Socially Responsible Investing:
Stock Market Ways to Invest
Socially responsible investing is an investment strategy that selects stocks and funds based on both financial performance and positive environmental, social, and governance (ESG) impact—giving you a way to grow wealth while backing companies that align with your values. You can practice socially responsible investing (SRI) through individual ethical stocks, sustainable investment funds, ETFs, or robo-advisor portfolios, using tools like positive screening (favoring solar, healthcare, or diverse leadership) and negative screening (excluding tobacco, weapons, or fossil fuels). Shareholder activism adds another lever, letting investors push for change from inside.
After more than 20 years building Complete Controller into a trusted name in cloud-based bookkeeping and accounting services, I’ve watched thousands of business owners and investors wrestle with the same question: Can I do good and still do well? The answer, backed by data, is yes. According to the US SIF Foundation, U.S. sustainable investing reached $8.4 trillion in assets under management in 2022—roughly 12% of all professionally managed U.S. assets. In this article, I’ll walk you through what SRI really means, how to screen stocks like a pro, the best ESG funds for 2026, real-world activism wins, and a portfolio blueprint you can put to work this week.
What is socially responsible investing and how do you start?
- Quick answer: Socially responsible investing combines financial returns with ethical impact by selecting stocks in ESG-aligned companies and avoiding harmful sectors—accessed through ETFs, mutual funds, individual stocks, or robo-advisors.
- Methods: Use positive screening, negative screening, and shareholder activism to shape your portfolio.
- Performance: A meta-study of 2,000+ studies found 63% showed a positive link between ESG and stock price performance.
- Vehicles: Individual ethical stocks, sustainable investment funds, ESG ETFs (like SUSL), and impact-focused robo-advisors.
- Long-term payoff: Reduced climate risk exposure and alignment with the 75% of Americans who now expect corporate positive impact.
Understanding Socially Responsible Investing and ESG Investing
Socially responsible investing focuses on values-based exclusions while seeking measurable social good. ESG investing, by contrast, evaluates every company on environmental, social, and governance metrics to manage risk-adjusted returns. Impact investing goes one step further, targeting outcomes you can measure—think clean water access or affordable housing units built.
That distinction matters when you’re building a portfolio. A landmark meta-study by Friede, Busch, and Bassen aggregated more than 2,000 empirical studies and found 58% showed a positive relationship between ESG and operating performance, and 63% showed a positive link between ESG and stock price performance. Translation: doing right by people and planet has real financial muscle behind it.
ESG criteria explained
Companies get rated across three pillars:
- Environmental: Carbon footprint, water use, renewable energy adoption
- Social: Diversity, labor practices, community engagement, supply chain ethics
- Governance: Board independence, executive pay, shareholder rights, transparency
Top performers on Morningstar’s sustainable list often show wide economic moats and strong risk management—two things every smart investor wants.
How to Screen Stocks for Socially Responsible Investing
Screening is where SRI stops being theory and starts being practical. Most beginner guides skip the how, so here’s the founder’s playbook I share with clients.
Positive screening vs. Negative screening
Positive screening means actively choosing leaders—solar firms, BIPOC-owned companies, healthcare innovators with strong governance. Negative screening means cutting out fossil fuels, gambling, weapons, or tobacco. Most serious SRI portfolios use both. Tools like Morningstar’s sustainable companies list, Sustainalytics, and Fidelity’s ESG screeners make the work manageable.
Best tools for ESG criteria research
- Fidelity and Merrill Edge SRI screeners for retail-friendly filtering
- Sustainalytics ratings for institutional-grade ESG risk scores
- Glassdoor culture scores to verify the “S” in ESG isn’t just marketing
- Sustainability reports read directly from company investor relations pages
- CFA Institute’s ESG Investing research library for deeper frameworks
ESG Investing Strategies for Beginners
If you’re new to ESG investing, the trick is starting small and diversifying smart. You don’t need to overhaul your whole portfolio in week one.
Building your first SRI portfolio
Here’s a starter framework I’ve used with mission-driven business owners:
- Allocate 5–10% to individual ethical stocks for conviction plays
- Anchor 60% in diversified ESG ETFs like iShares ESG MSCI USA Leaders (SUSL)
- Add 20% in green or social bonds for stability
- Reserve 10–15% for thematic plays—clean energy, water, or healthcare access
- Rebalance annually to lock in gains and reset your risk profile
Robo-advisors like Betterment’s impact portfolios or Wealthfront automate the customization for hands-off investors.
Thematic investing in sustainable sectors
Thematic SRI lets you double down on what you care about—green energy, women-led firms, or human flourishing markets. It’s where sustainable finance gets personal.
Best Long-Term Socially Responsible Investment Funds
Some SRI funds lag the S&P during high-flying tech years (Kiplinger’s ESG 20 returned 4.3% vs. the index’s 15.9% in one stretch), but the best long-term socially responsible investment funds prove resilience over full cycles. Here are 2026’s standouts:
| Ticker | Fund Name | 1-Year Performance | Focus |
| FTHF | First Trust Emerging Markets Human Flourishing ETF | 67.09% | Social impact |
| EMDM | First Trust Bloomberg EM Democracies ETF | 62.09% | Governance |
| SUSL | iShares ESG MSCI USA Leaders ETF | Sector-leading | ESG leaders |
| ESGG | FlexShares ESG | 15.7% (beats 71% of peers) | Global blend |
These funds align with the UN Principles for Responsible Investment, the gold-standard framework for long-term value creation.
