Socially Responsible Investment and Consumer-Led Environmentalism

This week, more than a dozen major corporations have joined forces to prioritize action on climate change. The coalition features a wide variety of industries, with Citi Bank, Shell Oil, and DuPont each joining on as members. This development provides yet another example that demonstrates the strong ability of businesses and consumers to initiate action on environmental issues.

It is no coincidence that corporations like Citi, Shell, and DuPont are voicing strong support for sustainability and action on climate. These organizations, along with many others, are responding tactfully to shifts in consumer attitudes. Consumers are beginning to place a greater emphasis on ethical values as opposed to monetary value, and this trend has led to massive growth in socially responsible investing (SRI). Rather than basing purchases and investments solely on potential returns, today’s consumers also take into account how a company conducts its business and whether or not it is doing good for the world. Socially responsible investors avoid supporting entities that fail to align with their values and often emphasize factors such as a company’s commitment to environmental issues when making investment decisions. Socially responsible investments have amounted to more than $12 trillion, equivalent to one fourth of managed assets in the United States, signaling that this trend is widespread and significantly impacts how businesses conduct themselves.

In their responses to socially responsible investing, corporations are not limiting themselves to expressing pro-environment rhetoric and engaging in advocacy efforts; many of them have taken voluntary action to demonstrate their concrete commitments to sustainability. Volvo recently entered into multi-billion dollar agreements with lithium ion battery manufacturers and pledged to have electric cars account for half of its sales by 2025. Apple pursued an aggressive transition away from fossil fuels and has been 100 percent powered by renewable energy since April of last year. Countless more corporations have taken similar actions, and much of this relates to the fact that nearly half of American consumers are willing to change consumption habits and choices to reduce their impacts on the environment.

Emphasis on values and socially responsible investing is even more pronounced among millenials and younger consumers. An impressive 83 percent of millenials say it’s extremely or very important for companies to pursue initiatives and implement programs that improve the environment. Millenial and Gen Z consumers, typically more integrated in the digital age, actively seek out products and companies online that align with their values. These trends help to create an open, competitive marketplace where the more socially responsible and environmentally friendly companies will enjoy greater success and attract more investments. The business and consumer-led movements towards sustainability and environmental consciousness will only intensify as millenials and Gen Z’ers begin to play greater roles in consumer markets.

Relationships between businesses and consumers have undergone significant changes in recent years. Consumers, no longer relying on profit potential as the exclusive factor in deciding where to invest, now place greater weight on values and hold companies to higher ethical standards. This philosophical shift has led to the emergence of socially responsible investment, and businesses have adopted pro-environment rhetoric and pursued sustainable initiatives in response. Together, consumers and businesses are contributing heavily to progress on environmental issues, and all of this action is taking place voluntarily and without government mandates. As consumers, we possess substantial power when it comes to shaping business behaviors, and this ability should be wielded to bring about environmental benefits that government intervention often fails to accomplish.