore financial centre, with a range of base erosion and profit shifting tools. Ireland's main Debt–based BEPS tool was the Section 110 SPV. However, Irish public tax scandals in 2016 concerning the use of this BEPS tool – involving artificial Irish children's charities – by U. S. distressed funds, assisted by the leading Irish tax-law firms, to avoid billions in Irish taxes damaged its reputation. In late 2016, the Central Bank of Ireland began a consultation process to upgrade the little-used L–QIAIF regime. In February 2018, the Central Bank of Ireland changed its AIF "Rulebook" to allow L–QIAIFs hold the same assets that Section 110 SPVs could own.
However, the upgraded L-QIAIFs offered two specific improvements over the Section 110 SPV which make L–QIAIFs a superior Debt–based BEPS tool: Three months after the Irish Central Bank updated its AIF "Rulebook", the Irish Revenue Commissioners issued new guidance in May 2018 on Section 110 SPV taxation which would further reduce their attractiveness as a mechanism to avoid Irish taxes on Irish assets. In June 2018, the Central Bank of Irela
A pension fund known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income. Pension funds have large amounts of money to invest and are the major investors in listed and private companies, they are important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold about $6 trillion in assets. In January 2008, The Economist reported that Morgan Stanley estimates that pension funds worldwide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity; the Federal Old-age and Survivors Insurance Trust Fund is the world's largest public pension fund which oversees $2.72 trillion USD in assets. Open pension funds support at least one pension plan with no restriction on membership while closed pension funds support only pension plans that are limited to certain employees.
Closed pension funds are further subclassified into: Single employer pension funds Multi-employer pension funds Related member pension funds Individual pension funds A public pension fund is one, regulated under public sector law while a private pension fund is regulated under private sector law. In certain countries the distinction between public or government pension funds and private pension funds may be difficult to assess. In others, the distinction is made in law, with specific requirements for administration and investment. For example, local governmental bodies in the United States are subject to laws passed by the states in which those localities exist, these laws include provisions such as defining classes of permitted investments and a minimum municipal obligation. Commonwealth Superannuation Scheme Military Superannuation and Benefits Scheme Public Sector Superannuation accumulation plan Public Sector Superannuation Scheme State Super AustralianSuper AustSafe Super CareSuper Cbus Energy Super FIRSTSUPER HESTA Hostplus legalsuper LUCRF Super Media Super MTAA Super NGS Super REI Super TWUSUPER UniSuper ANZ Australian Staff Superannuation Scheme Retail Employees Superannuation Trust Aceprev Baneses Banesprev Centrus FAPES Forluz Funcef Fundação Banrisul Fundação CESP Fundação Itaubanco Petros PREVI - Caixa de Previdência dos Funcionários do Banco do Brasil Sistel Valia Alberta Investment Management British Columbia Investment Management Corporation Caisse de dépôt et placement du Québec Canada Pension Plan HOOPP Ontario Teachers Pension Plan PSP investments Public Sector Pension Investment Board BC Pension Corporation, including the College Pension Plan, the Municipal Pension Plan, the Public Service Pension Plan, the Teachers' Pension Plan, WorkSafeBC Colleges of Applied Arts and Technology Pension Plan Healthcare of Ontario Pension Plan OMERS Administration Corporation Ontario Pension Board Ontario Teachers' Pension Plan OPSEU Pension Trust AFP Modelo Chile pension system Social Security Fund - managed by National Council for Social Security Fund Public Employees Pension Fund TAPILTAT, the Fund for Mutual Assistance of the Employees of Ioniki Bank and Other Banks, the multi-employer auxiliary pension fund Mandatory Provident Fund Employees' Provident Fund Organisation – a statutory body of the government of India that administers a compulsory Provident Fund Scheme, Pension Scheme and an Insurance Scheme.
Provident Fund is applicable across for employees across establishments. EPF is the largest social security organisation in India with assets well over ₹ 5 lakh crore as of 2014. National Pension Scheme – a defined-contribution–based pension scheme launched by the government of India open to all citizens of India on a voluntary basis and mandatory for the employees of central government who are appointed on or after 1 January 2004. Indian citizens between the age of 18 and 65 are eligible to join. See Japan Pension Service Government Pension Investment Fund, Japan Employees Provident Fund Caisse de dépôt et de gestion CMR Employees Provident Fund Nepal Stichting Pensioenfonds ABP Stichting Pensioenfonds Zorg en Welzijn The Government Pension Fund - Global The Government Pension Fund - Norway The pension system in Romania is made of three pillars. One is the state pension, the second is a private mandatory pension where the state transfers a percentage of the contribution it collects for the public pension, the third is an optional private pension.
The Financial Supervisory Authority – Private Pension is responsible for the supervision and regulation of the private pension system. Public Pension Agency General Organization for Social Insurance Central Provident Fund Pension system in Switzerland Sosyal Güvenlik Kurumu Social Security Institution was established by the Social Security Institution Law No:5502, published in the Official Gazette No: 26173 dated 20.06.2006 and brings the Social Insurance Institution, General Directorate of Bağ-kur and General Directorate
Insurance is a means of protection from financial loss. It is a form of risk management used to hedge against the risk of a contingent or uncertain loss. An entity which provides insurance is known as an insurer, insurance company, insurance carrier or underwriter. A person or entity who buys insurance is known as a policyholder; the insurance transaction involves the insured assuming a guaranteed and known small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship; the insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured. The amount of money charged by the insurer to the Policyholder for the coverage set forth in the insurance policy is called the premium.
If the insured experiences a loss, covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. The insurer may hedge its own risk by taking out reinsurance, whereby another insurance company agrees to carry some of the risk if the primary insurer deems the risk too large for it to carry. Methods for transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing; the Babylonians developed a system, recorded in the famous Code of Hammurabi, c. 1750 BC, practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen, or lost at sea. Circa 800 BC, the inhabitants of Rhodes created the'general average'.
This allowed groups of merchants to pay to insure their goods being shipped together. The collected premiums would be used to reimburse any merchant whose goods were jettisoned during transport, whether due to storm or sinkage. Separate insurance contracts were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates; the first known insurance contract dates from Genoa in 1347, in the next century maritime insurance developed and premiums were intuitively varied with risks. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in Enlightenment era Europe, specialized varieties developed. Property insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses; the devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for'the Insurance Office' in his new plan for London in 1667."
A number of attempted fire insurance schemes came to nothing, but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance company, the "Insurance Office for Houses," at the back of the Royal Exchange to insure brick and frame homes. 5,000 homes were insured by his Insurance Office. At the same time, the first insurance schemes for the underwriting of business ventures became available. By the end of the seventeenth century, London's growing importance as a center for trade was increasing demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house, which became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, those willing to underwrite such ventures; these informal beginnings led to the establishment of the insurance market Lloyd's of London and several related shipping and insurance businesses. The first life insurance policies were taken out in the early 18th century; the first company to offer life insurance was the Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas Allen.
Edward Rowe Mores established the Society for Equitable Assurances on Lives and Survivorship in 1762. It was the world's first mutual insurer and it pioneered age based premiums based on mortality rate laying "the framework for scientific insurance practice and development" and "the basis of modern life assurance upon which all life assurance schemes were subsequently based."In the late 19th century "accident insurance" began to become available. The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in England to insure against the rising number of fatalities on the nascent railway system. By the late 19th century governments began to initiate national insurance programs against sickness and old age. Germany built on a tradition of welfare programs in Prussia and Saxony that began as early as in the 1840s. In the 1880s Chancellor Otto von Bismarck introduced old age pensions, accident insurance and medical care that formed the basis for Germany's welfare state.
In Britain more extensive legislation was introduced by the Liberal government in the 1911 National Insurance Act. This gave the British working classes the first contributory system of insurance against illness and unemployment; this system was expanded after the Second World War under the inf
The British Isles are a group of islands in the North Atlantic off the north-western coast of continental Europe that consist of the islands of Great Britain, the Isle of Man, the Hebrides and over six thousand smaller isles. They have a total area of about 315,159 km2 and a combined population of 72 million, include two sovereign states, the Republic of Ireland, the United Kingdom of Great Britain and Northern Ireland; the islands of Alderney, Jersey and Sark, their neighbouring smaller islands, are sometimes taken to be part of the British Isles though, as islands off the coast of France, they do not form part of the archipelago. The oldest rocks in the group are in the north west of Scotland and North Wales and are 2.7 billion years old. During the Silurian period, the north-western regions collided with the south-east, part of a separate continental landmass; the topography of the islands is modest in scale by global standards. Ben Nevis rises to an elevation of only 1,345 metres, Lough Neagh, notably larger than other lakes in the island group, covers 390 square kilometres.
