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August 01, 2002
Investors Continue to Put Money into SRI Mutual Funds
by William Baue
While U.S. diversified mutual funds are experiencing significant net outflows in response to the
corporate scandals, SRI mutual funds are experiencing net inflows.
SocialFunds.com --
In the midst of the current crisis in investor confidence resulting from the wave of corporate
governance scandals, the old-fashioned options of stowing money under the mattress or burying it in
the back yard seem increasingly attractive. However, investors are not abandoning the market
altogether.
The Social Investment Forum (SIF) announced this
week that for the first half of 2002, there was net inflow of assets to SRI mutual funds. This
means that in the first six months of this year, more money was put into SRI funds than taken out.
The SIF made this conclusion based on analysis of data provided by Lipper, a Reuters-owned firm
that tracks 80,000 mutual funds worldwide.
According to SIF calculations, the Lipper data
show a 3 percent net inflow to SRI mutual fund assets between January and June, 2002, and a
concurrent 9.5 percent net outflow from the total assets of U.S. diversified funds. In other
words, while investors are withdrawing money from mainstream mutual funds, they are depositing
money into SRI mutual funds. Lipper data for June, a particularly volatile month that saw the S&P
500 drop by more than 13 percent, throws this phenomenon into sharp focus. SRI mutual funds
experienced net inflows of $47 million, while U.S. diversified funds experienced net outflows of
almost $13 billion.
"This data appears to confirm that there really is something to the
anecdotal reports we are hearing about the ongoing market scandals spurring new people to join the
ranks of socially responsible investing," said Steve Schueth, spokesperson for the Social
Investment Forum and president of First Affirmative Financial Network. "One might say that the
social investment industry is defying gravity at the moment."
Socially responsible
investing applies the same stringent financial analysis as traditional investing strategies.
However, SRI also analyzes companies' social and environmental performance. While such additional
due diligence does not guarantee the identification of fraudulent corporate accounting, SRI does
offer investors a broader view of their companies.
"The market faces a real crisis of
credibility, caused, in part, by a seemingly endless procession of corporate scandals," said Tim
Smith, president of the SIF and senior vice president of socially responsive investing at Walden
Asset Management. "Socially and environmentally responsible mutual funds use their influence to
promote more corporate responsibility through resolutions, dialogue and encouraging reforms in
corporate governance. When you combine that far sighted leadership with good relative performance,
screened funds are an increasingly attractive alternative for many of the nation's investors."
Order a free fund prospectus:
visit the SocialFunds.com Prospectus Ordering
Center.
©
SRI World Group, Inc. All Rights Reserved.
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