“Because corporate social responsibility can influence how consumers perceive a brand and their purchasing decisions, the pursuit of social and environmental goals can serve a similar role to advertising,” Bryan added.
On the other hand, adhering to social responsibility can also diminish costs. For example, improving energy inefficiency can help save on input costs over the long-term but require a large upfront capital expenditure.
Additionally, a reputation for social responsibility can attract and retain talented individuals who are more apt to feel proud of their work.
KLD and DSI both include stocks with strong environmental, social, and governance records in areas that are relevant to their industries, including carbon emissions, labor management and corporate governance. KLD, though, excludes companies operating in the weapons, alcohol, gambling, nuclear power, adult entertainment and genetically modified organisms industries.
For more information on socially responsible companies, visit our socially responsible ETFs category.
Max Chen contributed to this article.