Tuguegarao Archdiocesan Schools System

LYCEUM OF TUAO
Centro 02, Tuao, Cagayan, 3528
Email address: lyceumoftuao1965@yahoo.com.ph
BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

NAME OF TEACHER: AMY LIBERTY P. CASIBANG, LPT/ 0915-953-8600

MODULE NUMBER: 7 (2 WEEKS)
MODULE TITLE: LESSON 13: SOCIALLY RESPONSIBLE INVESTMENT (SRI) AND SUSTAINABILITY

LESSON OBJECTIVES:
At the end of this lesson, the students should be able to:
1. Define socially responsible investment (SRI);
2. Explain ethical banking;
3. Explain Economy of Communion enterprises; and
4. Explain impact investing.

DEFINING SOCIALLY RESPONSIBLE INVESTMENT (SRI)

The concept of social enterprise continues to mean different things to different people and there is no clear
understanding on where to locate it and on how to qualify social entrepreneurs. The term social enterprises is used to
refer either to an activity carried out or to particular organizations
and institutions. Social enterprise is thought to be something new
and something distinct from classical business an traditional non-
profit activity, combining at different extents elements of the social
purpose, the market orientation and financial-performance standards
of business.

SOCIALLY RESPONSIBLE INVESTMENT (SRI)

Socially Responsible Investment (SRI) is a strategy that considers not
only the financial returns from an investment but also its impact on
environmental, ethical or social change.

Ways to Make Socially Responsible Investments

An SRI encompasses many other types of investments, the similarity
between them being that they have a positive social impact. To be specific, investors looking to make such
investments focus on three key aspects – environmental, social, and corporate governance (ESG). Investors use the
three factors to assess the sustainability or social impact of an investment.

Now, socially responsible investors use various approaches to ensure their ventures achieve social goals,
namely:

1. Negative Screening
As implied in the name, the technique involves screening a company’s practices and products and/or services before
deciding to invest in it. So, if a potential investor discovers that a particular company produces harmful products –
such as cigarettes – or engages in unethical practices, then they won’t put their money into it.

2. Positive Investing
Here, an investor chooses to invest in companies whose practices they approve of. For example, let’s say that an
individual really cares about the environment. Then, their portfolio will probably comprise investments they’ve made
in green energy.
It can also mean that the only companies they’re willing to collaborate with are those that adhere to sustainable
practices. Examples of such green practices include:

-efficient equipment
-friendly work policies, such as asking individuals to switch off lights in rooms that are not in
use.

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 Tuguegarao Archdiocesan Schools System
LYCEUM OF TUAO
Centro 02, Tuao, Cagayan, 3528
Email address: lyceumoftuao1965@yahoo.com.ph
3. Community Investing
If an investor wants to try their hand at SRI, community investing is one of the best approaches. It entails putting
money in projects that boost local communities economically. For example, projects that utilize readily available
resources from the community and create opportunities for the disadvantaged.

Types of Socially Responsible Investments

Taking the different investing methods into account, there are different types of socially responsible
investments. They include:

1. Mutual Funds and Exchange-Traded Funds (ETFs)

Several mutual funds and ETFs adhere to the ESG criteria. If an investor is looking to invest in either of the
two funds, visit the SIF website, which outlines over 100 socially responsible mutual funds. Also, they can also look at
different socially responsible ETFs here.

2. Community Investments
An investor can also put their money directly into projects that benefit communities. An easy way to make
such an investment is to contribute to community development financial institutions (CDFIs).

3. Microfinance
Another way individuals can make socially-sound investments is by offering microloans or small loans to
startups. They can look for businesses in developing countries that offer financial assistance.

Socially responsible investment, thus have a special role to play in alleviating poverty, creating empowerment
and establishing at the grassroots level of socioeconomic development. They require easily accessible, low cost and
amenable funds and technology that can be sustained in the long-term rather than be some quick fix solution. The
end point of many social enterprises is a participatory socioeconomic transformation in which not only the non-
competing poor and needy cooperate with each other, but also meaningful relations are created between the
resourceful and the needy to enhance community well-being.

WHAT IS ETHICAL BANKING?

Ethical banking is a fairly broad term used to describe banks that operate around a set of
principles and ideals that are used to govern how they interact with their clients, their community, and
the world in general.

What is Ethical Banking?

As mentioned before, "ethical banking" is a fairly broad term. This allows financial institutions to decide for
themselves what sort of policies they wish to pursue and which
principles they are willing to follow. Those principles and policies
are often written down in policy documents that are available to
the public and their clients. But while the banks may have policy
differences, they do tend to share some common characteristics.
They include:

interest in it's community's welfare and takes steps to improve it.

