Socially responsible investing, or SRI, is an investment approach that considers both financial returns and the social good that a company generates. Also referred to as “sustainable,” “responsible,” “ethical,” or “green” investing, enthusiasm for SRI continues to surge. However, there still exists a certain amount of doubt, confusion, and skepticism about SRI and the value it brings to the table.
So to help clear things up, here are three common SRI myths debunked.
Myth 1: SRI sacrifices returns
The most common myth about socially responsible investing is that it won’t yield as much money as traditional investing approaches. This is simply not true. You don’t have to sacrifice good returns to support environmental and social responsibility. In fact, the research shows that SRI exhibits a largely neutral, and often positive, impact on financial performance. So through SRI, investors can make a difference on issues that impact our world, all while watching their money grow.
Myth 2: SRI holdings don’t look that different from conventional funds
Another prevailing myth is that the companies contained within SRI funds are similar to those contained within mainstream mutual funds. While on the surface this may appear to be true for Canadian equity funds, the reality is that the holdings within an SRI fund have been vetted through a rigorous analysis of their environmental performance, social responsibility, and corporate governance (ESG). As a result, companies with significant negative impacts such as tobacco, weapons and nuclear power are absent from SRI funds.
Myth 3: SRI costs more than other funds
The last myth to debunk is the one that assumes that socially responsible investing costs more than traditional or conservative investing. The truth is that the fees for SRI funds are comparable to conventional mutual funds.
You shouldn’t have to choose between building wealth and building a better world, and with socially responsible investing, you don’t have to.
Fun disclaimer alert: