Socially responsible investments: Value creation beyond economic performance

By Valery Diaz and Kevin Serpa

What is the first thing you think about an investment? Traditionally, its success has been focused only on evaluating how economically profitable it turns out to be for the parties involved in the transaction, leaving aside very important aspects in the current global context. Various initiatives such as the fight against climate change or respect for human rights show the need to rethink the value of an investment beyond the profits obtained, and incorporate new factors that allow expanding its impact framework as socially responsible investments.

Socially responsible investment, known by its acronym ‘SRI’, can be defined as that strategy that combines social and environmental criteria with traditionally financial criteria when making an investment decision and / or managing assets (Alejos, 2014). This practice dates back to the early 70s with the launch of the first SRI mutual fund in the US, and in the last twenty years they have gained much more relevance as a complement to traditional financial analysis and portfolio construction techniques (Principles for Responsible Investment, 2020).

With the launch in 2006 of the Principles for Responsible Investment and its alignment with the Sustainable Development Goals established by the UN in 2015, these investments have gone from being marginally followed by few investors to being practiced in more than 40 countries by institutional investors (Principles for Responsible Investment, n.d.).

We will delve into the relevance of SRI in the current context and the criteria it considers to decide where to allocate these investments. Likewise, we will describe the role of the Program of Responsible Investment (PRI) as an organization dedicated to promoting SRI, the principles that they established among its signatories and the main advances achieved in Peru. Subsequently, we will present the financial instruments that allow this type of investment.

Unlike conventional investments, which have the sole purpose of obtaining economic returns, SRI seeks that these returns are also socio-environmental and intended for organizations with adequate corporate governance (Fernández, 2013). Therefore, this type of investment relies on corporate social responsibility and stakeholder theory to argue that ethical behavior can improve the economic performance of assets or a portfolio, especially in the long term (Cañal et al., 2008).

In this way, ISRs respond to ESG (environmental, social and corporate governance) criteria:

  1. Environmental: Environmental considerations, which can be observed through business activity impact reports, initiatives to reduce pollution levels or carbon emissions, waste management, water management, among others.

  2. Social: Aspects related to the working conditions of employees in the workplace (diversity, human rights) and ties with the community (philanthropy).

  3. Corporate Governance: Focused on business practices at the level of shareholders and those who make up the C-suite regarding the management of companies (anti-corruption, compensation, tax strategy, donations, among others).

Taking these factors into account, SRI managers can incorporate them into the comprehensive financial analysis of the various investment options, in order to decide how to build their portfolio. In this way, they can incorporate into this process other practices such as “screening”, which seeks to select companies based on values ​​or codes of ethics of an investor; or “thematic investments”, which are known as high impact investments as they contribute to obtaining specific environmental and social results. Some examples of current thematic investment funds include environmental technology, cybersecurity, artificial intelligence, infrastructure, among others.

The Program of Responsible Investment

At the international level, the mission of the Program of Responsible Investments (PRI) is to achieve the creation of a sustainable global financial system by promoting certain principles related to responsible investment (PRI, n.d.) The PRI was established thanks to a group of investors institutions of the UN in 2005. The six principles were finally launched in 2006 on the New York Stock Exchange, and since then the number of signatories has grown exponentially (see graph 1):

Graph 1: Evolution of signatories and assets under management (US$) from 2006 to 2020

Source and elaboration: PRI, n.d.

In this way, in a period of 15 years the number of signatories to the PRI has grown by 47 times its original number (from 63 founders to 3,038). By April of this year, a value of assets managed by all the signatories of US$ 103.4 trillion was considered. Delving into the PRI, we will mention below the six principles promoted by the organization, which, in turn, allow its signatories to incorporate actions related to ESG criteria in investments:

  1. We will incorporate environmental, social and corporate governance (ESG) issues into investment analysis and decision-making processes.

  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.

  3. We will seek appropriate disclosure of ESG issues by the entities in which we invest.

  4. We will promote the acceptance and implementation of the Principles within the investment industry

  5. We will work together to enhance our effectiveness in implementing the Principles

  6. We will each report on our activities and progress towards implementing the Principles.

Undoubtedly, all these guidelines point to the responsibility, transparency and communication of the destination of the investment funds and the instruments used, as well as the articulated work between all the actors participating in the process to integrate ESG factors in investigations and evaluations. financial; from analysts, commission agents, rating agencies, among others. In this way, the PRI presents guidelines for a capital market regulation framework, on which they can facilitate socially responsible investment in stock exchanges.

As for the PRI in Peru, in 2016 it was formalized as a non-profit entity, and currently has 20 signatories, among which both exponent companies of the country (banking, insurance, AFPs, asset management) and the Office participate. of Provisional Standardization (ONP), COFIDE, among others (Responsible Investment Program, n.d.). Since 2020, within the framework of COP20, the PRI has a priority to increase its presence in the Peruvian market via the Lima Stock Exchange (BVL), Grupo Sura, A2G and COFIDE.

Financial instruments and sustainability in capital markets

Currently, there are numerous studies that show that the integration of ESG criteria in investment processes generate higher returns and reduce the downturn risk (Cox, Brammer, & Millington, 2004); (Sherwood and Pollard, 2017); (Humphrey and Tan, 2014); (Johnson and Greening, 1999). The success of these investment strategies can be understood due to the incorporation of a multidimensional analysis, in which not only the economic-financial factor is evaluated, but also social and environmental risk factors that can threaten the performance of the company are analyzed.

