EXPLORING SOCIALLY RESPONSIBLE INVESTMENT IN PAKISTAN

Key Points:

  • Socially responsible investment or investing (SRI) is an umbrella term for investments and investment strategies that consider the attempt to create positive social change, minimise environmental damage, and incorporate religious or ethical beliefs.
  • A socially-oriented investor makes environment, social and corporate governance (ESG) metrics an integral component of the investing process.
  • SRI and Corporate Social Responsibility (CSR) can be considered “the two sides of the same coin”. CSR is the corporate answer to SRI and a firm’s solution to ESG concerns raised by shareholders.
  • Social screening, community investing, and shareholder activism are major SRI strategies.
  • Though a relatively new trend, the increased state guidelines regarding the SRI strategies have increased the need for SRI products in Pakistan.
  • Apart from the SECP and PSX’s requirements, SRI is quite closely associated with the Islamic code of business conduct.
  • Lack of information, transparency and due diligence, and higher risk perception towards SRI comprise the major impediments to the investment strategy in the country.
  • SRI can become more widespread in Pakistan by mentoring younger investors, increasing transparency, suitable registrations and governance mechanisms, and allowing access to relevant information. Also, as MNCs are diligent in abiding by CSR and imposing it on their contractual partners, increased local-MNC partnerships can increase the room for SRI as a consequence.

Fareha Iqtidar Khan

Fareha Iqtidar Khan is Associate Editor at the Centre for Strategic and Contemporary Research. She is also Visiting Faculty at the International Islamic University, Islamabad.

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