January 15, 2003
Sierra Club Launches SRI Mutual Funds
by William Baue
The Sierra Club is harnessing its name recognition and expertise on corporate environmental
performance with its launching of an SRI equity mutual fund and an SRI balanced mutual fund.
The Sierra Club is best known for its
environmental activism, but the century-old organization is promoting corporate environmental
responsibility in a new way by offering two socially responsible investing (SRI) mutual funds.
The Sierra Club Stock Fund and the
Sierra Club Balanced Fund were launched earlier this month and are managed by San Francisco-based
Forward Management. Both funds use
screens, which were originally developed for use with the Sierra Club endowment's equity
investments, to exclude companies with poor environmental performance. Forward Management will pay
a portion of its management fees to the Sierra Club for identifying securities that meet the
established environmental screening guidelines. The Sierra Club will use this monetary infusion to
support its ongoing environmental activism. This arrangement between the two organizations
provides another way for these funds to promote a healthier environment.
"The Sierra Club
created the environmental and social guidelines that the funds use to determine what investment
opportunities they will consider," said Forward Management Director of Marketing Craig Lamson.
"Few organizations or individuals can claim they are more qualified for that task."
Sierra Club is no stranger to socially responsible investing. For the last half-dozen years, Harris Bretall Sullivan & Smith has applied the
club's exclusionary environmental screens to the equity portion of the club's endowment
"We believe in exclusionary screening and do not accept 'best-in-class'
companies," Mr. Lamson told SocialFunds.com.
The best-in-class approach identifies
companies with the best environmental performance in a particular sector. The Sierra Club Mutual Funds operate from the belief that
some sectors, such as the oil and automobile sectors, inherently are environmental spoilers and,
therefore, should be entirely excluded from investment.
The Sierra Club Mutual Funds
will apply a total of 19 screening criteria. The criteria relate to areas such as the production
of nonrenewable energy, nuclear and chemical waste management, contribution to global warming, and
manufacture or distribution of military weaponry.
However, the screens are not airtight.
For example, the Sierra Club Balanced Fund invests in U.S. Treasury Bonds, which many social
investors avoid because such bonds fund the Department of Defense. The Sierra Club defends its
inclusion of U.S. Treasury Bonds in its balanced fund.
"The U.S. government plays a
critical and unique role in protecting our environment, including the air we all breathe, our
drinking water and our national parks," Sierra Club Director of Conservation Bruce Hamilton told
SocialFunds.com. "All Americans rely on our government to crack down on polluters and enforce our
environmental laws, and we think it is important to invest in those efforts. The Sierra Club
doesn't agree with many of the current Administration's policies, and we're working every single
day to change the policies that are harmful to the environment."
Sierra Club's name lends
brand recognition to the new funds. In fact, the Sierra Club designation may be more familiar to
investors than any other brand identification in the SRI field. Green Century Funds, which similarly focuses its SRI
efforts on environmental issues, is predominantly owned by Public Interest Research Groups (PIRGs)
but does not highlight that fact.
The Sierra Club Stock Fund has a head start on the
Sierra Club Balanced Fund in terms of assets. That is because Forward Management is reincarnating
its Forward Garzarelli U.S. Equity Fund as the Sierra Club Stock Fund. The fund, formerly managed
by Elaine Garzarelli, brings with it about $20 million in assets and invests at least 80 percent of
its assets in stocks. The Sierra Club Balanced Fund, which started from scratch, will allocate
approximately 60 percent of its assets to stocks and 40 percent of its assets to fixed income
securities (such as bonds) and cash equivalents.
Forward Management may charge fund
shareowners a management fee of 2.36 percent of assets per year, though the rate has been capped
initially at 1.84 percent. A portion of this capped fee will be plowed back into environmental
action. Forward Management now returns 0.12 percent of assets to the Sierra Club as recompense for
the use of its name and screening services, and this rate could rise to as high as 0.20 percent.
SRI World Group, Inc. All Rights Reserved.