SRI is given through different investment mechanisms, among them are equities (shares). Investing in stocks from companies who show good ESG indicators have proven to be more resilient in times of recession. For example, in the Latin American region, those companies with good ESG indicators have historically had fewer losses in the stock market during the first months of the COVID-19 crisis, compared to their peers whose ESG indicators are not favorable (see graph 2).

Graph 2: Gross return% of the MSCI ESG leaders vs non-ESG index in Latin America

On the other hand, fixed income instruments refer to the issuance of debt instruments, also called bonds.

It is important to note that investments in bonds represent a great opportunity to finance large infrastructure projects and long-term sustainable development projects because the characteristics of the bond itself entail a very low level of risk for the investor, and in general, they have an expiration date greater than 5 years.

Today the potential of bonds to attract large flows of money has involved the creation of thematic bonds. The characteristic of these bonds is that they are linked to the financing of projects related to the fulfillment of the United Nations Sustainable Development Goals (IDB Invest, n.d.).

The International Capital Markets Association (ICMA) defines some types of thematic bonds as follows:

  • Green bonds: these are debt instruments used to finance green projects. For example, in renewable energy, sustainable building, pollution control, among others (ICMA, 2018a).

  • Social bonds: these are instruments focused on financing social projects, for example to finance programs that provide access to essential services, job creation and healthy eating systems (ICMA, 2020a).

  • Sustainable bonds: the combination of a green bond with a social bond results in a sustainable bond, in this way, objectives with greater scope and depth are integrated regarding a problem in which society and the environment are involved (ICMA, 2018b).

  • Bonds linked to ESG indicators: in this type of bond, the price and yield of the bond itself is subject to the results of the ESG criteria of the entity issuing the bond. In other words, the amount collected is intended to improve the main indicators that affect the company's ESG criteria. (ICMA, 2020b)

  • Transition bonds: unlike the previous ones, the transition bond is aimed to companies with high emissions of greenhouse gases and / or dangerous for the environment in order to transform their production processes more ecological. Transition bonds are only recognized in those companies from brown industries, for example: the industrial sector, materials, public services, and transport (BNP Paribas, 2019)

According to estimates by the BNP Paribas bank (2020), the accumulated issuance of thematic bonds globally in recent years is close to reaching 1 trillion dollars (see graph 3). Green bonds are the ones that cover the largest amount in the market.

Graph 3: Issuance of thematic bonds by category 2012-2020


Responsible investments are positioning themselves as a viable alternative investment, and, above all, they are understood as investments deeply aligned with the 2030 Agenda. As part of the promotion of a more inclusive and sustainable financial system, the role of the PIR is fundamental given that the promotion and incorporation of ESG criteria in institutional investors allow to focus investments on companies and/or projects whose purpose is to obtain a financial return and achieve good results on SDGs.

Finally, the ability of SRI to attract large capital flows from individual and institutional investors has given rise to the innovation of financial products aimed at meeting social and environmental needs. In this sense, it is expected that these instruments will consolidate in the Latin American region and they may enhance the great challenges that Latin America faces.

Bibliographic references

PRI. (n.d.). About the PRI. Retrieved October 2, 2020, from,the%20Principles%20for%20Responsible%20Investment.

Alejos, C. (Ed.). (2014, march). Socially Responsible Investment (SRI): An option committed to well-being (No. 22). "La Caixa" Chair of Company Social Responsibility and Corporate Governance.

BID Invest. (n.d.). Financial Products and Services: Thematic Bonds. Obtenido de

BNP Paribas. (2019). Transition Bonds - New funding for a greener world.

Cañal, V., Pérez, B., Rodríguez, M., Bilbao, A., & Arenas, M. (Eds.). (2008, September). Socially Responsible. Multicriteria Decision Group of the University of Oviedo.

Cox, P., Brammer, S., & Millington, A. (June of 2004). An Empirical Examination of Institutional Investor Preferences for Corporate Social Performance. Journal of Business Ethics, 27 - 43. doi:10.1023/B:BUSI.0000033105.77051.9d

Fernández, G. M. (2013, 1st July). Do the returns and risk differ in unconventional mutual funds? | Notebooks of Economy and Management of the CEDE Company. ELSEVIER.

Humphrey, J., & Tan, D. (2014). Does it Really Hurt to be Responsible? Journal of Business Ethics, 375-386. doi:10.1007/s10551-013-1741-z

ICMA. (2018a). Green Bond Principles: Voluntary Process Guidelines for Issuing Green Bonds. Retrieved from:

ICMA. (2018b). Sustainability Bond Guidelines. Retrieved from:

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ICMA. (2020b). Sustainability-Linked Bond Principles: Voluntary Process Guidelines. Retrieved from:

Johnson, R., & Greening, D. (1999). The Effects of Corporate Governance and Institutional Ownership Types on Corporate Social Performance. The Academy of Management Journal, 564-576. doi:10.2307/256977

Principles for Responsible Investment. (n.d.). The SDG investment case. PRI. Retrieved October 2nd of 2020, from

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Programa de Inversión Responsable, PIR. (s. f.). Somos | PIR - Programa de Inversión Responsable. Retrieved October 2ndo of 2020, from

Sherwood, M., & Pollard, J. (2017). The risk-adjusted return potential of integrating ESG strategies into emerging market equities. Journal of Sustainable Finance & Investment. doi:10.1080/20430795.2017.1331118