In January 2010, US SIF reviewed the performance of 160 member funds on its mutual funds performance chart, which is tracked by Bloomberg. The foundation found that 65% of these funds outperformed their benchmarks in 2009, most by significant margins. Large-cap funds that use ESG criteria did especially well-72.6% of them outperformed the S&P 500. A majority of these large-cap funds also beat the S&P 500 over three- and ten-year periods, according to US SIF. This data often changes advisors' and clients' perceptions that sustainable investing means sacrificing performance (though past performance is no guarantee of future results).

Fifteen years of academic research indicate that, over time, strategies employing ESG criteria perform well against those that do not. The 2011 winner of the UC Berkeley Moskowitz Prize, which recognizes research in SRI, was a paper called Does Corporate Social Responsibility Affect The Cost Of Capital? In it, the authors found that firms with better corporate responsibility scores enjoy cheaper equity financing. Investing in responsible employee relations, environmental policies and product strategies, the authors suggest, can help companies substantially reduce their cost of equity.  

In another recent study, two Harvard Business School professors analyzed 180 companies and found that "high sustainability companies dramatically outperformed their counterparts over the long term, both in terms of stock market and accounting performance."  The authors of the study, The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance, suggest that strong environmental and social performance policies create a strong culture and promote a company's values and mission. 

Because sustainable investment portfolios are focusing on companies with increasingly diverse ESG criteria, they have also started investing in companies from sectors of the economy that were in the past excluded. By expanding their universe, portfolio managers now own more companies that pay dividends and can support a total return approach to portfolio allocation. 

What's The Marketing Strategy?