A number of years ago there was an initial movement towards Socially Responsible Investing. During the run up prior to 2008, and in the years after, some of the best performers were investments that some people would not ordinarily may not want to support, such as alcohol, tobacco, firearms or gambling companies. In light of this, you had sponsors putting together offerings that focused on companies that fit the SRI mold. Furthermore, yo had a number of funds that aimed to comply with various religious tenants in a number of faith based funds. Unfortunately, many of these funds underperformed versus their unconstrained peers.
Over the last few years, in in the last 2 in particular, we had a new take on this theme with the introduction of “Sustainability Investing.” While there is no one single definition, most of the sponsors who offer products in this space define it around 3 pillars, environmental, social and corporate governance and responsibility.
Touchstone Investments describes it as follows:
…evaluation of a company’s sustainability practices which considers and analyzes the potential environmental, social and governance impacts and risks of a company, how well the company manages these impacts and risks, and ascertains the company’s willingness and ability to take a leadership position in implementing best practices.
Based on the above criteria, sustainability themed investments will tend to be your larger, well capitalized firms.
From the few funds that we do have, on the whole, you can expect to get market performance with about the same volatility. Generally the funds we have looked at are better performers than purely SRI driven investments, and should be an option to look into if SRI is a part of your investment policy.