The climate is temperate marine, with warm summers. The North Atlantic drift brings significant moisture and raises temperatures 11 °C above the global average for the latitude; this led to a landscape, long dominated by temperate rainforest, although human activity has since cleared the vast majority of forest cover. The region was re-inhabited after the last glacial period of Quaternary glaciation, by 12,000 BC, when Great Britain was still part of a peninsula of the European continent. Ireland, which became an island by 12,000 BC, was not inhabited until after 8000 BC. Great Britain became an island by 5600 BC. Hiberni and Britons tribes, all speaking Insular Celtic, inhabited the islands at the beginning of the 1st millennium AD. Much of Brittonic-occupied Britain was conquered by the Roman Empire from AD 43; the first Anglo-Saxons arrived as Roman power waned in the 5th century, dominated the bulk of what is now England. Viking invasions began in the 9th century, followed by more permanent settlements and political change in England.
The Norman conquest of England in 1066 and the Angevin partial conquest of Ireland from 1169 led to the imposition of a new Norman ruling elite across much of Britain and parts of Ireland. By the Late Middle Ages, Great Britain was separated into the Kingdoms of England and Kingdom of Scotland, while control in Ireland fluxed between Gaelic kingdoms, Hiberno-Norman lords and the English-dominated Lordship of Ireland, soon restricted only to The Pale; the 1603 Union of the Crowns, Acts of Union 1707 and Acts of Union 1800 attempted to consolidate Britain and Ireland into a single political unit, the United Kingdom of Great Britain and Ireland, with the Isle of Man and the Channel Islands remaining as Crown Dependencies. The expansion of the British Empire and migrations following the Irish Famine and Highland Clearances resulted in the dispersal of some of the islands' population and culture throughout the world, a rapid depopulation of Ireland in the second half of the 19th century. Most of Ireland seceded from the United Kingdom after the Irish War of Independence and the subsequent Anglo-Irish Treaty, with six counties remaining in the UK as Northern Ireland.
The term "British Isles" is controversial in Ireland, where there are nationalist objections to its usage. The Government of Ireland does not recognise the term, its embassy in London discourages its use. Britain and Ireland is used as an alternative description, Atlantic Archipelago has seen limited use in academia; the earliest known references to the islands as a group appeared in the writings of sea-farers from the ancient Greek colony of Massalia. The original records have been lost. In the 1st century BC, Diodorus Siculus has Prettanikē nēsos, "the British Island", Prettanoi, "the Britons". Strabo used Βρεττανική, Marcian of Heraclea, in his Periplus maris exteri, used αἱ Πρεττανικαί νῆσοι to refer to the islands. Historians today, though not in absolute agreement agree that these Greek and Latin names were drawn from native Celtic-language names for the archipelago. Along these lines, the inhabitants of the islands were called the Πρεττανοί; the shift from the "P" of Pretannia to the "B" of Britannia by the Romans occurred during the time of Julius Caesar.
The Greco-Egyptian scientist Claudius Ptolemy referred to the larger island as great Britain and to Ireland as little Britain in his work Almagest. In his work, Geography, he gave these islands the names Alwion and Mona, suggesting these may have been names of the individual islands not known to him at the time of writing Almagest; the name Albion appears to have fallen out of use sometime after the Roman conquest of Great Britain, after which Britain became the more commonplace name for the island called Great Britain. The earliest known use of the phrase Brytish Iles in the English language is dated 1577 in a work by John Dee. Today, this name is seen by some as carrying imperialist overtones although it is still used. Other names used to describe the islands include the Anglo-Celtic Isles, Atlantic archipelago, British-Irish Isles and Ireland, UK
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham and David Dodd at Columbia Business School in 1928, subsequently developed in their 1934 text Security Analysis; the early value opportunities identified by Graham and Dodd included stock in public companies trading at discounts to book value or tangible book value, those with high dividend yields, those having low price-to-earning multiples, or low price-to-book ratios. High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value; the discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". For the last 25 years, under the influence of Charlie Munger, Buffett expanded the value investing concept with a focus on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price.
