Which concept emphasizes sustainability and ethics in investment choices?

Socially Responsible Investing (SRI) is centered around the principle of integrating environmental, social, and governance (ESG) factors into investment decisions. This approach advocates for the use of capital in ways that promote sustainable and ethical practices. Investors who practice SRI seek not only financial returns but also positive social and environmental impacts from their investments. This concept encourages the selection of companies and projects that adhere to ethical standards, support community development, promote environmental sustainability, and engage in fair labor practices.

In contrast to traditional investment strategies, which primarily focus on financial performance without necessarily considering ethical implications, SRI specifically prioritizes these sustainability and ethics factors. Similarly, risk arbitrage typically involves profiting from price discrepancies between related securities and does not inherently account for ethical or sustainable practices. Index fund investing may track a wide array of companies, but it does not specifically target investments based on ethical considerations unless those criteria are explicitly built into the index.

The choice of SRI highlights the growing recognition among investors that financial decisions can also reflect personal values, leading to a broader understanding of the impact of investments on society and the environment.