A better world and better returns?

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Study after study shows there’s no penalty for choosing socially responsible investing, SRI, says Peter DeSimone, director of programming at the Social Investment Forum. an association of firms, professionals and institutions engaged in SRI. SRI funds across the board outperform their benchmarks three quarters of the time. It’s quite remarkable really.

Investors seem to agree. A recent study from Harvard University found that $400 billion in investment money poured into mutual funds that invest in socially conscious firms, from 2001 to 2007. That turned out to be a 19-percent increase over the six years.

The main business of Wall Street is getting the most return for the risk and institutional investors are interested in SRI, says Amanda Adkisson, a professor at the Mays Business School of Texas A&M University. While SRI may not be main stream, it is more than a sideshow with several big investment houses catering to it.

Even in a slow economy, money is still coming in; SRI funds now have more than $2.5 trillion under management in the U.S. alone. Analysts say the US should reach $3 trillion by 2011. Europe is now at $2 trillion.

The number of social responsible mutual funds (stock and bonds) has mushroomed from 181 in 2001 to more than 260 today—with funds targeting specific areas like small businesses, green technology and affordable housing, to list just a few. And ETF’s are now focused on SRI with at least 17 exchange traded funds dedicated to alternative energy.

So, what is social responsible investing? Simply put, it’s investors favoring corporate practices that promote social, religious, business or environmental issues that reflect their own personal values.

That can mean turning to shareholder activism—where shareholders advocate socially responsible policies within a corporate structure. But to reap a true capital gain—investors these days have found SRI means putting money where their values are.

There’s been a growing rise in environmental and social consciousness since the 60’s and 70’s, says Lou Abel, managing director of First Foundation Advisors. This has spilled into areas of investing in SRI.

Take Stephanie Davis, executive director ofGeorgia Woman for a Change. a public policy and advocate center in Atlanta, Ga.She invests 100 percent of her portfolio in SRI stock and mutual funds and has done so since 1988.

I consider myself an activist on a lot of social issues, says the 63-year-old Davis. So it just made no sense for me to make money off of corporations whose products I despise. I focus on women in leadership positions as well as companies that are green and aren’t involved in weapons.

SRI is hardly new—its origins go back to Biblical times, when Jewish law issued decrees on how people should invest ethically. Fast forward to the Quakers in 18th century America to see a re-birth of sorts for SRI as church elders prohibited members from actively participating in the slave trade.

But it was in the 1960’s, experts say, that the modern model for SRI came about as economic development projects started through the Civil Rights movement, coupled with a backlash to the Vietnam War and apartheid in South Africa, established a benchmark for responsible investing.