As investors become increasingly concerned about more than just the financial bottom line, many companies are look at ways of becoming environmentally and socially accountable.

This need for sustainable and responsible operational strategies has grown from the ethical investing movement, or Sustainable Responsible Investment (SRI).

Defined by the Ethical Investment Association of Australasia as “an approach to investing that considers both the profit potential and the investment's impact on society and the environment”, SRI helps share buyers make an investment choice which mirrors their individual ethical standards, while still remaining viable economically.

In fact, SRI companies are a more financially viable option than many would think.

The 2006 Annual SRI Benchmarking study was undertaken by ethical investment company Corporate Monitor.

It found that although the SRI sector is still only a minor part in the Australian market, it is growing rapidly.

A snapshot of 40 Australian financial advisors who had clients with SRI weighted share portfolios indicated investment of $681 million, a 40 per cent jump from $482 million in 2005.

This growth can be attributed to solid share market performance and a rise in the level of superannuation assets and investment portfolios, as well as continued acceptance and integration of SRI values, the study said.

So how do shareholders determine which companies are ethically responsible?

The Ethical Investment Association of Australia provides four key approaches in selecting an ethically responsible company.

- Negative Screening – avoiding companies involved in producing ethically unsound goods and services such as gambling, smoking or weapons companies

- Positive Screening – supporting companies with existing ethically sound products and practices such as renewable energy, health care, as well as future-oriented ventures

- Best of Sector – using a company’s environmental and social performance and sustainability as a determining measure within each business segment, and

- Social Responsibility Overlay – choosing shares conventionally, but also taking into consideration the company’s attitudes and practices towards social responsibility.

It is also important for ethical investors to look for like-minded fund managers with an emphasis on transparency as well as a high level of openness regarding the investment procedure from start to finish, the SRI study said.

It’s a change in thinking – and investing - which is steadily being incorporated into the business environment.

The Australian Ethical Investment company has its own ethical charter, which provides detailed guidelines on which companies ethical shareholders should either support or avoid.

In line with other accepted SRI guidelines, it recommends avoiding investments which needlessly harm or destroy both sentient beings and natural resources, exploit people through financial over-commitment or substandard working conditions, and act to the detriment of humankind, for example through armament production.

Alternatively, it encourages supporting investments that promote environmental preservation, human rights, the reduction of poverty in all its forms and ventures which contribute to human independence, happiness, dignity and education.

These guidelines spell out what is also known as the “Triple Bottom Line”, the new key indicators of a company’s value - its approach to the planet, people and profit.

In looking at non-financial activities as a measure of a company’s investment value, shareholders are now forcing company executives to be accountable in areas that were once considered trivial. It’s a balancing act for organisations – should they get it wrong, it may be the company itself facing extinction.