Increasingly, clients are asking whether their investments can reflect their personal values — in addition to their financial goals. For many people, it matters that their capital supports companies behaving responsibly toward the environment, their employees, and the communities they operate in. Sustainability investing offers a way to pursue that alignment without sacrificing a well-diversified portfolio.
The US market for sustainable investments has grown from a niche strategy to a mainstream one, reaching $6.6 trillion in 2025, up from $1.6 trillion in 2019. Recent political headwinds have slowed, but haven’t reversed, that growth.
Sustainable investing examines how companies address environmental, social, and governance (ESG) issues. It applies screens that rank companies based on their climate impact, how they manage their environmental footprint, and their approach to a defined set of social issues.
For years, our investment strategies have offered sustainability components across our core US and international holdings. We feel that doing so promotes positive change without compromising other portfolio objectives, including risk and return. Our approach considers the following criteria:
The extent to which companies manage their carbon footprints to reduce emissions and minimize climate change.
Supporting environmental policies that promote responsible land use, water management, toxic spill prevention, and waste reduction.
Avoiding companies engaged in coal production or factory farming.
Excluding private prisons and immigrant detention facilities, where profit is tied directly to the incarceration of people.
Eliminating companies engaged in manufacturing civilian firearms, landmines, and cluster munitions.
Favoring companies with policies that prevent child labor throughout the supply chain, not just at the company level but across the broader network of suppliers.
Prioritizing business practices that exclude companies involved in significant environmental, social, or governance controversies.
These criteria matter not just as expressions of shared values — but also because they tend to reflect how well a company is run. We believe that a business that takes its environmental responsibilities seriously, treats its workers fairly, and governs itself well is often a better long-term investment. And a better corporate citizen.
Does sustainability lessen investment risk? It might. ESG criteria can improve a company’s long-term financial health in tangible ways. Stronger governance may lead to more consistent earnings. And environmentally responsible practices can reduce exposure to stranded asset risk—the risk that assets, such as oil and gas, may lose value as regulations shift, technology evolves, or customer demand changes.
How well has sustainability performed over the years? Below, we compare the performance of our main domestic sustainability fund, the DFA US Sustainability Core 1 Portfolio (DFSIX), to that of the broad US stock market, as represented by the Russell 3000 Index. We track the data from 4/2008 through 4/2026, the full 18 years of the fund’s life.
Growth of the DFA US Sustainability Core 1 Portfolio to the US Stock Market (Russell 3000)
As the chart above illustrates, the fund closely tracked the index throughout the period. In aggregate, it delivered an 11.74% annualized return net of fund expenses, while the Russell 3000 delivered 11.73% with no fund expenses. The fund essentially matched the US market's performance, indicating no long-term performance penalty for sustainability investing.
However, within that long period, we notice some underperformance in the most recent five years. This is mainly because sustainability funds typically underweight or exclude most of the energy sector, including oil and gas stocks. If energy stocks underperform in the future, we would expect to see a reversal of this trend.
Conclusion
For investors who want their investment objective to include their personal values, sustainability investing offers a way to do so while still pursuing competitive returns. By focusing on companies with stronger environmental, social, and governance practices, investors can support positive corporate behavior without sacrificing their long-term returns.
Data sources include Dimensional Fund Advisors, Perplexity, and US SIF. Past performance is not a guarantee of future results.
The performance shown for the DFA US Sustainability Core 1 Portfolio reflects the fund’s returns, which are net of the fund’s own fees and expenses. The Russell 3000 Index is an unmanaged index and does not reflect the deduction of any fees or expenses. Index returns are shown for comparative purposes only and do not represent the performance of any actual investment. Investors cannot invest directly in an index.