Thud: Socially Responsible Investing Meets Reality

The goal of business is to make money.

Plain and simple.

Or so I thought…

According to the latest data, money is spilling into sustainable investments.

Chalk it up to America’s newly evolving “outrage” culture that now pervades our lives.

The last two years have witnessed investors push more than $2 trillion into socially responsible funds.

To these folks — and their trillions’ worth of capital — businesses should value certain social criteria above making money.

What if a business fails in this regard? Then it isn’t worthy of investment.

That’s how the socially responsible investor thinks!

But I’ll furnish hard proof today that socially responsible investors — among the fastest-growing demographics on the planet — are playing a fool’s game.

Spoiler Alert: CNBC characterized it best — “If you want to feel good about the stocks you’re holding, you’ll pay the price in lower performance.”

It’s Anything but “Smart Money”

In the early 1970s, with the war raging in Vietnam, protesters found it deplorable that companies like Dow Chemical (the maker of napalm) were actually profiting from the war.

The controversy gave rise to the world’s first socially responsible investing (SRI) fund — the Pax World Fund.

Fast-forward nearly 50 years and SRI funds are enjoying their salad days.

According to the latest data from the Forum for Sustainable and Responsible Investment…

More than one out of every five dollars under professional management in the United States — roughly $8 trillion — is invested alongside socially responsible mandates.

But don’t be fooled by the increasing popularity or large capital inflows.

Considerable research demonstrates this is anything but “smart money.”