Socially Responsible Investing, SRI for those in the know, is the selection of stocks or funds based on certain social criteria...in other words, investing in companies that don't do anything that you will lose sleep over. It is ironic, however, that socially responsible investing has been deemed as politically incorrect. This may have something to do with the view that if you oppose tobacco stocks, for example, you must also resist alcohol, gaming and defense companies. However, when we select stocks or funds based on our own personal financial criteria, such as selecting an internet upstart, or a pharmaceutical company with a new life-saving drug, aren't we, in essence, assuming other investors will embrace our vision. Is it then so out of line to expect the same with our social expectations? Say, for example, that I believe cigarettes are the devil's work, and that all of the anti-smoking campaigns will eventually end the tobacco companies existence, why would I want to invest in a fund or a company that opposes my ideals?
Elizabeth Elliott-McGeveran, a spokesperson for the Social Investment Forum (SIF), http://www.socialinvest.org, says that most people come to Socially Responsible Investing, "through particular issues. Tobacco is one of those issues. An oncology nurse in a cancer ward or a high school biology teacher, may discover that a portion of their nestegg is in tobacco companies, and be very offended that they are investing in the very things they are fighting against." "Further", she says,"we believe there is a shift in American culture. Investors are trying to integrate their economic choices and their social values. More and more, people are discovering that they do not have to sacrifice performance for their values."
Indeed, the choices for funds that have a social screen as well as a financial screen have tripled from 55 in 1995 to 244 in 1997, and they range from balanced funds to international, growth and even hedge funds...some outperforming the S&P 500. The SIF believes that the diversification issue that was once a prevalent argument against socially responsible investing is no longer an issue. In fact the Domini 400, the stocks that make up the Domini Social Equity Fund and the socially responsible equivalent of the S&P 500, has outperformed the S&P many times.
Annualized Returns DSEF S&P 500 One Year 22.07 % 18.46 % Three Year 30.19 % 28.05 % Five Year 26.45 % 26.22 % Since Fund Inception* 19.46 % 19.30 %
