SRI Funds - Expect Increase

Pierce Halsted profile picture
Pierce Halsted


  • SRI Investing's AUM is continuing to grow, and its ceiling is far from reached.
  • SRI index (MSCI KLD 400) has outperformed the S&P 500 over the last few decades.
  • SRI Funds are undervalued and provide a strong buying opportunity for astute investors.

Funds with SRI (Socially Responsible Investing) strategies seek financial return for its investors while bringing about social change by investing in companies adhering to religious, social, moral, and/or environmental beliefs. In 1995, total AUM for SRI strategies in the U.S. was about $640 billion. In 2012, the number was calculated to be at about $3.7 trillion, which amounts to about 11% of all AUM in the states (SRI Performance). This grew to 17.9% in 2014, and 21.6% in 2016, and it does not look like it is going to stop. Many expect the U.S. to follow the trend of Europe's growth for SRI, which is now at 52.6% as of 2016. The total AUM increased from $6.57 to $8.72 trillion from 2014 to 2016, a growth of 33 percent, and has an average annual growth rate of 15.2% (2016 GSI Review).

While many investors choose to invest in SRI Funds for moral reasons and desire to do good, the returns the investors receive are attractive reasons as well. Since 1990, SRI funds have earned an average annual return of 10.46% compared to the S&P 500's performance of 9.93% (SRI beats S&P500)

The strong outperformance of ethical and responsible investment funds should finally put to bed the myth that a more responsible approach to investing leads to lower returns (Ethical Funds Outperform)

The performance of SRI Funds coupled with the sheer amount of SRI Funds available, over 600 MF's & ETF's, gives investors the ability to invest in companies that align with their moral, social, religious, and environmental ethics and goals without sacrificing the ability to earn high returns.

I believe the market for SRI Funds will continue to shoot up as many people and companies aim for climate change and to protect the environment. When Trump announced that the U.S. would leave the Paris Climate Agreement, hundreds of companies took a stand and fought back, with 25 of them - including Apple (AAPL), Facebook (FB), Tesla (TSLA), Google (GOOG), and Microsoft (MSFT) - bought full page ads in the Wall Street Journal to argue their case of why we should remain in the agreement (Companies Lament Paris Accord Exit). There is a powerful movement towards clean energy and a desire to push climate change, and many SRI Funds focus on investing in energy and resource companies researching clean energy.

Dr Vogel, professor and of business ethics at Berkeley's Haas School of Business, argues that many Socially Responsible Funds are highly undervalued, because many investors do not believe they achieve as high of a return (which has been proven false). This provides a strong buying opportunity for astute investors (Does SRI's Make Financial Sense).

One fund that I believe will greatly increase is the Inspire Global Hope Large Cap ETF (BLES) and Inspire Small/Mid Cap Impact ETF (ISMD). Both Funds come from Inspire Investing, which is a new firm that uses an impact score to determine which companies and projects they should invest in. Click here to learn more: Inspire Impact Score.

Including SRI Funds in your portfolio now, while many are still undervalued and the growth potential is still extremely high, will not only allow you to give back, make a difference, and bring about change, but should also provide high returns for years to come, and could even outperform the S&P 500 as it has in the past.

This article was written by

Pierce Halsted profile picture
I am currently a Finance and Economics double major at Baylor University desiring a future career in Finance. I have held internships with an Asset Management firm and a Private Wealth Management Firm. I will provide opinions and insight on stocks and market trends. Feel free to comment on articles as I hope to learn other opinions and views on stocks and the markets, and hope to absorb opinions as much as I give my own.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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