Will impact investing hinder potential profits?

Is there a correlation with impact investing and earning fewer profits? I am a strong believer in socially responsible investing, but I don’t want my portfolio to suffer because of it.

Investing, Asset Allocation
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May 2017

Great question. There used to be a compromise in returns for making socially responsible investments, but there is no longer if you choose among established companies with a track record of competitive returns. Outstanding options to consider are Parnassus, Pax, Calvert, and Domini.

A little background - socially responsible investing was introduced in the 1970s, and was premised on screening out problematic companies or industries based on values choices. The socially responsible investment universe was small at that point in time. By 2000, socially responsible investing had begun to evolve into sustainable investing, which was premised on screening in companies based on positive environmental, social, and governance criteria. By 2010, sustainable investing had evolved even further, to impact investing, which you mention. Impact investing insists on two things - one, that sustainable investing strategies must provide competitive returns, and two, that impact investments must be designed to produce positive environmental, social and governance changes.

To provide some hard evidence that there is no longer need for compromise, with my portfolio management firm, our socially responsible portfolios actually beat our mutual fund portfolios' returns in 2016, and year to date 2017 have matched them. So by all means, look seriously into your impact investing choices!

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