Many investors are skeptics when it comes to socially responsible investing. The folks at Forbes believe that might be a good thing.
Seems kind of crazy right? Why would someone view skepticism as a good thing?
Forbes listed two primary reasons:
- It requires SRI supporters to research and prepare evidence-based arguments in support of the investing choice
- It drives future innovation in the category by disciplining the thinking of those who support it
Does SRI raise capital for "sinful" companies?
Some argue that by requiring companies to "do good" and thus be considered SRI it would, in turn, "raise the cost of capital for "sinful" companies and lower their share price relative to what it would have been absent their intervention."
What about performance?
Many assume that socially responsible investments will have poor returns. Some do and some do not. Many SRI and ESG strategies fail to beat their benchmarks which is no different than other non-SRI or non-ESG strategies. Investors should approach these investments as they would any investment and do their research. Proponents for SRI and ESG, if they've done their research, can then provide their arguments for or against the particular strategy.
The full article can be found here.