How do socially responsible investments perform?
How will socially responsible investing effect our overall financial returns? Your mix of asset classes and the level of risk and diversification employed in your portfolio are the primary driver of financial returns. Adjusted for asset classes, risk, and diversification, socially responsible investments generally provide financial returns commensurate with funds invested without regard to SRI. In some cases, the financial and societal impact of such investments yields a greater total return due to the inclusion of social and ethical objectives. For example, an interesting study titled The Eco-Efficiency Premium published in the March/April 2005 issue of the Financial Analysts Journal found that environmentally responsible companies were superior performers and this differential could not be explained by differences in market sensitivity, investment style, or industry specific factors. Overall, academics studying the link between commonly used social criteria and stock performance have
