socially responsible investing

ABC News

By DAVID McPHERSON
Oct. 24, 2007

 

By one estimate from the Social Investment Forum, socially responsible funds held about $179 billion as of 2005. That was up more than tenfold from a decade earlier, according to the organization. But still it represents a sliver of the $9 trillion overall held in mutual funds at that time.

The socially responsible investing segment includes more than 200 mutual funds, the Social Investment Forum says, and it continues to expand with the introduction of exchange traded funds geared toward this investing audience.

Typically, socially responsible investing has been associated with liberal causes, such as human rights and the environment. But it also includes religious-oriented funds, many of which feature a conservative focus. These are sometimes referred to as examples of morally responsible investing, or MRI.

The LKCM Aquinas Funds, for example, seek to promote Catholic values by following investment guidelines set by the U.S. Conference of Catholic Bishops. The Aquinas Funds screen investments for policies on issues such as abortion, contraceptives, human rights, gender and race discrimination and fair employment practices. The fund managers say they will try to influence a company's practices to reflect the bishops' guidelines, and if unsuccessful they may sell the investment.

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Once a person has settled on general principles to follow, an investor should not get too hung up on exact screening procedures for broadly screened social mutual funds.

"They're all a little bit different in their criteria. It's not that big a deal unless you have some belief you want to be strict about," Wheat said.

Once done with that process, Wheat says they should consider the same factors as with other mutual funds, such as performance.

In general, socially responsible funds are higher cost than otherwise comparable funds, according to Morningstar. That is partly because of the expenses associated with the screening process and partly because many of the funds are run by smaller investment firms.

As a whole, such funds do just as well as other mutual funds over the long term, says Morningstar.

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