There’s a powerful trend emerging in the investing world. Investors are building portfolios based on their morals and values. Dubbed “socially responsible investing”, or SRI, these investors align their investments with their values by avoiding companies with poor environmental, social or governance practices.

Like their counterparts, sustainable investors also want to earn a good financial return on their investment. They don’t want to sacrifice performance for social impact. And these days, they don’t have to. For the last several years, the returns on socially responsible investments have risen sharply – and many are beating the S&P 500

What’s driving the boom in Socially Responsible Investing?

Socially responsible investing (SRI) funds have been enjoying increasing popularity, largely due to the emergence of “impact investing” – a feel good concept that started in the U.K.

The difference between the two is that socially responsible investing avoids investments that are inconsistent with the values of the investors while impact investing actively pursues a specific positive impact.

For example, funds that don’t invest in companies that make alcohol, tobacco, gambling and weapons are considered socially responsible investments. A more targeted approach, impact investing addresses specific issues like sustainability, women’s rights, the environment and more.

Just how popular is SRI?

In 1995, there were only 55 mutual funds that engaged in SRI, with $12 billion in assets. Today there are nearly 500, with assets exceeding $500 billion.

What’s In It for Investors?

Socially responsible investing looks a lot different than it did just a decade ago. As SRI has evolved, the advantages for investors are numerous: