Does Socially Responsible Investing Have Hidden Costs?

The Millennial generation has become known as a more socially conscious generation, preoccupied with the environment, sustainability and quality of life. As these millennials enter the workforce and begin investing they will continue to support the growth of socially responsible investing. What are the implications of this new investment trend?

Instead of favoring profitability above all else, socially responsible investors choose companies on the basis of their performance across a broad range of social, environmental, governance indicators and rank at the top of their industry group. This is no small trend. There even exists a United Nations document outlining Principles for Responsible Investment now listing around 1,349 signatories. Furthermore, it has been estimated by the U.S. SIF's 2014 Report on U.S. Sustainable, Responsible and Impact Investing Trends that socially responsible investing (SRI) portfolios have reached around $6.57 trillion at the start of 2014, a 76% increase on the number reported in 2012. These assets now account for more than one out of every six dollars under professional management in the United States. That would be 18% of the $36.8 trillion in total assets under management.

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