Henry Blodget says socially responsible investing is neither as profitable nor as responsible as advertised. But here’s how to do it right.

The flaws and challenges that have confined SRI to a niche strategy in the past reveal the key to expanding its influence going forward. To be meaningful, any analysis of a company’s practices must be painstaking and deep, and screening decisions must be made on objective criteria that others can assess for themselves. Investments must be made for the long term—several years at a minimum and preferably decades—because any incremental value created by sustainable policies (rather than by publication on a CalPERS focus list) will likely take years to be realized. Investors should be active partners in a company’s development, sponsoring or supporting referenda or participating in discussions with management—or they should draft behind shareholders who are. And as in all intelligent investing, price must be taken into account. Even if a company’s practices are downright saintly, and even if the saintly practices may help the company deliver superior earnings—far from proven—you won’t benefit if the value of such practices was already reflected in the stock’s price when you bought it. (A Porsche is only a great deal when it is priced like a Volkswagen. Otherwise it’s just a great car—and priced like one.) Lastly, because companies and stocks that satisfy these criteria will likely be few and far between, you will have to live with the risks as well as the potential rewards of limiting your portfolio to a handful of stocks, instead of holding a diversified basket of hundreds.

To read more go to: http://www.theatlantic.com/doc/prem/200710/socially-responsible-investing