Skip to main content

SRI Investments and “The Performance Question”

By December 19, 2014May 21st, 2019Leadership News

Briefly: Because portfolios that incorporate non-financial criteria — sustainability issues, say, or ESG (environmental, social, and governance) issues — will have a somewhat smaller set of stocks to choose from, most investment professionals assume that those portfolios will be significantly more volatile, and quite likely to perform worse, than broad market portfolios. After all, the thinking goes, you’re missing out on the opportunity to profit from activities that are legal, if at least ethically questionable, so you’re giving up that performance.

But a quick look at the long-term performance history of several SRI indexes (including the Calvert Social Index and the MSCI KLD 400) show that they compare favorably to non-SRI indexes (such as the S&P 500 or the Russell 3000) — they have similar performance, without greater volatility. Past performance is never a guarantee of future results, of course, but this shows that