Is now the time to make a serious effort at incorporating some form of SRI into your advisory practice? Maybe.

Interest in alternative energy, climate change and other environmental issues has been growing rapidly over the last five years. Ask your neighbors, your friends, your family if they are worried about pollution harming their health or whether cleaner energy options are needed in the United States. And now that we are in the midst of the worst financial crisis in more than 70 years, one caused in large part by bad business practices, many people are talking about who deserves to be bailed out and at what cost, or talking about outrageous CEO pay and all the lousy decisions that led to where we are today.

"Studies have shown there is a growing group of people in our country who hold similar values and are interested in transformative change in our society. The recent [presidential] election is one indication," says Georgette Frazer, CPA, PFS, CFP, AIF, owner of Lifetime Financial Services in Marshfield, Wis. Frazer is an advisor with First Affirmative Financial Network, a nationwide network of investment professionals serving socially conscious investors.

The desire for change "is an underlying reason why there is growing demand for SRI and renewable energy, complementary (alternative) medicine, whole and healthy foods, healthy lifestyles. All of these kinds of things go together. The growth curves of these products and programs are very similar, and that's because there's a growing base of people who are interested in them," she adds.

Not only that, but the world of SRI has evolved, too. Investors now have access to more sophisticated research and investment choices to diversify their portfolios. The Social Investment Forum, a national association founded in 1981 that promotes SRI, now has more than 500 members, including institutions, advisors, analysts, portfolio managers, banks, mutual funds and foundations.

As the number of people who want their investments to bring positive change to social and environmental problems has grown, so too has the debate about the priorities and goals of SRI and related investment approaches. The acronym has long been used for socially responsible investing, but SIF and others now often use it for sustainable and responsible investing as well. Many industry participants say the focus of SRI is shifting to sustainable investing from ethical investing.

Researchers who have championed sustainable investing maintain there are fundamental differences between it and traditional socially responsible investing. Traditional SRI is based on screening for investments that reflect an individual's personal values, or ethical concerns, they say. Many traditional SRI funds won't invest or restrict investments in companies that are involved in alcohol, tobacco, gambling, animal testing or defense. They also look for firms with positive environmental and shareholder advocacy records.

Sustainable investors don't screen out companies based on values that don't affect long-term returns, proponents say. Instead they look for companies that follow good environmental, social and governance practices because such companies will produce higher profits for investors over the long run than other investments, they maintain. These companies are better managed because they look at risks from ignoring-and opportunities from addressing-global problems such as climate change, water shortages and worker mistreatment.

Institutions such as pension funds have taken the lead in sustainable investing, but its principles will hold more appeal for mainstream retail investors than traditional SRI and at some point will become part of routine investment analysis, proponents believe.

Some separate account managers construct portfolios based on sustainability criteria and a few mutual fund companies, like Pax World, that offered traditional SRI portfolios already have shifted their focus to sustainable investing. Calvert also has introduced funds aimed at addressing sustainability issues, including its Calvert Global Water Fund. In December, Dreyfus Corp. introduced the Dreyfus Global Sustainability Fund, billed as the first U.S. mutual fund that invests in companies included in the Dow Jones Sustainability World Index.

Jeffrey A. Scales, CFP, a 20-year veteran advisor who works in Rhinebeck, N.Y., and is affiliated with Commonwealth Financial Network, believes SRI was considered just another alternative investment category until the concept of sustainable investing started to emerge a few years ago. "People want to support alternative energy-solar, wind and geothermal-and companies doing something about the water crisis. They want to invest in companies that operate in a sound manner," he says. "They want to invest in companies that treat their employees well-that are not run to just see profit as a dollar figure but that see the impact of the company as providing societal and community benefits. Shareholder dollar profits are not the only objective. There should be larger measurements of what is considered as success as a company."

Performance And Diversification
Some advisors and investors haven't looked closely at SRI because they are concerned that they might be sacrificing return. FA green Senior Editor Jeff Schlegel takes an in-depth look at the performance question in another article on FA green, "A Look At Performance."

Advisors who have worked for years with SRI clients all say that they have seen dramatic changes in the breadth of investments since they began their practices. Today, portfolios built on SRI or sustainable principles can deliver the same performance as those that don't.

Hal Brill, AIF, managing partner of Natural Investments in Paonia, Colo., says that when he began working with his father in this area about 20 years ago there was little hard data with which to evaluate socially responsible investments. "It took a leap of faith," he says. "There were less than a dozen fund choices. Not all asset categories were covered, and not all of them had a decent track record. It was really for people who wanted to be on the front line as a pioneer."

