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January 17, 2008

Social Investment Options on the Rise
    by Anne Moore Odell

A flurry of new socially responsible mutual funds and products makes it easier then ever to invest in a double bottom line. -- Maybe it is Al Gore and the UN's Intergovernmental Panel on Climate Change winning the Nobel Prize. Maybe it is the cost of gas at the pump. Maybe the Enron scandal opened investors' eyes. Perhaps the news from the Sudan has pushed investors.

SRI Mutual Funds GuideWhatever the reasons, more people are investing with social responsible mutual funds. Over the last year and a half, more SRI mutual funds and products have been launched, meeting consumer demands. No longer can the argument be made that SRI funds offer investors limited choices.

"Socially responsible investors can now choose among more SRI funds than ever, with more specifically targeted investment strategies," said Cheryl Smith, Executive Vice President at, Trillium Asset and Chair, Social Investment Forum (SIF). "Any investor concerned about climate change, human rights, corporate governance, and shareholder rights can find an appropriate fund, whether they are focused on bonds or on stocks, income or growth, domestic or international investments."

Green can be big like an ocean

Green is the color of the new century, with mainstream and SRI mutual fund companies rushing to offer alternative energy, clean tech, green, and climate change products.

"I think two things are driving the interest in SRI, a general interesting in the environment, in part due to climate change awareness," said Paul Hilton, Director, Advanced Equities Research at Calvert. "It seems every magazine has had a 'green' issue."

Hilton continued, "the other piece driving interest in ESG issues is the mainstream investor shops and the new investment research in ESG, like the research from Goldman Sachs in London. Calvert has been investing responsibly since 1982. We think that the new interest validates that our strategies have merit and will attract more investors."

In a survey released last year, Calvert reported that 85% of respondents consider investing in alternative energy as an opportunity to make a profit while helping to mitigate climate change. Calvert's Global Alternative Energy Fund launched May 2007 with the biggest launch in Calvert's history. Since its inception, it has collected over $120 million in assets.

Winslow launched the Winslow Green Solutions Fund in November 2007, investing in mid-cap domestic and international companies that pass Winslow's green screens. This new fund joins Winslow's Green Growth Fund, which has been a small-cap mutual fund green leader since 2001.

The Spectra Green Fund, launched January 2007, is a growth fund with a broad definition of green companies. Its top holding as of the end of 2007 include Apple, Microsoft, Deckers Outdoor Corp, Deere and Co, and Borgwarner.

The Merrill Lynch Energy Efficiency Index made index history in 2007 as possibly the first index to focus solely on energy efficiency.

"SRI funds are clearly the leaders amongst all mutual funds on the important issue of global climate change that will affect industries across the board," Smith told

"While most mainstream funds do not even vote their proxies in favor of shareholder resolutions on climate change, SRI funds are engaging in dialogues, filing resolutions, and voting their proxies in favor of climate change resolutions. They are also leaders in investing in new energy saving and renewable energy technologies," Smith added.

We are the world

SRI funds are looking internationally to invest with the best companies the world over. This international approach diversifies portfolios and profits from the rise of new markets.

The Pax World Value Fund, launched September 2007, invests in undervalued large-cap companies and rounds out Pax mutual funds offerings, which also include a Balanced Fund, Growth Fund, High Yield Bond Fund, and Women's Equity Fund.

Calvert launched the Calvert International Opportunities Fund in May 2007 and, as of November 2007, had holdings in small and mid-cap companies in 25 countries. It invests in both developed and emerging markets with no more than 10% in US stocks.

Launched at the end of 2006, the Domini PacAsia Social Equity Fund and the Domini European PacAsia Social Equity Fund extend the specific targeted areas Domini Social Investments offers in mutual funds. Both funds invest in mid-to large cap companies in the specific areas.

"We've seen that investors who care about sustainability really need the full set of allocation tools and investment products that have traditionally been available to conventional investors," said Adam L. Deixel, Director of Marketing and Communications for Domini. "That's why we've begun offering our international funds."

Where the skies are not cloudy

Domestic funds are also represented in the new crop of mutual funds.

Gabelli SRI Fund launched in June 2007 looks to invest with companies that pass social and environmental screens. This is the first Gabelli fund with SRI in the title.

"We believe the time is right to offer this historically institutional product to the mutual fund community in the form of The Gabelli SRI Fund. This Fund will allow the mutual fund investor - if he or she chooses - to invest with their conscience," Christopher Desmarais, Senior Vice President, Director of SRI, and Portfolio Manager for the Gabelli SRI Fund, told right after the fund's launch.

MMA Praxis Mutual funds also added two new funds to its family last year: Small Cap and Growth Index Funds. The small cap fund balances between growth and value styles while the growth fund a portfolio mirrors the investment performance of the US large cap growth equities market. All of MMA Praxis's funds follow SRI investment strategy born from the Anabaptist faith tradition.

Miner for a heart of gold

Another growing field for SRI investors is microfinance. Microfinance is the granting of very small loans-often $50 to $500-to individuals in emerging markets to develop small businesses. Individual investors work with microfinance organizations and institutions to bring capital to areas of the world and individuals underserved by traditional banks. The microfinance institutions (MFIs) offer their clients loans with much lower interest rates than underground loans made by loan sharks. MFIs also see a very high rate of repayment.

MMA and the Mennonite Economic Development Associates (MEDA), working with MicroVest and the Calvert Foundation, launched the OneWorld Community Investment Program in June 2007. Investors with as little as $1000 can take part in the program designed to close the capital gap by investing in MFIs. High net worth individuals can become involved in microfinance through MicroVest's MicroVest I Fund launched in 2003.

MicroPlace was launched by eBay last year, with the goal of helping people invest over the Internet in microfinance. The Calvert Foundation, which helped develop MicroPlace, was named as the first issuer to sell investments on the site.

To market, to market, to buy a plum cake

"Public alarm over climate change has passed its tipping point, and it is probably the largest factor in convincing investors to invest for a better world, but there are many other issues that our investors care about: unsafe and unhealthy products, sweatshops and child labor, predatory lending and other financial abuses, lack of investment in poor communities, as well as a broad range of other environmental challenges," concluded Domini's Deixel.

Deixel continued, "What all of these issues have in common is that they are all tied, in one way or another, to the financial system. Our kind of investing is about fixing that system, and telling corporations how their owners expect them to behave. We're finally starting to see companies responding to the climate change challenge, in part because social investors and other shareholders have made it so difficult for them to avoid the issue."

It is impossible to lump SRI investors into any one category. They are as diverse a group as any set of investors and like all investors, SRI investors want their portfolios to perform well. However, one aspect that sets social investors apart from traditional investors is that social investors often take the long view, looking at how sustainable companies are for future generations, not just this quarter's earnings. Looking at companies through a SRI lens actually offers investors a valuable tool to identify how companies are posed to deal with risks and capitalize on opportunities.

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