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September 24, 2003

SRI Money Market Accounts Earn Competitive Financial Returns
    by William Baue

In addition to offering social and environmental returns, socially responsible investing money market accounts generate competitive financial returns compared to their non-SRI counterparts.

SocialFunds.com -- Retail socially responsible investing (SRI) is most often associated with mutual funds, but investors can support social and environmental progress with their more basic investments as well. For example, many SRI firms offer money market accounts that provide social and environmental returns without compromising financial returns.

"If you're going to put money in the bank, you may as well put it in an SRI money market account, because you can earn market-rate returns while helping communities," said Michael Hanbridge, director of communications for Domini Social Investments.

The Domini Money Market Account (DMMA), which focuses on community development as its social return, generates an annual percentage yield of 1.00 percent (as of July 31, 2003.) The DMMA is managed by ShoreBank, the oldest and largest community development bank in the US. ShoreBank converts assets in the DMMA, which currently amount to $58.1 million, into community development loans that support underserved communities, low-income individuals, and minority- and women-owned businesses, among other things.

The Domini Money Market Account functions like a traditional savings account, complete with Federal Deposit Insurance Corporation (FDIC) coverage up to $300,000, according to Domini's website. Banking regulations require performance to be disclosed in terms of yield.

Money market funds that function more like a mutual fund, however, disclose performance in terms of annual return as stipulated by Securities and Exchange Commission (SEC) regulations. One such fund is the Calvert Social Investment Fund Money Market (CSIXX), which invests in companies with proactive social and environmental practices while avoiding companies that lag behind on these issues, like an SRI mutual fund.

"You don't have to give up performance to invest in your values," said Elizabeth Laurienzo, director of corporate communications at Calvert. "You can have both."

The CSIXX, which currently has $184.2 million in assets, has generated a one-year average annual rate of return of 0.69 percent for the period ending August 31, 2003. The average rate of return for all money market funds tracked by Lipper is 0.60 percent for this same period, while the Lipper Money Market Index for this period stands at 0.83 percent.

The Pax World Money Market Fund (PWMMF), which also functions more like a mutual fund, uses the same social screens as it does for its mutual funds.

"One of our guiding questions is, 'What are we funding?'," said Anita Green, vice president of Pax World Funds. "In the PWMMF, that question leads us to exclude the large investment banks, since that's where projects like the 3 Gorges Dam in China are bankrolled." Pax views those who invest in the 3 Gorges Dam as taking on a huge environmental liability.

"On the other hand, you will see auto makers names show up more in the MMF than in our other funds," Ms. Green told SocialFunds.com. "This is because we will buy paper from their credit departments, where the consumer auto loans are made." Supporting consumer loans generates a social as well as a financial return.

Pax's SRI money market differs from non-SRI money market accounts in terms of its investable universe.

"The PWMMF differs from non-SRI money market accounts in that the list of permitted issuers is smaller," said Molly Flewharty, portfolio manager of the PWMMF. "The fund is required by the SEC to invest in issuers of the highest credit quality and liquidity, and the social screens further restrict this list somewhat."

The PWMMF further distinguishes itself from non-SRI money market accounts in ways that may create advantages.

"The PWMMF is permitted to purchase U.S. government instrumentalities, such as
Freddie Mac and Fannie Mae, and these securities comprise a substantial
percentage of the portfolio," Ms. Flewharty told SocialFunds.com. "Most of the non-SRI Tier I money funds will not have as high a percentage of agencies in their portfolio."

"The agencies provide excellent credit quality and liquidity and very recently they have been trading at levels close to that of commercial paper," she continued.

The PWMMF's average annual return for the one-year period ended December 31, 2002 was 1.34 percent.

"Although it may seem that a smaller buy list would hurt returns, that's simply not the case," said Ms. Green. "Our returns are about the same as non-screened funds."

© SRI World Group, Inc. All Rights Reserved.

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