You don't have to check your values at the door when investing in the market. An increasing number of investors are choosing to put their money to work in companies that not only have a profitable future, but also reflect their values, like those committed to environmental sustainability or ones that give back to the community. But this isn't charity, it is Socially or Sustainable and Responsible Investing (SRI), and investors still expect and seek a strong return on their money – just one that balances their values with their investment goals.

The Rise of the SRI Fund
The first SRI fund of its kind started in the early 1990s with very few assets. But at the end of 2010 there were over 250 SRI-focused funds for investors to choose from. Funds earmarked for SRI investments now make up around 12%, or $3 trillion, out of the $25.2 trillion invested in the market today, according to The Forum for Sustainable and Responsible Investment (US SIF), a trade group representing SRI funds.
Inside the funds, which are managed by professional money managers, are a collection of companies and investments that comply with a certain SRI cause. They usually follow some sort of environmental, social or corporate governance theme, which are collectively known as ESG issues.

Several of the large money managers offer several SRI products for their clients, ranging from simple passive index funds that track large or small SRI compliant companies, to actively managed funds that invest in companies focused on one of the three main ESG themes. Investors can also put their money in one of a number of exchange traded funds (ETFs) that track SRI compliant companies.

What Does It Mean to Be "SRI Compliant?"
The large funds may be a bit too broad for many investors, money managers screen and add or eliminate companies that normally do not comply with the general idea of what makes up an SRI company, but peoples' values aren't usually that simple.
In general, money managers choose to avoid adding companies that deal in things that kill (defense & weapons, landmines & cluster munitions), things that are vices or sins (gambling, pornography, usury, tobacco and alcohol) and very controversial topics (abortion, contraceptives, animal testing, genetic engineering, stem cell research and nuclear power).

They also avoid investing in companies that do business with, or are domiciled in, "rouge" nations like Iran, North Korea, Sudan, Myanmar (Burma), Cuba and Syria. The screening process varies by money many manger so be sure to find out what they are when choosing to invest in a SRI focused fund. One way to find out is to use this handy chart from US SIF.

How SRI Funds Stack Up
So how do these "feel-good" investments actually stack up with the broader market? Well it's hard to say, given how variegated the funds are based on their various themes, but as a group, they tend to track the S&P 500 index pretty well. There are more than 20 studies that show SRI funds perform basically on par with non-SRI funds. One can review the studies at, which is collection of all the major academic studies on SRI investing.
But some SRI themes have been hard hit lately, especially those focusing on alternative energy. Weak natural gas prices and the reduction of government subsidies for alternative energy companies have obliterated funds that focus on wind, solar and geothermal energy start ups. For example, the Calvert Global Alternative Energy Fund A, which invests in wind and solar companies, was down 33% last year. You can review all SRI fund performance on the US SIF website.

Related Articles
  1. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  2. Mutual Funds & ETFs

    Top 4 Asia-Pacific ETFs

    Learn about four of the best-performing exchange-traded funds, or ETFs, that offer investors exposure to the Asia-Pacific region.
  3. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  4. Professionals

    How Brokers are Candy-Coating Alternatives

    Alternatives have become a sexy choice for many advisors. But they also come with additional risks that are not always clearly spelled out to clients.
  5. Investing

    Costs New Investors in Real Estate Do Not Consider

    As lucrative as real estate investment can be, there are a multitude of costs that new real estate investors must consider.
  6. Investing

    Asset Manager Ethics: Acting Professionally and Ethically

    To aid managers in understanding the requirements for ethical and professional behavior, we offer some basic guidelines.
  7. Professionals

    The Pros & Cons of Alternative Investments

    Alternative investments are becoming popular investment vehicles for individual investors. Here are the pros and cons of adding them to your portfolio.
  8. Mutual Funds & ETFs

    Top 2 ETFs For Investing in Singapore

    Discover information about the two primary exchange-traded funds, or ETFs, that offer investors exposure to the emerging market economy of Singapore.
  9. Mutual Funds & ETFs

    A Look At the Growth Of the ETF Industry

    Explore the phenomenal growth rate of the ETF industry, and learn some of the principal reasons why ETFs are projected to continue to grow at a rapid pace.
  10. Professionals

    Growth of Alternatives via Wirehouses Explained

    Despite a six-year bull market run, alternative investments are gaining ground among wirehouses. Here's where advisors are focusing.
  1. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  2. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  3. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  5. Which socially responsible retailers appeal most to ethical investors?

    Ethical investors have many reasons to consider companies in the retail sector. The sector is broad and features an abundance ... Read Full Answer >>
  6. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!