Graham never used the phrase, "value investing" — the term was coined to help describe his ideas and has resulted in significant misinterpretation of his principles, the foremost being that Graham recommended cheap stocks. Value investing was established by Benjamin Graham and David Dodd, both professors at Columbia Business School and teachers of many famous investors. In Graham's book The Intelligent Investor, he advocated the important concept of margin of safety — first introduced in Security Analysis, a 1934 book he co-authored with David Dodd — which calls for an approach to investing, focused on purchasing equities at prices less than their intrinsic values. In terms of picking or screening stocks, he recommended purchasing firms which have steady profits, are trading at low prices to book value, have low price-to-earnings ratios, which have low debt. However, the concept of value has evolved since the 1970s. Book value is most useful in industries. Intangible assets such as patents, brands, or goodwill are difficult to quantify, may not survive the break-up of a company.
When an industry is going through fast technological advancements, the value of its assets is not estimated. Sometimes, the production power of an asset can be reduced due to competitive disruptive innovation and therefore its value can suffer permanent impairment. One good example of decreasing asset value is a personal computer. An example of where book value does not mean much is retail sectors. One modern model of calculating value is the discounted cash flow model, where the value of an asset is the sum of its future cash flows, discounted back to the present. Value investing has proven to be a successful investment strategy. There are several ways to evaluate the success. One way is to examine the performance of simple value strategies, such as buying low PE ratio stocks, low price-to-cash-flow ratio stocks, or low price-to-book ratio stocks. Numerous academics have published studies investigating the effects of buying value stocks; these studies have found that value stocks outperform growth stocks and the market as a whole.
Examining the performance of the best known value investors would not be instructive, because investors do not become well known unless they are successful. This introduces a selection bias. A better way to investigate the performance of a group of value investors was suggested by Warren Buffett, in his May 17, 1984 speech, published as The Superinvestors of Graham-and-Doddsville. In this speech, Buffett examined the performance of those investors who worked at Graham-Newman Corporation and were thus most influenced by Benjamin Graham. Buffett's conclusion is identical to that of the academic research on simple value investing strategies—value investing is, on average, successful in the long run. During about a 25-year period, published research and articles in leading journals of the value ilk were few. Warren Buffett once commented, "You couldn't advance in a finance department in this country unless you thought that the world was flat." Benjamin Graham is regarded by many to be the father of value investing.
Along with David Dodd, he wrote Security Analysis, first published in 1934. The most lasting contribution of this book to the field of security analysis was to emphasize the quantifiable aspects of security analysis while minimizing the importance of more qualitative factors such as the quality of a company's management. Graham wrote The Intelligent Investor, a book that brought value investing to individual investors. Aside from Buffett, many of Graham's other students, such as William J. Ruane, Irving Kahn, Walter Schloss, Charles Brandes went on to become successful investors in their own right. Irving Kahn was one of Graham's teaching assistants at Columbia University in the 1930s, he was a close friend and confidant of Graham's for decades and made research contributions to Graham's texts Security Analysis and Stability, World Commodities and World Currencies and The Intelligent Investor. Kahn was a partner at various finance firms until 1978 when he and his sons, Thomas Graham Kahn and Alan Kahn, started the value investing firm, Kahn Brothers & Company.
