The bright line between corporate governance and socially responsible investing (SRI) is beginning to blur. The shareholder’s role in corporate governance—proxy voting, shareholder proposals, monitoring and engagement or full-blown activism—traditionally has been a distinct activity from SRI, an investment approach based on excluding certain types of industries from one’s portfolio based on moral or ethical grounds.

But a new trend is taking hold. In recent years, some institutional investors, not to mention insurers, credit analysts, and underwriters, have started to integrate these activities into a combined approach, often called responsible or sustainable investment, which looks at enterprise risk based on a variety of environmental, social, and corporate governance (ESG) factors. While not a mainstream activity, the trend is quite apparent, particularly in Europe.

One common denominator is an emerging view that a board’s failure to address important (ESG) concerns can increase a firm’s financial and reputational risk—and its corollary, a growing view among investment professionals that ESG issues can affect the performance of investment portfolios.

Howard Sherman is president and CEO of Governance Metrics International (GMI), an independent research and ratings firm