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January 09, 2002

Social Mutual Funds Beat Critics' Predictions In 2001

SocialFunds.com Analyzes the Impact of Last Year’s Top Social Investing Stories

Brattleboro, VT - SRI World Group, Inc. announced through its website, SocialFunds.com, the top social investing stories of 2001. They were: 1) Competitive social mutual fund performance; 2) Shareowner proposals concerning social and environmental issues surged to a 9-year high; 3) A strong push for sustainability investing in Europe; 4) The New Markets Tax Credit; and 5) The introduction of ten new stock indexes.

The most compelling social investing story of 2001 was the continued competitive financial performance of social mutual funds. According to percentile rankings compiled by Weisenberger for the year, 11 percent of the 57 social mutual funds (one share class per fund) tracked by SocialFunds.com were ranked in the top 10 percent of all mutual funds in their respective categories. In addition, 28 percent of social mutual funds finished in the top quarter of all funds in their respective categories, and 60 percent of social mutual funds beat half of all their peers in their respective categories. These financial achievements dispelled the predictions that social mutual funds would under perform the market last year because they were heavily weighted with poorly performing tech stocks.

“Social investing continues to demonstrate that good financial managers are the most critical factor in determining financial performance,” said Jay Falk, president of SRI World Group.

The next top story was that shareowner proposals regarding social and environmental issues surged to a 9-year high. With 158 resolutions up for proxy vote, 2001 was the busiest year since 1992 for social shareowner action, according to the Investor Responsibility Research Center.

The large number of proposals is notable considering the diverse range of issues addressed last year. Resolution issues included board diversity, labor standards, and human rights. In 1992, on the other hand, the 169 proposals filed were primarily related to the single issue of Apartheid in South Africa.

The third top story was the major push for sustainability investing in Europe. A number of European countries are embracing legislation requiring public pension fund trustees or their fund managers to disclose how sustainable business practices are accounted for in making investment decisions. In 2001, Belgium, France, Germany, and Sweden passed or took under consideration such legislation.

In the UK, London-based Morley Fund Management announced it would begin requiring large UK companies to publish environmental reports. The Association of British Insurers (ABI) also said its 400 members would begin asking companies to disclose external social, ethical, and environmental risks and the policies for managing those risks. These new policies affected the market, as Morley and ABI members account for over £690 billion in UK equities.

“The combination of public demand and government requirements for transparency will continue to make Europe a center of social investing activity,” said Mr. Falk.

An impending federal government plan to give tax credits for investing in community development was the fourth top story in 2001. The New Markets Tax Credit (NMTC), enacted by Congress in December of 2000, was crafted to generate $15 billion in new equity investment in low-income urban and rural communities.

The U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund, which is administering the NMTC, has begun taking applications from organizations that wish to be designated as a community development entity (CDE). Only organizations that are qualified CDEs can apply for allocations of the NMTC.

Rounding out the top five social investing stories was the launch of ten new indexes by U.S. and European firms. These new indexes will give social investors more tools to make like comparisons between screened and unscreened investments.

In the U.S., KLD Research & Analytics and Russell/Mellon Analytical Services announced the introduction of the KLD Large Cap Social Index, which is modeled on the Russell 1000 Index.

Nine new indexes were also launched by European firms. UK-based FTSE introduced four new benchmark indexes collectively titled FTSE4Good. The indexes are weighted by market capitalization and cover four geographical areas: the UK, Europe, the U.S., and the world. FTSE also created a corresponding tradable index for each of the four benchmark indexes.

Dow Jones Indexes, SAM Group, and STOXX Limited also launched four sustainability indexes for the European market. All four indexes are subsets of the 600 largest European companies. And ARESE, a corporate social, environmental, and sustainability performance research firm based in Paris, introduced the ASPI Eurozone index. The ASPI Eurozone index uses the Dow Jones EURO STOXX index as a benchmark financial universe, but includes only companies that have been rated highly in terms of sustainability.



SRI World Group, Inc. is a financial information and consulting services firm. The company operates SocialFunds.com and InstitutionalShareowner.com, which serve individual and institutional investors, respectively. SRI World Group is a leading provider of news, data, and analysis to the sustainable and responsible investing and corporate social responsibility markets. It also operates CSRwire, a dedicated newswire service for corporate social responsibility press releases.

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Socially Responsible Investing is the act of making investment decisions to achieve social as well as a financial return. Together a social and financial return are often described as a "double bottom line." The three main strategies of socially responsible investing (SRI) include screening, community investing, and shareholder activism.

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