What Is Socially Responsible Investing (SRI) and How to Get Started
Becoming a socially responsible investor isn't difficult — and can be even more lucrative than traditional investing.
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Picking up litter, volunteering at a hospital, donating to racial justice organizations, investing — which of these is not like the others? When it comes to making the world a better place, investing isn’t the first thing that comes to mind. But socially responsible investing is more attainable and profitable than ever.
Once considered a fairly radical strategy, it has increasingly gained in popularity. According to a 2026 Morgan Stanley survey, 92% of individual investors are interested in sustainable investing.
What is socially responsible investing?
Socially responsible investing (SRI) is an investment strategy that aims to generate both social change and financial returns for investors. Socially responsible investments can include companies making a positive sustainable or social impact, such as a solar energy company and exclude those making a negative impact.
SRI tends to go by many names, including values-based investing, sustainable investing and ethical investing. The abbreviation “SRI” has also come to stand for sustainable, responsible and impact investing. Some SRI practices use a framework of environmental, social and governance factors to guide their investing. This is generally referred to as ESG investing.
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Understanding socially responsible investing
Investors interested in SRI don’t just select investments by the typical metrics — performance, expenses and the like — but also by whether a company’s revenue sources and business practices align with their values. And since everyone has different values, how investors define SRI will vary from person to person.
If you’re passionate about the environment, your portfolio will likely have investments in green energy sources such as wind and solar companies. If you care about supporting the advancement of women, people of color and other marginalized groups, you may have some mutual funds that invest in women-run companies or hold stock in Black-owned businesses. And since socially responsible investing is as much about the investments you don’t choose as the ones you do, you may choose to divest from a company if you learn that it mistreats LGBTQ employees, for example.
You may find that some SRI funds match your values while others do not — and you may be surprised at what companies end up in an SRI fund. For example, Vanguard’s ESG U.S. Stock ETF (ESGV) is screened for certain ESG criteria and excludes stocks of certain companies in industries such as fossil fuels and nuclear power. But the fund’s top holdings include Amazon and Tesla, which some SRI investors have opted not to support.
In the past, SRI funds have been tied to higher fees than their traditional counterparts. While you certainly can find expensive SRI funds, you can also find fairly inexpensive ones. The aforementioned Vanguard ETF has a 0.09% expense ratio, for example, which is even lower than the 0.14% industry average expense ratio for ETFs.
How do socially responsible investments perform?
Does a do-good investment strategy perform as well as the standard? The short answer is yes, especially in the long term. A 2026 analysis from Morgan Stanley shows that if you had invested $100 in a sustainable fund in 2018, you would have $162 today. In contrast, if you had invested $100 in a traditional fund, you would have $152. That doesn't seem like a huge difference, but the dollars add up over time.
In the past, there have been doubts about SRI, with opponents arguing that narrowing the field of investment options also leads to a narrowing of investment returns. Now, there is a growing pool of evidence that shows the opposite: SRI isn’t just good for your heart, it’s good for your portfolio, too.
How to build a socially responsible investment portfolio
Creating an ethical portfolio doesn’t have to be difficult or intimidating. As long as you know the values that are important to you, you can start using your investment dollars for good. Here’s how to build an SRI portfolio.
1. Decide how much help you want
There are a couple of avenues you can choose when it comes to creating a socially responsible portfolio. You can build it yourself, picking and choosing specific investments and monitoring them over time, or you can get some help. Choose from the two options below to get started:
I want to DIY my SRI portfolio. If you want maximum assurance that the companies you’re investing in support your personal definition of SRI, you may want to create your own SRI portfolio. If this is the path for you, head to step two.
I want help. The majority of people prefer to make socially responsible investments when possible — but it takes some work to figure out how committed a company really is to ethical practices. This is where robo-advisors come in. Robo-advisors use algorithms to build and maintain an investment portfolio based on your risk tolerance and goals.
The upsides of robo-advisors are that they’re inexpensive and several offer SRI portfolios that will do all the work of finding ethical investments for you. The downside is that they don’t let you add specific investments you’re interested in.
If you choose a robo-advisor, the next steps listed here won’t be required. However, knowing about the entire process could be useful in the future.
Here are some robo-advisors that offer socially responsible portfolios:
Betterment: Provides three impact portfolios to choose from: Broad Impact, Climate Impact and Social Impact.
Wealthfront: Offers a pre-made socially responsible portfolio that you can adjust.
Merrill Edge Guided Investing: Clients can invest in an ESG portfolio and request restrictions on certain ETFs.
2. Open an investing account
If you’ve decided to build your portfolio on your own, you’ll need to open a brokerage account first. This is an account you can use to buy and sell investments. Some brokerages have stronger socially responsible investing offerings than others, so you'll want to shop around before opening an account.
3. Outline what’s important to you
It may be helpful to specifically write down what you’re looking for in an SRI or ESG investment. Are gun manufacturers a deal-breaker? Would you be comfortable owning stock in a company that scores lower in the environmental category if it had a majority-female board of directors? Knowing what industries you are and aren’t OK with supporting will make it easier to include or exclude certain investments.
4. Research your investments with care
Once you have a brokerage account and you know your priorities, you can start building a portfolio that supports what matters to you. An easy way to judge how socially responsible a company is is to review ratings from independent research firms such as Morningstar. Two types of investments you may consider for a sustainable portfolio are stocks and funds.
Individual stocks generally shouldn’t encompass more than 5% to 10% of your portfolio, but if there is a company you expect to show strong growth, you may want to include it. In addition to factors like revenue and net income, you may want to see if the company produces a sustainability report you can read, how diverse their board of directors is and how their employees grade the work culture through a third-party site such as Glassdoor.
Mutual funds are an easy way to instantly diversify your portfolio, and there are more sustainable funds to choose from than ever before. Mutual funds include selected assets that adhere to criteria laid out by the fund manager. If your broker has a screening tool, it can likely help you sift through different fund options to find the right ones for you. Some funds have a specific focus area, such as investing in companies that are fossil-fuel free.
To read about the nitty-gritty of a particular fund, you’ll want to look through its prospectus, which should be available through your broker's website. Two important things to look for are a fund’s holdings and expense ratio.
» Ready to find funds? See our list of the top-performing ESG funds