Irving Kahn remained chairman of the firm until his death at age 109. Walter Schloss was another Graham-and-Dodd disciple. Schloss never had a formal education; when he was 18, he started working as a runner on Wall Street. He attended investment courses taught by Ben Graham at the New York Stock Exchange Institute
A hedge fund is an investment fund that pools capital from accredited investors or institutional investors and invests in a variety of assets with complex portfolio-construction and risk management techniques. It is administered by a professional investment management firm, structured as a limited partnership, limited liability company, or similar vehicle. Hedge funds are distinct from mutual funds, as their use of leverage is not capped by regulators, distinct from private equity funds, as the majority of hedge funds invest in liquid assets; the term "hedge fund" originated from the paired long and short positions that the first of these funds used to hedge market risk. Over time, the types and nature of the hedging concepts expanded, as did the different types of investment vehicles. Today, hedge funds engage in a diverse range of markets and strategies and employ a wide variety of financial instruments and risk management techniques. Hedge funds are made available only to certain sophisticated or accredited investors, cannot be offered or sold to the general public.
As such, they avoid direct regulatory oversight, bypass licensing requirements applicable to investment companies, operate with greater flexibility than mutual funds and other investment funds. However, following the financial crisis of 2007–2008, regulations were passed in the United States and Europe with intentions to increase government oversight of hedge funds and eliminate certain regulatory gaps. Hedge funds have existed for many decades and have become popular, they have now grown to be a substantial fraction of asset management, with assets totaling around $3.235 trillion in 2018. Hedge funds are always open-ended, allow additions or withdrawals by their investors; the value of an investor's holding is directly related to the fund net asset value. Many hedge fund investment strategies aim to achieve a positive return on investment regardless of whether markets are rising or falling. Hedge fund managers invest money of their own in the fund they manage. A hedge fund pays its investment manager an annual management fee, a performance fee.
Both co-investment and performance fees serve to align the interests of managers with those of the investors in the fund. Some hedge funds have several billion dollars of assets under management; the word "hedge", meaning a line of bushes around the perimeter of a field, has long been used as a metaphor for placing limits on risk. Early hedge funds sought to hedge specific investments against general market fluctuations by shorting the market, hence the name. Nowadays, many different investment strategies are used, many of which do not "hedge risk". During the US bull market of the 1920s, there were numerous private investment vehicles available to wealthy investors. Of that period the best known today is the Graham-Newman Partnership, founded by Benjamin Graham and his long-time business partner Jerry Newman; this was cited by Warren Buffett in a 2006 letter to the Museum of American Finance as an early hedge fund, based on other comments from Buffett, Janet Tavakoli deems Graham's investment firm the first hedge fund.
The sociologist Alfred W. Jones is credited with coining the phrase "hedged fund" and is credited with creating the first hedge fund structure in 1949. Jones referred to his fund as being "hedged", a term commonly used on Wall Street to describe the management of investment risk due to changes in the financial markets. In the 1970s, hedge funds specialized in a single strategy with most fund managers following the long/short equity model. Many hedge funds closed during the recession of 1969–70 and the 1973–1974 stock market crash due to heavy losses, they received renewed attention in the late 1980s. During the 1990s, the number of hedge funds increased with the 1990s stock market rise, the aligned-interest compensation structure and the promise of above high returns as causes. Over the next decade, hedge fund strategies expanded to include: credit arbitrage, distressed debt, fixed income and multi-strategy. US institutional investors such as pension and endowment funds began allocating greater portions of their portfolios to hedge funds.
During the first decade of the 21st century hedge funds gained popularity worldwide, by 2008 the worldwide hedge fund industry held US$1.93 trillion in assets under management. However, the 2008 financial crisis caused many hedge funds to restrict investor withdrawals and their popularity and AUM totals declined. AUM totals rebounded and in April 2011 were estimated at $2 trillion; as of February 2011, 61% of worldwide investment in hedge funds came from institutional sources. In June 2011, the hedge fund management firms with the greatest AUM were Bridgewater Associates, Man Group, Paulson & Co. Brevan Howard, Och-Ziff. Bridgewater Associates had $70 billion in assets under management as of 1 March 2012. At the end of that year, the 241 largest hedge fund firms in the United States collectively held $1.335 trillion. In April 2012, the hedge fund industry reached a record high of US$2.13 trillion total assets under management. In the middle of the 2010s, the hedge fund industry experienced a general decline in the "old guard" fund managers.
