How John Wesley Paved the way for Socially Responsible Investing

If you are a bit confused let us clarify. Yes, we mean THAT John Wesley. The one who founded the Methodist faith. If you are asking what could a religious cleric possibly have to do with Wall Street, please, read on.

The first roots of socially responsible investing in the United States are believed to date back over 200 years to the investment practices of the Methodist religion.  John Wesley, the founder of the faith urged his practitioners to avoid the practice of making money at the expense of their neighbors.  As a result, members of the faith refrained from making investments or forming partnerships with anyone who made their money through alcohol, tobacco, weapons, gambling, and a few more categories that made up the group of investments known as sin stocks.  These prohibitions laid the groundwork for the idea of investing in ways that aligned with an individuals moral and ethical compass. 

The 1960’s saw a rise of activism in a generation that was dissatisfied with the state the Vietnam War, civil rights, and income inequality.  Once the 1970’s arrived that activism made its way into labor movements, and ultimately into corporate resolutions.  As the decade continued concerns over the environment, and nuclear power started to take the place of war activism.

It was the 1980’s that the power of socially responsible investing was first seen.  In response to the growing unrest over the racist system of apartheid in South Africa, many organizations divested themselves of all investment in the country. The lack of capital led to economic instability in the country and helped contribute to the end of the apartheid system.

The 80’s also saw the creation of the first specific socially responsible investment funds.  The first generation of SRI funds used positive and negative to screen stocks in the portfolio.  These screens included the original sin stocks of the Methodist belief as well as more modern filters for environmental concerns and race relations.

The proliferation of SRI funds continued throughout the 90’s and 2000’s as demand grew and consumer awareness of the funds became more common. As millennial investors came onto the scene in the 2000’s popularity of SRI funds exploded into a full scale industry of its own. The current landscape provides options for every type of investor, with every type of ethical code.