Screens on Investment Performance’ [2] compared the performance of a socially responsible portfolio with two unrestricted portfolio without taking into account the effects of transaction costs, management fees , etc on portfolio performance to more transparently examine the implications of restricted social investing on portfolio returns. His findings indicated that the social responsible screenings do not necessarily have an adverse impact on investment performance.

4. Impact Investing

While the above studies conclude that socially responsible investments do not underperform as compared to unrestricted investments and therefore should be preferred over unrestricted investment, a bigger question is that can capital markets bring about social change? One way a negative screening investment strategy does help in bringing about social change is by raising awareness about social concerns among socially unresponsive firms. As more and more people turn to SRI they can place pressure on these firms to change and become socially and environmentally responsible.

A more direct way of bringing about a social change is through 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 by investing in businesses which work towards bringing about a positive social change. Impact investing helps solve social or environmental problems while generating financial returns. [8] Since the intention here is to generate measureable social or environmental impact, it is distinguished from the negative screens strategy as it explicitly focuses on making a positive impact on the society and environment. This kind of investing is at the intersection of philanthropy and for-profit capitalism. It can act as a complement to philanthropy and government policies to address the social and environm