Also called impact investing, it is a form of socially responsible investing which aims to bring about positive social and environmental effects while also generating financial gains. Impact investing helps solve social or environmental problems while generating financial returns. [8] While negative screening investment strategy strives to avoid harm, impact investing specifically targets to have a positive social and environmental impact.  Impact investors actively seek to invest in companies and businesses that can provide solutions to social and environmental problems facing the world today. [6]

3. Socially Responsible Investing Portfolio Performance

There is an ongoing decade running for the past two decades that whether sustainable investing gives returns comparable to unrestricted investment.

On the face of it one feels that SRI probably underperforms since it reduces the range of investment and limits investment opportunities.  Opponents of SRI raise similar concerns. They highlight potential negative impact such as increase in volatility and hence increased risk caused by reduced diversification and lower returns due to screening of some high return generating securities.

Morningstar in 1993 reported that socially responsible mutual funds earned approximately 1% less returns annually as compared to the average mutual fund over the period 1988 through 1993. [2] Sally Hamilton, Hoje Jo and Meir Statman in their paper ‘Doing Well While Doing Good? The Investment Performance of Socially Responsible Mutual Funds’ [5] concluded that the returns generated by  socially responsible mutual funds are not much different than the returns on conventional mutual funds.  Jon Entine in his paper ‘The Myth of Social Investing’ [3] questioned the basis of the social ratings generated by social investment researchers like Kinder, Lydenberg, & Domini (KLD) and called these ratings flawed. He concluded that “Social investment advocates rely on sketchy, highly selective research and pseudo-objective ratings that belie the complexity of modern corporations and economi