But given this observation about socially responsible investments making less money, it's not much of an answer to say a socially responsible investor can still do "good" (for his/her causes) and "well enough" (financially) by undertaking these socially responsible investments.

The socially responsible investor likely would do more "Good" and more "Well," it seems to me, by (1) making the financially best investments, which'll yield about 3.5% more, it appears, and then (2) donating a portion of that 3.5% surplus to, say, Greenpeace, Amnesty Int'l, or whatever.

Whereas the "socially responsible investing" plan "donates" money only to marginally more responsible corporations, this plan actually donates money to nonprofits actually doing work on whatever cause it is you support. If I were an animal nut, I'd rather donate $2000 to the Animal Legal Defense Fund than sacrifice $4000 in investment returns by buying stock in a cosmetics company that doesn't test on animals.

The socially responsible investment phenomenon seems to me to be like that of "organic" food. Upon a closer inspection much of what gets classified as organic does not uphold traditional organic values. I think that if we looked closely at what constitutes "socially responsible" investments, we would find many morally troubling investments. In business, it is very difficult to separate responsible from the irresponsible investments. Sometimes there are clear cases (e.g., Sudan divestment) but most investments are not so easily classified.

Right, D -- also, one company may be great on one issue but bad on another that's just as important to liberals. L'oreal may do less animal testing than Revlon but treat its employees worse. I highly doubt that "socially responsible investment" strategies can properly consider what must be an impossibly complex matrix of maybe 20 issues important to liberals (enviro, unions, discrimination, animal testing, ...).

Wal-Mart is another example. For liberals, Wal-Mart is terrible on labor issues but a leader on environmental issues and on workplace diversity. Wal-Mart has been at the forefront of US corporate counsel in increasing the numbers of minority outside counsel and in-house opportunities for minorities and women. Performance pay is based in part on creating diversity. Wal-Mart also benefits consumers through lower prices. Remember when consumer welfare enhancement was a social good and not something to be shunned?

Even granting, for the sake of discussion, the normative continuum from "socially good" to "socially bad," there is an exponential aspect to the complexity that Scott highlights. You can have conflicting social "goods." A case in point is a major issue in the chemical business from which I came. Flame retardant additives save lives when put in television housings, computer printers, children's pajamas, furniture foam. You can count the lives affected. But the cost-effective chemicals may (I repeat - may - and the responsible chemical companies work with NGOs and governments to study it) have long term environmental effects. Or you can put the expensive stuff into the pajamas, and then only rich people can afford to have flame retardant Doctor Dentons.

If shares of socially responsible companies were systematically overpriced, something would have been really odd about capital markets. I, for one, would have happily selected those stocks and shorted them. Fortunately, this is not the case. “Socially responsible investing” is wasteful not because socially responsible companies are overpriced, but because "socially responsible investment funds" that pick those companies are overcharging for their services. Just like most actively-managed funds, I would add, so there is nothing special about those funds in this respect. In short, your overpayment isn't caused by anything inherent in socially-responsible companies; it's caused by investment-fund managers wasting your money.

As a side note, even if you were overpaying for “socially-responsible” stocks directly, the "socially-responsible companies" wouldn’t actually get your overpayment, unless you purchase the stock directly from the company. The (unlikely) fact that you choose to trade papers with another guy and overpay him for his piece of paper does not help the company and does not help the cause.

Some of these comments strike me as susceptible to "the perfect is the enemy of the good" response. Okay, so it may be hard to differentiate between companies based on their "social responsibility." Is it impossible? Look, if it's just PR and there's no real difference, then I agree with Kate: some clever folks are making money by making others feel good. But it's not impossible, I think, to differentiate between companies based on certain discrete parameters.

And I don't necessarily buy Scott's tradeoff in his first comment. If one of PETA's big campaigns is to stop animal testing, why would I invest in an animal testing company and then give some small percentage to PETA, rather than invest in a company that does no animal testing? This argument applies more directly to consumers, but I don't know why you'd want to invest there, either. And yes, "trading papers" does help the company, because you're helping to keep the stock price higher.

This was all about a year ago... what's the take on it now??