However, statistics based on years of experience suggest otherwise. Multiple recent studies by well-respected organizations have found no validity in the notion that socially responsible investing has a negative impact on one’s potential financial success.
In fact, some studies indicate that selecting companies with admirable practices and policies on social issues may actually increase the likelihood of good financial returns. For example, a company’s initiatives to reduce waste, improve energy efficiency or conserve natural resources that flow to a company’s bottom line. And, companies with strong governance may potentially avoid costly workforce problems, negative publicity and regulatory sanctions. These practices can increase shareholder value.
The Chartered Financial Analysts (CFA) Institute review of a study in the Journal of Investing found that although “concerns persist that reducing an investment universe negatively affects portfolio construction and returns,” analysis of the research shows that “there is a positive effect when excluding poorly ranked ESG (environmental, social, governance) companies from a universe.” CFA concluded: “this study should help alleviate concerns that ESG investing necessitates a performance cost.”
Responsible Investing Today
Socially responsible investing is a well-established and growing investment choice:
• $8.72 trillion in assets in the U.S.*
• $1 of every $5 under professional management in the U.S.*
• Over 1,300 ESG strategies in the U.S.*
• Globally, over 11,000 public companies report on ESG factors**
*US SIF Foundation. Report on US Sustainable, Responsible and Impact Investing Trends 2016. **Bloomberg Impact Report Update (2015).
Investing in the stock market involves gains and losses and may not be suitable for all investors. The investment’s socially responsible focus may limit the investment options available to the investment and may result in returns lower than those from investments not subject to such investment considerations.