Risks and Costs of Socially Responsible Investing [Archive.org URL]

Socially responsible investors don’t want their money to support companies that do things they disapprove of, such as selling tobacco, alcoholic beverages or weapons. They may be willing to sacrifice some financial returns for their convictions—but how much must they give up? In one of the first studies of socially responsible investing on a risk-adjusted basis, Wharton’s Christopher C. Geczy, Robert F. Stambaugh and David Levin show that index-style investors may pay a modest price for investing in socially responsible funds. For investors who favor actively managed funds, though, the cost could be much higher.

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