Sometimes it’s not just about the money, even in business.
Socially responsible investing — investing that considers nonmonetary factors such as a company’s stand on the environment, human rights, or moral issues — is on the rise in the 21st century. The trend spikes following disasters such as the BP oil spill or the 2007–2008 global financial crisis, a UT business professor has found.
“People start thinking about wanting investments that are more conducive to what their values are,” said Laura Starks, who holds an endowed chair in finance at the McCombs School of Business.
Starks studied the performance of conventional mutual funds and those that operated under the principles of socially responsible investing (SRI). SRI status is partly self-reported and partly based on ratings agencies.
“People are asking businesses these days to be more responsible, particularly on environmental issues,” Starks said. “Businesses seem to be responding.”
SRI funds in the United States still represent just a fraction of professionally managed assets — about $1 in every $9 — but between 2007 and 2010 they increased by 90 percent.
“It’s not the majority of investors, but I think it shows a steady movement,” Starks said.
Perhaps the most encouraging finding: People don’t have to choose between social responsibility and the bottom line.
“Many people think that they will have to accept a lesser return on their investment if they invest in SRI funds,” Starks said. “Our study shows that this is not the case.”