Socially Responsible Investing Portfolio Construction for Real Returns
Most articles skip the math. Real socially responsible investing portfolio construction looks like this: 60% diversified ESG funds and ETFs, 20% individual ethical stocks, 20% green bonds—rebalanced yearly for climate risk exposure. At Complete Controller, we typically advise clients to begin with 10–20% SRI allocation and scale up as conviction builds.
Handling volatility and shareholder activism
SRI funds historically show lower volatility because ESG-strong companies manage long-tail risks better. And activism works. In 2021, the small activist fund Engine No. 1 ran a proxy fight at ExxonMobil and won three board seats, arguing the company wasn’t managing climate risk well. Reuters reported the campaign forced strategy and governance changes tied to long-term value—proof that even retail-aligned activism can move giants. You can vote your shares, too; the SEC’s investor bulletin on proxy voting walks you through the process.
The Compliance and Human Touch in Ethical Investing
Greenwashing is the dirty secret of ethical investing. A fund slaps “sustainable” on its name and calls it a day. Aligning with UN PRI standards and verifying ratings through multiple sources keeps you protected from regulatory headaches and disappointing performance.
Where AI screening needs founder expertise
AI screeners catch the obvious metrics but miss cultural nuance—how a company actually treats its workers, whether community impact is real or staged. My team at Complete Controller pairs automated tools with human judgment because clients deserve bookkeeping and accounting services that match their values, not just their spreadsheets. That same principle applies to your investments.
Final Thoughts
Socially responsible investing gives you a clear path to grow wealth while backing the companies shaping a better future—through smart screening, diversified funds, and active ownership. The data is on your side: most studies link strong ESG to better stock performance, and trillions of dollars are now flowing into sustainable strategies. Start small, use trusted screeners, diversify across ETFs and individual ethical stocks, and rebalance with intention.
After two decades helping business owners align money with mission, I can tell you this: the investors who blend values and finance sleep better and often perform better. Your next move can be one ethical stock, one ESG fund, or one conversation with a financial pro who gets it. For more expert guidance on topics like this, visit the team at Complete Controller today.
Frequently Asked Questions About Socially Responsible Investing
What is socially responsible investing?
It’s an investment strategy that selects stocks and funds based on financial returns and positive ESG impact, while excluding harmful sectors like tobacco, weapons, or fossil fuels.
What’s the difference between ESG investing and impact investing?
ESG investing screens companies for sustainability risks and governance quality. Impact investing aims for measurable social or environmental outcomes, like carbon reduction or affordable housing units delivered.
Are socially responsible investments actually profitable?
Yes—a meta-study of 2,000+ empirical studies found 63% showed a positive link between ESG and stock performance, and several SRI funds have outperformed traditional benchmarks with lower volatility.
How do I start socially responsible investing as a beginner?
Open a brokerage account at Fidelity, Schwab, or Merrill Edge, use their built-in ESG screeners, or pick a robo-advisor like Betterment’s impact portfolio for automated SRI allocation.
What are the best ESG funds for 2026?
Top performers include FTHF (First Trust Emerging Markets Human Flourishing ETF) at 67% and SUSL (iShares ESG MSCI USA Leaders) for U.S. blue-chip ESG exposure—always cross-check with Morningstar ratings.
Sources
- M1 Finance. (2026). “Socially Responsible Investing: How to Build a Portfolio.” https://www.m1.com
- Kiplinger. (2026). “Kiplinger ESG 20: Our Favorite ESG Stock and Fund Picks.” https://www.kiplinger.com
- NerdWallet. (2026). “What Is Socially Responsible Investing (SRI) and How to Get Started.” https://www.nerdwallet.com
- Carbon Collective. (2026). “Socially Conscious Stocks.” https://www.carboncollective.co
- Women of Influence. (7 Oct. 2021). “How to Get Started with Socially Responsible Investing.” https://www.womenofinfluence.ca
- NerdWallet. (2026). “14 Best-Performing and Cheap ESG Funds for 2026.” https://www.nerdwallet.com
- Curio Wealth. (2026). “Socially Responsible Investing 101.” https://www.curiowealth.com
- Morningstar. (2026). “Best Sustainable Companies to Own in 2026.” https://www.morningstar.com/sustainable-investing/best-sustainable-companies-own-2026
- Green America. (2026). “Socially Responsible Investing.” https://www.greenamerica.org
- ETF Database. (2026). “Socially Responsible ETF List.” https://www.etfdb.com
- Bankrate. (2026). “What Is ESG Investing?” https://www.bankrate.com
- US SIF Foundation. (2022). “2022 Report on US Sustainable Investing Trends.” https://www.ussif.org/trends
- Friede, Gunnar, Timo Busch, and Alexander Bassen. (5 Mar. 2015). “ESG and Financial Performance: Aggregated Evidence from More Than 2000 Empirical Studies.” Journal of Sustainable Finance & Investment. https://www.tandfonline.com/doi/full/10.1080/20430795.2015.1118917
- DiNapoli, Jessica. (2 Jun. 2021). “Exxon Investors Elect at Least Two, Possibly Three, Dissident Directors.” Reuters. https://www.reuters.com/world/us/exxon-investors-elect-two-dissident-directors-engine-no-1-2021-06-02/
- CFA Institute. “ESG Investing.” https://www.cfainstitute.org/en/research/esg-investing
- U.S. Securities and Exchange Commission. “Investor Bulletin: Proxy Voting.” https://www.sec.gov/oiea/investor-alerts-bulletins/ibproxyvoting.html
- UN Principles for Responsible Investment. “UN PRI.” https://www.unpri.org
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
Brittany McMillen
Brittany McMillen