Why Do Advisors Not Offer SRI Portfolios

It seems that no matter how much evidence flows in that counters the pervasive idea that responsible investing produces inferior returns, most investment professionals still choose to deny the facts. Responses from my local Bend colleagues regarding Socially Responsible Investing (SRI) continue to be influenced by this misconception. This is still the main reason they don’t offer this option to their clients, and they even attempt to steer them away from it! This reaction to SRI from most advisers at the larger firms reflects what they are being fed by their companies (although many independent advisers still remain behind the times regarding SRI as well). I know, because I used to think similarly when I was at larger firms and before I began independently researching the SRI arena.


We have written often on the returns misnomer because it still represents the biggest obstacle for most individual investors when it comes to considering aligning their values with their portfolios. In previous articles we address this issue directly with the numbers to sufficiently disprove any remaining ideas about the necessity of sacrificing returns in order to invest according to your values.

In Misconception #1: Poor Returns, we summarize the March 2015 Morgan Stanley report (Sustainable Reality ) which examined the performance of 13,102 mutual funds & separately managed accounts. They found, “investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments. This is on both an absolute and risk-adjusted basis, across asset classes and over time.”

An extensive recent report, (Establishing Long-Term Value and Performance), Deutsche Bank found that companies incorporating Environmental, Social and Governance (ESG) factors have lower risk from an investment standpoint while providing better returns!

We also covered a significant development regarding the 2015 decision by the Department of Labor (DOL) about the use of SRI in retirement plans covered by ERISA (SRI Growth Potential ). Language used in the past had the unintended effect of causing fiduciaries to exclude SRI options for fear that they might be considered inferior in some way to other investments. This new interpretation clarifies that this was not the original intention and acknowledges that the numbers show SRI performance is in-line with the broader market. The DOL’s  Interpretive Bulletin brings ERISA guidance in step with today’s realities by noting that “fiduciaries need not treat commercially reasonable investments as inherently suspect or in need of special scrutiny merely because they take into consideration environmental, social, or other such factors.”

So, if your financial advisor persists in towing the company line and choosing to make recommendations based on misconceptions and false information regarding Socially Responsible Investing, maybe you can direct them to these articles reports. If they continue to dig their heels in, it might be time to find an advisor that has embraced the rapid change and growth of SRI.