As President of Parnassus Investments, I often think about what responsible investing might look like over the coming decades. The future is anchored in the past, so I believe the best way to begin an answer to this question is with a look back at the early years of responsible investing.

The Origins of Values-Based Investing

The modern movement to link investors’ values with their portfolio holdings is rooted in the 1970s. During this period, social concerns like the Vietnam War, civil rights, women’s equality and environmental protection became passionate causes for many members of the Baby Boomer generation. At this early stage of the movement, some idealists were willing to accept lower returns in exchange for investments that aligned with their views on social issues.

The key feature of these early responsible investment strategies was the application of screens to limit the investment universe. The idea was to avoid companies that were perceived as harmful to the environment and society. Many observers concluded that a limited universe would necessarily diminish returns over time. This notion that responsible investing would, by definition, under perform persisted for many years.

Read more at Green Money Journal

Image: Benjamin E. Allen, President, Parnassus Investments and a portfolio manager for the Parnassus Core Equity Fund (Credit: Green Money Journal)