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November 08, 1999
Two Trillion Dollars in Socially Responsible Investments
Social Investment Forum reports that one out of every eight dollars under management is now
invested responsibly.
SocialFunds.com --
More than $2 trillion (US) is now invested in a socially responsible manner in the U.S., according
to a study released by the Social Investment Forum (SIF), the nonprofit professional association
dedicated to promoting socially responsible investing. The total of $2.16 trillion accounts for all
segments of social investing, including screened portfolios, shareholder advocacy, and community
investing.
 The new figure is up 82 percent from 1997 levels,
roughly twice the rate of all assets under management in the U.S., which climbed 42 percent during
the same period. Social investments now account for about 13 percent of the estimated $16.3
trillion under professional management in the U.S.
"Clearly, a growing number of
individuals and institutions are insisting that their money be invested in a fashion that is
aligned with their values," said SIF President Steve Schueth. "At the same time, the strong
performance of social investing in recent years has played a major role in the influx of assets."
SIF found that socially screened portfolios have seen impressive growth in the last two
years, rising 183 percent, from $529 billion (US) to $1.49 trillion. New socially screened mutual
funds continue to appear, now numbering 175, up from just 139 in 1997. Assets in screened mutual
funds grew by 60 percent from 1997 to 1999, from $96 billion to $154 billion.
It's
important to note that SIF's criteria for socially screened portfolios include screens for any
social issues, even the most basic tobacco, gambling, and alcohol exclusions. While 96 percent of
socially screened portfolios exclude tobacco, only 43 and 38 percent deal with human rights and
labor rights issues, respectively.
In fact, a dramatic rise in tobacco exclusion screens
is partly responsible for the growth in screened portfolios, according to SIF. Recent concerns
about the impact of smoking on public health, marketing cigarettes to children, and evidence about
health risks withheld by the tobacco industry have driven this divestment trend.
SIF also
attributes much of the success of screened portfolios to their recent performance. The Domini 400
Social Index (DSI) and the Citizens Index, indexes designed to characterize the performance of
socially screened securities from a broad range of industries, have both outperformed the S&P 500
on a total return basis since their inception (1990 and 1995, respectively). A recent report from
Morningstar found that socially screened mutual funds are twice as likely as all mutual funds to
get top five-star, as of June 30, 1999.
SIF also found that social investing has grown as
a retirement plan alternative. A recent survey by Calvert Group, for instance, showed that 35
percent of mutual fund investors with defined contribution retirement plans at work said that their
employer offers a socially screened investment option, more than double the 16 percent found in
1996.
Shareholder advocacy, or claiming rights of company ownership by sponsoring and
voting on shareholder resolutions, is an increasingly productive venue for social investors,
according to SIF. Between 1997 and 1999, the amount of money controlled by investors who are
involved in shareholder advocacy rose from $736 billion to $922 billion, an increase of 25
percent.
While this figure for shareholder activism is remarkable, and makes up nearly
half the $2 trillion total quoted by SIF, only a fraction of that $922 billion is actually wielded
in the form of resolutions and proxy votes. Still, an impressive 120 institutions and mutual fund
families have used the power of their ownership positions in publicly held companies to sponsor
resolutions or vote their proxies on corporate social responsibility issues.
SIF found
that the fastest growing component of socially responsible investing is the growth of portfolios
that employ both screening and shareholder advocacy to encourage corporate responsibility. Assets
in portfolios utilizing both strategies grew 215 percent, from $84 billion in 1997 to $265 billion
in 1999.
Community investing, the investment of critically important capital in community
development banks, credit unions, loan funds, and venture capital funds, grew by 35 percent,
according to SIF. Assets held and invested by these community development financial institutions
(CDFIs), focusing on local urban and rural development, affordable housing, and small business
lending, totaled $5.4 billion, up from $4 billion in 1997.
"The clear message from this
data is that socially responsible investing is now firmly on a path of steady growth," said
Schueth, "thanks to a growing acceptance of social investment as a viable and value-added approach
to asset management."
Several recent trends, including strong performance, divestment from
tobacco stocks, and increased social investment by retirement and pension plans, have contributed
to the impressive growth of socially responsible investing in the past two years. Social investors
can hope that this growth represents greater prospects for bringing corporate responsibility and
accountability to the forefront.
www.socialinvest.org
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SRI World Group, Inc. All Rights Reserved.
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