ABSTRACT
As you will have seen in earlier chapters of this book, responsible investment (RI) is by no means a new concept. Indeed Kinder and Domini (1997) trace the origin of responsible investment in the USA to as far back as the seventeenth century. The first RI fund was launched in 1923 (Plihon and Ponssard, 2002). Plihon and Ponssard (2002) document that the early responsible investors were motivated by a desire to exclude certain firms from their portfolios that engaged in businesses not aligned with their religious beliefs (see also Knoll, 2002; Derwall, Koedijk and Ter Horst, 2011). Thus was born the concept of negative screening. Stocks in these undesirable industries have subsequently been labelled ‘sin stocks’ and comprise stocks of firms involved in alcohol, tobacco, gambling, pornography and weapons production, among other issues. Today, there are still many RI products that use negative screening, although the available screens now also incorporate such issues as poor environmental behaviour, animal testing and human rights abuses, along with the traditional sin screens. Negative screening can also be performed at the country level. For example, during the apartheid regime many RI products did not invest in South Africa. More recently, with the ethnic cleansing in the Darfur region of the Sudan, a negative screen on Sudan has been imposed by a large number of RI products, as investors do not want to hold companies with involvement in that country. For example, in the USA, the US Social Investment Forum Foundation (2012) reported that a screen for Sudan was used by institutions that held over $1.63 trillion in assets.
