The Modern Portfolio Theory (MPT) emphasizes that diversification is critical for minimizing your risk exposure. Diversification is a core value in successfully investing – and it is no different for socially responsible investments (SRI). Some critics believe that diversification is limited with social investing screens, and thus, the volatility of socially responsible stock portfolios increase. However, with proper asset allocation, socially responsible investments can achieve the same – if not lower – risk exposure levels as non-screened counterparts.

The foundation of socially responsible investing rests upon the screens set forth to filter socially responsible stocks. However, there exists a fine balance in selecting the appropriate screens that will allow you to invest consciously, but also profitably within acceptable risk parameters. Because social investing screens decrease the size of available investment options, it is important to ensure that your risk-to-reward ratio preferences are balanced appropriately.