Among other things, this can include funding
affordable housing projects, providing scholarships for students in
local high schools, sponsoring community events and holding
seminars to educate members of the community about their
services.
-friendly practices whenever
possible, as well as to support clients who practice those policies.

organizations and corporate entities with a history of unethical and immoral practices. For example, it may avoid
doing business with a company that has a history of using child labor.
Consistent internal and external ethics: Simply put, the bank practices what it preaches. If a bank applies
the same ethical centers to it's internal operations as it does to it's external operations. For example, if a bank is not

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 Tuguegarao Archdiocesan Schools System
LYCEUM OF TUAO
Centro 02, Tuao, Cagayan, 3528
Email address: lyceumoftuao1965@yahoo.com.ph
going to do business with a company that does not offer it's employees health insurance, it cannot refuse to offer
health insurance it's own employees.

The model of ethical banks and social enterprises provides a much needed moral framing to the whole
discussion, which is helpful in clarifying the fact that mistaken business assumptions have effectively excluded ethical
criteria from the behavior of people and decision makers and from the functioning of the market.

Ethical banks’ vey mission is to bridge social opportunity into sustainable reality innovatively, effectively and
efficiently, with the specification that ethical business and values are inherently embedded in the ideology, principles,
standards and objectives of the banking organization.

The aims of ethical banking go beyond economic benefits to include social objectives, assuming that both are
relevant in a socioeconomic model. In some cases, traditional banks incorporate ethical and social aspects through
corporate social responsibility (CSR), which can be another way to add value. This is a self- regulating mechanism
whereby financial entities monitor and ensure their adherence to law and international norms, specifically in the terms
of the triple bottom line (TBL) comprising people, planet and profit but it does not involve directly ethical
commitments around financial decision-making. The differentiation between ethical banks and traditional banks is
important for stakeholders as they need to acquire information not only about investments in positive projects but
also about the ethical management of financial entities globally. There are also great differences between one ethical
bank and another. If there are such differences between banks, it is important that investors and other stakeholders
be aware of the fact.

WHAT IS ECONOMY OF COMMUNION ENTERPRISE?

“Unlike the consumer economy based on a culture of having, the Economy of Communion is the economy of
giving. This could seem difficult, arduous and heroic. But it is not, because the human person, made in the image of
God who is love, finds fulfillment precisely in loving, in giving.”
- Chiara Lubich, Focolare Movement founder

The Economy of Communion is a calling to live work and business in an integrated way, in concert with all of
the other people in our lives. In a more concrete sense, it is a project of the Focolare Movement that seeks to unite
people through economic activity and enterprise. It is, first of all, rooted in two ideals of the Focolare; that we might
all be one, and that none among us be in need. It therefore unites those in material and spiritual need with
entrepreneurs, their companies, customers, employees, competitors, and suppliers in a global effort to create material
and spiritual abundance and to freely share that abundance in ways that make us all better off.

One of the crucial manifestations of this project is the more than 800 businesses around the world (more than
40 in North America) whose owners and founders commit their business activity to these ideals.

are profits to help those in material need, provide opportunities for meaningful work, offer
products and services that meet real human and social needs, and seek to manage their companies with moral
integrity.
se ideals by their actions and involvement in their local
communities, and by serving in a mentoring and support role to each other.

Objectives of the Economy of Communion

 to help person in difficulty- by creating new jobs and assisting them in basic needs
 to spread the “culture of giving” and of love without which could not be possible to make the economy of
Communion a reality; and
 to develop the business, keeping it profitable and open to spirit of giving.

Three Major Principles of Economy of Communion

 the first is the association where potential shareholders of a business pool their resources together in a
common fund
 the second distinctive concept is a “spirit of fraternity” where stockholders, employees and the beneficiaries of
the business treat everyone equally and with respect
 the third major concept is a unique distribution of profit which is sometimes as a 33% Rule

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 Tuguegarao Archdiocesan Schools System
LYCEUM OF TUAO
Centro 02, Tuao, Cagayan, 3528
Email address: lyceumoftuao1965@yahoo.com.ph
 33% RULE (The profit of the company is pooled in common and divided into three parts:
 The first portion is
allocated in helping the poor
in their immediate needs
 The second
portion is appropriate to
programs that are designed
to share and spread the
ideologies of EOC
 The last portion is
invested into the company
to develop and increase the
competitiveness of the
business

Advantages of the EOC

 The purpose and mission of EOC to help the less fortunate is very appealing to people of all religion and
nationalities
 Trust and solidarity with employees, customers, suppliers and business partners is attained and sustained.
This is because the human person , not profit, is the center of the business of EOC
 Competent people are entrusted with running the business. EOC enterprises make use of the latest
management and business practices to ensure that the company stays competitive in its chosen field.
 Resources are pooled together. Initials requirements for small businesses are more easily attained since the
monetary time and skill resources of the member are pooled together,

Disadvantages of the EOC

 The practice of sharing a third of the profit to non-employees may not be acceptable to employees who are
not members of the Focolare Movement
 EOC may be applicable only small to medium sized companies
 Earmarking only a third of the profits may be insufficient to growth of the business. In today’s very
competitive business atmosphere using all sources of funds including retained earnings particularly during the
start-up period is critical
 Standardizing and implementing the profit sharing rule will be very difficult. A study of ten EOC enterprises
shows that their methods of profit sharing very significantly
 An extensive cultural change is necessary to sustain and spread the EOC philosophy. Without sufficient
followers who will accept the EOC culture and philosophies, the sustainability of any EOC enterprise will be on
doubt.

