Proceedings of the International Association for Business and Society

Volume 12, 2001

Proceedings of the Twelfth Annual Meeting

Don't Get Stuck in the Middle
A Curvilinear Bridge Spanning the Great SRI Divide

A central debate in socially responsible investing (SRI) concems the relationship between financial and social performance. Opponents of SRI argue for a negative association while proponents claim either a positive association or no relationship at all. We bridge this long-standing divide by measuring financial performance differences within SRI funds, not between SRI and non-SRI funds. We find that as the number of social screens used by an SRI fund increases, financial returns decline at first, but then rebound as the number of screens reaches a maximum. That is, we find a curvilinear relationship, suggesting that these competing viewpoints may, in fact, be complementary.