The Cost of Being Good‪.‬

Introduction This paper examines the performance of U.S. equities through the use of socially responsible investment screens. Socially responsible investing (SRI) is reflected in the attitudes of the investor to apply social goals to their investment portfolio. We extend the SRI literature by examining a broader study of social screens in a more restrictive context. The sample used in Sauer (1997), based on the Domini Social Index, is "selected to minimize the potential negative side effects." In contrast, our initial approach is to examine the costs and benefits from the most extreme approach of socially responsible investing--the exclusion of companies not meeting a social investment screen. The exclusionary approach results in portfolios that maximize the costs to socially responsible investing. We examine the returns and risk-adjusted returns to investing in socially responsible investment portfolios using 20 social screens from KLD Research & Analytics, Inc. (KLD).