Socially responsible investing was at the time ignored and then later ridiculed in many publications, he says, and only gradually did it gain acceptance. His father Jack Brill has helped demonstrate that an investor can build a diversified, competitive portfolio with SRI funds. In 1993 The New York Times asked him, as one of five mutual fund experts, to invest a hypothetical $50,000 for someone who planned to retire in 20 years. The Times followed the managers for seven years and found that Brill's portfolio, the one with socially responsible investments, returned more than 200% over that period, just 10 basis points below the leader of the five experts in the study and 4 points from the No. 2 performer.

Judith L. Seid, president and founder of Blue Summit Financial Group in La Mesa, Calif., says she's noticed a change in attitudes toward SRI. Today, many clients feel like it is no longer "just a feel-good kind of thing" but can provide safer alternatives and better returns than other investments. She says she noticed the shift slowly starting to happen after the dot-com bubble burst in 2000 and then with the fall Enron. "Corporate accountability standards caused investors to lose faith in corporations and they saw SRI addressing some of those concerns," Seid says.

Incorporating SRI Into Your Practice
Advisors who think they might want to offer SRI can find plenty of ways to learn more about it. SRI advisors interviewed for this article say two of the fastest ways to get an overview are to visit the Social Investment Forum's Web site and attend SRI in the Rockies, an annual conference on socially responsible investing. SIF's Web site tracks the performance of SRI mutual funds and shows how they are screened. The SRI in the Rockies conference offers attendees a chance to learn about issues, products and services.

Scales believes that advisors who want to offer SRI to their clients first need to be able to convince themselves that such investments-whether they are mutual funds, separate accounts or private equity-provide competitive performance over time. Advisors need to be aware of SRI offerings in each asset class, he says, so they can say with conviction, "Here are some funds that we've researched that have decent track records."

Advisors who want to get involved with SRI should ask their existing clients if they are interested. A 2006 study commissioned by Calvert Funds found that only 20% of investors with an interest in SRI reported that their financial advisor had proactively brought up the option with them.

Letting friends and family know that you offer SRI or sustainable investing can lead to referrals and help build your client base, says Stephen J. Siegel, CFP, AIF, who got many new clients that way when he started out in his Baltimore practice in 1987 (he affiliated himself with First Affirmative 10 years ago).

Workshops and seminars also can be effective. Siegel recalls arranging a mini-conference on the subject in his early days. One of the participants was Amy Domini, founder and CEO of Domini Social Investments and cofounder of the Domini 400 Social Index.

A key way that Frazer says she has found clients has been to offer a seminar, "The ABCs of SRI" at the Midwest Renewable Energy Fair, which will be celebrating its 20th anniversary this year and bills itself as "the world's largest renewable energy, energy efficiency and sustainable living educational event of its kind."

Seid also found workshops to be helpful in building her client base. "At my first workshop, I got about 40 people there. I did a mailing of all Co-op America's members, now Green America. Then I did a series on women and investing with the help of Calvert. I just worked really hard," she says.

A number of RIA networks and broker-dealers also offer investment services for advisors interested in SRI. First Affirmative, an RIA, is one of the most well-known ( Progressive Asset Management ( is an independent broker-dealer that specializes in SRI. If you are affiliated with another broker-dealer, ask what SRI services they do or could offer. Other independent broker-dealers, while not primarily focused on SRI, can support advisors interested in offering such services.

Advertising your services can help too. Many SRI advisors advertise in Green America's National Green Pages (formerly Co-op America). The directory offers a comprehensive listing of SRI advisors as well as listings of many other green service providers.

Some advisors, like Brill of Natural Investments, have expanded their SRI clients beyond individuals to institutions, such as family offices, nonprofits and 401(k) plans. In 2008, the firm became subadvisor to an SRI private placement life insurance product offered by Prudential, he says.

"I think there are all kinds of ways to access this work and all kinds of levels to do it at," says Frazer, who has offered SRI to clients for more than 20 years and in 2007 refocused her practice to offer SRI exclusively. "Just from what I've heard, many more traditional advisors will have one or two or more clients who are keenly interested in this. And I just know from talking to clients, if these folks could be supported by the advisors they know well and like to work with, they won't leave. But if they feel their advisors are trying to tell them their thinking is wrong or their values are wrong, they are at risk of losing those clients to someone like me."