In previous articles, the attempt was made to explain and expand the meaning behind Socially Responsible Investing (SRI). Now we turn to its historical development.

There are number of historical events and issues that affected the investment industry in general, and the development of SRI in particular. As we will see, the rise of SRI is closely linked to some major changes in society around the world. Socially Responsible Investing has always followed the development of some key social movements, such as those supporting human rights or environmental awareness (Shepherd 2001).
 

The concept of using money in a morally acceptable way goes back to the origins of Christianity. The correct use of money is a recurring topic throughout the Christian Holy Scripture, better known as the Bible (the theme is also recurring in other religious writings, i.e. the Koran etc.). By emphasizing universal moral standards, the Bible obliges Christians to act in a responsible manner even with their material belongings. Although they are not forbidden to own, they are called to own in a responsible manner. Hancock (2002) confirms this when reasoning that religious beliefs do not preclude an individual from accumulating wealth by building a successful business through hard work or investing, but it should preclude achieving such a goal by unethical means. Thus, religious organizations such as churches or religious charities, by insisting on moral responsibility, produced the first driving force and effort to include an ethical element to investment and portfolio management in the early 20th century.

Kreander et al (2004) made an observation that such initiatives and developments “represented an attempting to put religious beliefs into practice”. By contrast, Williams (2005) assigned the early development of Socially Responsible Investing in the UK to Victorian social concerns about temperance and fair employment conditions. However, the significant role of Quakers, Methodists and some other denominations in establishing ethical investments in the UK is well supported (see Kinder and Domini 1997; Hancock 2002; Sparkes 2002; Kreander et al 2004).

In addition, the first ethical fund available to public investors in Europe was the Ansvar Aktiefond Sverige based in Sweden. Kreander et al (2004) emphasize the involvement of certain churches (such as Baptists) in setting up this mutual fund. Among the most active religious organizations in this area were the Methodist church (known for their ascetic zeal against alcohol, tobacco and gambling) and Quakers (known for their pacifism). These churches were the first significant ethical investors.

“Concurrently, many churches began to see inconsistencies between their preaching and their portfolios. Was it not hypocritical of them to rail against apartheid on Sunday and cash the dividend checks they received on their South African investments on Monday? How could they oppose smoking while owning stock in cigarette manufacturing companies such as Philip Morris Companies Inc. or American Brands Inc.? Was their avowed opposition to war as a means to resolve international disputes credible if their own portfolios included shares of the nation’s major defense contractors such as General Dynamics Corporation or McDonnell Douglas Corporation? And so, churches became leading players in the socially responsible investing movement.” (Miller 1991:4)