WHAT IS IMPACT INVESTING?
 A generally accepted description of impact investing is “investing both financial and social return.” Put another
way, impact investing is “making money while influencing
positive change.” An alternative way of describing it is
“earning while serving” or “serving while earning.” Its other
synonyms are sustainable investing and environmental, social
and governance (ESG) investing.
 For some investors, maximizing financial return is not the
only thing that matters. Investing profitably and in a manner
that is useful, honorable, compassionate and ultimately
makes a positive difference can express itself in the form of
impact investing.

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 Tuguegarao Archdiocesan Schools System
LYCEUM OF TUAO
Centro 02, Tuao, Cagayan, 3528
Email address: lyceumoftuao1965@yahoo.com.ph
There are a wide variety of issues that an impact investor may seek to address. These include (but are certainly not
limited to):










Key Characteristics of Impact Investing

 Aims to Have a Positive Environmental or Social Impact Impact investing uses investments to help
address social and environmental issues like climate change, hunger, poverty, homelessness, and the
HIV/AIDS epidemic.
 Delivers a Financial Return on Capital Impact investing is foremost a business activity and, therefore,
expected to yield a financial return on capital or, at least a return of capital.
 Spans a Broad Range of Sectors and Regions Impact investing is inclusive across asset classes, from
cash equivalents and microfinance, to private equity and clean technology.
 Measures Social/Environmental Impact Regularly The impact investor regularly assesses and reports
the social and environmental performance of existing investments to ensure transparency and accountability,
and inform potential investors.

MISSION-RELATED INVESTING (MRI)

Foundations have been practicing their own version of impact investing for years via mission-related investing
(MRI). MRI is a term associated with foundations and involves seeking out investments that offer market-like returns
and also provide for social, environmental or educational impact, this allowing foundations to better align their
investments with their stated missions. An example of this is the Global Impact Investment Network (GIIN), a non-
profit organizations dedicated to promoting more effective impact investing around the world. Spearheaded by the
Clinton Foundation and its founder, former US President Bill Clinton, GIIN seeks to promote the infrastructure,
activities, education and research that facilitate more effective impact investing. The ultimate aim is a coherent, well-
developed marketplace for the impact investing industry, creating along the way “social investment banks” and “social
enterprise clubs”.

Although the literature on impact investing does not promise automatic success for companies delivering ESG
performance, there is a nevertheless reason for hope. In the integral investing model, financial returns must be
inseparable from a deep impact on the social, environmental, cultural and behavioral aspects of reality as well as
human development. A constant struggle is needed in this industry: investors who care deeply about sustainable
investing have to make sure that all investments are always in line with their philosophy and mission. The first step
toward eliminating inconsistencies is to ensure that the same mission and vision unite both arms of a philanthropic
organization – the program driven one and the trust. Investors and their wealth managers must stay alert, informed
and flexible and must be ready to adapt their investment portfolio on an ongoing basis. There is a need to introduce
more integrated measuring criteria such as coming together of five domains namely: economic, social, ecological,
cultural and ethical.
ECONOMIC

ETHICAL SOCIAL

CULTURAL ECOLOGICAL

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 Tuguegarao Archdiocesan Schools System
LYCEUM OF TUAO
Centro 02, Tuao, Cagayan, 3528
Email address: lyceumoftuao1965@yahoo.com.ph
ACTIVITY
CASE STUDY
Gawad Kalinga (GK) Enchanted Farm

The GK Enchanted Farm is a Gawad Kalinga’s platform to raise social entrepreneurs, help local farmers and
create wealth in the countryside. As we learned that the road out of poverty is a continuing journey and therefore,
providing homes is merely the beginning, we also realize that our country is abundant with resources (land included)
that we can harness for every Filipino to continuously lead a life with dignity.

What Filipino entrepreneurs need today, especially young and rising ones, is an environment that will help
bring their ideas to life and challenge them to aspire for the greatest social impact. This means keeping connected to
community and gaining access to good mentoring, value-added networking and basic facilities and resources. As a
Village University, classrooms are connected to communities, making it an ideal site for any university student. Here,
students will be exposed to how to start social enterprises and communities.

Currently the following social enterprises can be found on the GK Enchanted Farm:

Guide Questions: 5 points each

1. Is a social enterprise the same as an ethical business?

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2. Do you think the GK social enterprises above are successful? Why or why not?

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3. Do you think the GK social enterprises above are sustainable? Why or why not?

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4. How would you define sustainability?

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5. Do you think the GK enterprises help in poverty alleviation or reduction? Explain.
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