Socially responsible investing(SRI) has been around for more than a century. It involves applying social and environmental factors to choose investments. The principles appeal to many people. Yet, one question lingers for individual and institutional investors alike: if I adopt SRI principles, will it help my investment returns? Or hurt them?
This research seeks to answer this compelling question. The report looks at dozens of independent, third-party academic and industry studies. Many of these studies are themselves reviews of hundreds of other studies. This research tends to approach SRI in one of four ways:
The report surveys research from each of these categories. The overarching conclusion: SRI does not result in lower investment returns. Not everyone agrees, of course. But there is certainly support for individual investors and trustees of institutional funds to pursue SRI strategies. There is also reason for confidence that SRI will see deliver returns similar to traditional investment options – or even better.
Many major studies reviewed by RBC GAM found a clear correlation between strong sustainability business practices and company performance. Findings include:
Despite the strength of this evidence, disputes continue over the quality of the data and the most appropriate methodology to use. No definitive answer has yet emerged to satisfy all critics of SRI.
Interestingly, research suggests that traditional funds are now becoming more and more like an SRI fund. They have been decreasing their exposure to the socially sensitive sectors traditionally excluded from SRI funds. This trend will likely grow as ESG risks continue to emerge around the world.
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