The History of ESG

Lily Styrmoe, CFP®, CSRIC™

Oct 22, 2020

If I’m getting interested in a new sport, I like to know the history behind it. Who made it popular? Who was the first person to really test the boundaries? Where did the technology come into play to make the sport bigger and better than ever before? Mountain biking is my new sport, and the amount of content I’ve consumed is a little embarrassing. But if I’m passionate about something, I want to know where it started.

That’s why I feel like it’s important for us to understand the origins of SRI investing. And in such a tumultuous time, it’s often helpful to look back through history to see where the big catalysts of change came from…and maybe we can continue learning and progressing if we take the time to look back.


First, let’s understand the difference between SRI and ESG. SRI (Sustainable and Responsible Investing) is really the overarching term for so many different facets of investing. Green investing, mission-based investing, triple bottom line investing….the list goes on and on. Based on the The Chartered SRI Counselor™ (CSRIC™) literature The Foundations and History of SRI, a true SRI portfolio will balance three dimensions: Integration, Values, and Impact.

  • Integration- maximizing returns with minimal risk—you’ve read this many times before when researching basic investing principles. But! The thought here is that you are investing in ethical, strong, responsible companies that will organically minimize risk just by their practices.
  • Values- this is a big one, does the portfolio align with investors’ values?
  • Impact- what is the lasting impact investors are making by utilizing this portfolio? Can you measure the change that these investments make in the real world?

ESG is really the analysis that is incorporated in all SRI strategies. ESG stands for environmental, social and governance criteria that helps build the standards for an SRI portfolio.

  • Environmental: Climate change, green buildings, cleaning up pollution, water use and conservation.
  • Social: workplace safety, avoidance of tobacco, diversity and anti-bias.
  • Governance: Corporate political contributions, board diversity, executive comps.

The list goes on regarding these criteria, but you get the idea.

Now that we have the basics down, let’s get into some history! Let’s play the highlight reel of the history of SRI; this is a blog post after all.  

A Brief History of SRI

In reality, there is an incredible number of iterations to sustainable investing that stemmed from different religious beliefs. Judaism, Christianity and Islam encouraged people to consider their morals in their money practices. Based on the text from The Foundations and History for SRI, Judaism acknowledged that investments can be a driver for social good. In Christianity, there is the goal to avoid business practices that are sinful or unholy. Finally, in the Islam religion, specific Shariah-compliant funds are used to abide by the concept that interest collected on loans is forbidden in Islamic practice (just to name a few).

1758- In Philadelphia, the Quaker leadership forbade their members from profiting from the slave trade. Their discussion focused on the issue of slave trading as an ethically viable industry. According to the CSRIC text, this is the first time the term “socially responsible” was used in the context of investing.

1872- John Wesley of the Methodist Church gave a sermon titled “The Use of Money,” where he introduced the idea of sin stocks: no guns, liquor, or tobacco. I really appreciate this quote from Wesley’s sermon: “We ought to gain all we can gain but this it is certain we ought not to do; we ought not to gain money at the expense of life, nor at the expense of our health.”

1968- The first non-religious approach to SRI investing can be linked back to unrest with the Vietnam War, the Civil Rights movement and the push for equality for women. One example includes shareholders pressuring companies to stop the production of napalm.

1988- Anti-Apartheid Investors screened $625 billion of investments to exclude South African businesses and projects.

1990-The Domini Social Index was created, the first cap-weighted index fund that met certain standards of environmental and social excellence.

1997- The Kyoto Protocol is adopted, committing industrialized countries and economies in transition to limit and reduce greenhouse gas emission with agreed upon targets.

Moving into the 2000s, we have the PRI (Principles of Responsible Investing), an effort to increase sustainable investing and the SDG’s: 17 Sustainable Development Goals created by the Department of Economic and Social Affairs at the United Nations. 

Current SRI Trends

According to the author Jon Hale, “Today, sustainable funds are available in open-end (221) and exchange-traded (82) formats; most are equity funds (219), but investors now can consider 57 fixed-income funds and 27 allocation funds.”

Sustainable and responsible investing now comes in a multitude of different flavors. Do you want to focus on exclusionary metrics and screen out sin stocks? Do you want to focus on a fund that is investing in renewables? Are you looking at a more local, community bond fund for affordable housing projects? WHATEVER your passion and value, know that there are more options than ever before.

Needless to say, this is a huge movement that continues to draw in more investors. Based on an article from Morningstar, “Global sustainable funds pulled in $45.6 billion during the first quarter, compared to an outflow of $384.7 billion for the overall fund universe amid the coronavirus pandemic market sell-off.”

While the news is inundating us with negative information on a minute-to-minute basis, I like to focus on this silver lining. Out of war, slavery, chemical weapons, oil spills, etc. comes change. Change to insist that companies do better, focus on the future, and protect the resources we have for the next generation. Focus to treat people equally and give everyone opportunity. I have to continue to believe in this change for a better world. And when I can’t focus on the silver lining…that’s when I know it’s time to jump on the mountain bike and pedal it out!

Get new blog posts in your inbox:


Share this Post:

Contact Headshot Image

Let's talk.

Curious to see if we’re a good fit for each other? All it takes is a brief conversation with a TCI advisor to find out. Fill out the form below to have an advisor contact you. We’d love to hear from you.

(877) 733-1859

Your Name

Phone Number

Email address

ZIP code