Business Week’s SRI: Invest With Your Heart and Soul makes this claim: “the dark secret of SRI is that it is neither art nor science: It’s image and impulse. It reflects ideological litmus tests…”

Maybe so, but this is all changing very quickly. Read Joe Keefe’s (CEO of Pax World) August 6 article From Socially Responsible Investing to Sustainable Investing.

Keefe makes a strong case that socially responsible investing (SRI) is running out of rope and that we’re headed toward a new era of sustainable investing. He’s essentially made a cut-and-dry case for what is already happening with companies popping up across the country, including my favorites Nau, GOOD Magazine, Timberland and others. According to Keefe, it’s NOT about the avoidance of “sin stocks” nor about striking the balance between performane and values. Sustainable investing is about a new form of capitalism that says financial performance is maximized with sustainability is baked into the DNA of a company. What Keefe is suggesting is that there is empirical evidence proving that the best performing companies (e.g. the best investments) are those that put social and environmental performance in front. Where SRI narrows the investment portfolio, ESG (or sustainable investing) has broad and mainstream appeal. Is he saying that those seeking purely a financial return in the long run are better off investing with sustainable businesses? Read the article and let me know your take, but that’s what I read.

It seems to me, though, that the sustainability mindset is rooted in a cultural shift happening all around us — particularly with Gen Y and Gen X — that is essentially saying our problems can be fixed with good old capitalism. In fact, in my fledgling new start-up, Changents, we are finding amazing young entrepreneurs whose “do well by doing good stories” are addictive in such a way that they transform consumerism. We’ve called this cultural shift “ego-altruism” — its about an Internet generation who views living big and giving big as an expression of what they are all about.

Check out the Keefe article, Nau, GOOD Magazine and other examples. SRI, ESG… call it what you will — its a model flip that says business not only has the obligation but also the right to make a difference.