The private cost of socially responsible investing

Over $625 billion is invested in funds that screen holdings according to ethical considerations. A crucial issue to many investors is whether ethical screening affects portfolio performance. We examine twenty-eight common stock portfolios over the period January 1, 1989–December 31, 1991 in order to determine whether ethical screening has an impact on portfolio performance. Analysis of eleven distinct ethical screens and three combinations of screens reveals little impact. To the extent that any impacts are observed, the market appears to reward good environmental performance, charitable giving, and an absence of nuclear and defence work, and it appears to penalize firms that provide family-related benefits such as parental leave, job sharing, and dependent care assistance.