“There is a lot of evidence to suggest that ESG investments can not only have similar performance to their traditional peers, but they can sometimes outperform them,” Benson says.
Pay extra attention to the expense ratios — or the annual fees — of your mutual fund or ETF investments, as sometimes socially responsible funds can carry slightly higher costs than traditional investments.
Many investors are skeptical about socially responsible investments as a cure for what ails us. Close to three-quarters of investors (73%) agree that it’s difficult to figure out whether socially responsible investing actually benefits society. And 77% of investors believe many companies that promise to operate in socially responsible ways don’t actually follow through on those promises.
What you can do: Research the impact of your investments
A healthy dose of skepticism around socially responsible investing is a good thing, particularly due to the practice of greenwashing, or the misrepresentation of an investment or company to make it seem more sustainable than it actually is. As socially responsible investing becomes more popular, some companies appear to have no qualms about representing themselves as sustainable when they’re anything but.
“It’s very difficult to know what your investment’s direct impact is, but many socially responsible investments offer impact reports,” Benson says. “These documents can tell you about a fund or company’s socially responsible or sustainable practices, whether that’s reducing carbon output or hiring more diverse board members.”