Dan Loeb called it a "hedge fund killing field" due to the classic long/short falling out of favor because of unprecedented easing by central banks. The US equity market correlation became untenable to short
Socially responsible investing
Responsible investing, or social investment known as sustainable conscious, "green" or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about a positive change. It has become known as "sustainable investing" or "responsible investing". There is a subset of SRI known as "impact investing", devoted to the conscious creation of social impact through investment. In general responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, diversity; some avoid businesses involved in alcohol, fast food, pornography, contraception/abortifacients/abortion, fossil fuel production or the military. The areas of concern recognized by the SRI practitioners are sometimes summarized under the heading of ESG issues: environment, social justice, corporate governance. "Socially responsible investing" is one of several related concepts and approaches that influence and, in some cases, govern how asset managers invest portfolios.
The term "socially responsible investing" sometimes narrowly refers to practices that seek to avoid harm by screening companies included in an investment portfolio. However, the term is used more broadly to include more proactive practices such as impact investing, shareholder advocacy and community investing. According to investor Amy Domini, shareholder advocacy and community investing are pillars of responsible investing, while doing only negative screening is inadequate; the origins of responsible investing may date back to the Religious Society of Friends. In 1758, the Quaker Philadelphia Yearly Meeting prohibited members from participating in the slave trade – buying or selling humans. One of the most articulate early adopters of SRI was John one of the founders of Methodism. Wesley's sermon "The Use of Money" outlined his basic tenets of social investing – i.e. not to harm your neighbor through your business practices and to avoid industries like tanning and chemical production, which can harm the health of workers.
Some of the best-known applications of responsible investing were religiously motivated. Investors would avoid “sinful” companies, such as those associated with products such as guns and tobacco; the modern era of responsible investing evolved during the political climate of the 1960s. During this time concerned investors sought to address equality for women, civil rights, labor issues. Economic development projects started or managed by Dr. Martin Luther King, like the Montgomery Bus Boycott and the Operation Breadbasket Project in Chicago, established the beginning model for responsible investing efforts. King combined ongoing dialog with direct action targeting specific corporations. Concerns about the Vietnam War were incorporated by some social investors. Many people living during the era remember a picture in June 1972 of a naked nine-year-old girl, Phan Thị Kim Phúc, running towards a photographer screaming, her back burning from the napalm dropped on her village; that photograph channeled outrage against Dow Chemical, the manufacturer of napalm, prompted protests across the country against Dow Chemical and other companies profiting from the Vietnam War.
During the 1950s and 1960s, trade unions deployed multi-employer pension fund monies for targeted investments. For example, the United Mine Workers fund invested in medical facilities, the International Ladies' Garment Workers' Union and International Brotherhood of Electrical Workers financed union-built housing projects. Labor unions sought to leverage pension stocks for shareholder activism on proxy fights and shareholder resolutions. In 1978, SRI efforts by pension funds was spurred by The North will Rise Again: Pensions and Power in the 1980s and the subsequent organizing efforts of authors Jeremy Rifkin and Randy Barber. By 1980, presidential candidates Jimmy Carter, Ronald Reagan and Jerry Brown advocated some type of social orientation for pension investments. SRI had an important role in ending the apartheid government in South Africa. International opposition to apartheid strengthened after the 1960 Sharpeville massacre. In 1971, Reverend Leon Sullivan drafted a code of conduct for practicing business in South Africa which became known as the Sullivan Principles.
However, reports documenting the application of the Sullivan Principles said that US companies were not trying to lessen discrimination in South Africa. Due to these reports and mounting political pressure, states, faith-based groups and pension funds throughout the US began divesting from companies operating in South Africa. In 1976, the United Nations imposed a mandatory arms embargo against South Africa. From the 1970s to the early 1990s, large institutions avoided investment in South Africa under apartheid; the subsequent negative flow of investment forced a group of businesses, representing 75% of South African employers, to draft a charter calling for an end to apartheid. While the SRI efforts alone did not bring an end to apartheid, it did focus persuasive international pressure on the South African business community; the mid and late 1990s saw the rise of SRI’s focus on a diverse range of other issues, including tobacco stocks, mutual fund proxy disclosure, other diverse focuses. Since the late 1990s, SRI has become defined as a means to promote environmentally sustainable development.
Many investors consider effects of global climate change a significant investment risk. CERES was founded in 1989 by Joan Bavaria and De