Though socially responsible investing has been practiced for more than a century, its popularity has increased exponentially in the last decades as a method for those with strong convictions about social responsibility to reap the financial benefits of the equities market.
Before investing in companies, socially responsible investment funds (or SRIs) consider factors that others do not — like a company’s carbon footprint, its human rights records, or its commitment to gender or racial diversity in its corporate ranks. It’s natural to assume that these do-gooder mutual funds and ETFs would naturally underperform the greater market since profits and growth weren’t the only factor taken into consideration in choosing companies in which to invest. And it’s natural to worry that investors would take a small hit for trying to do the right thing.
Though we’re certainly still in the early days of research, a growing number of studies suggest this simply isn’t the case — that funds that place value on social responsibility perform just as well as any other funds. Though it’s a tad premature to conclude that there’s absolutely no material difference in performance, it’s clear that if there is any disparity, it’s negligible and likely well worth it for those investors concerned with making money while also making the world a better place.