Changes for the Socially Conscious Investor

Physician's Money Digest, July 2007, Volume 14, Issue 7

Despite the best intentions, socially responsible investment funds (SRIs) have not performed well vs the broad market over the past 3 years (8.5% vs 10.4%).

The Investing Do-gooder

As their name suggests, SRIs are funds that invest in socially responsible companies and avoid sectors deemed harmful or objectionable (eg, energy, mining, tobacco, gambling, and military).

Unfortunately for SRIs, these objectionable sectors have been recent strong performers. According to Fortune magazine, however, several changes are under way to help bolster the returns of SRI funds. For example, PAX World Fund (PAXWX), with $2.5 billion in assets under management, has dropped the prohibition on gambling and alcohol stocks and is instead focusing on companies with proper corporate governance, product integrity, climate change, and human rights. The fund is also evaluating companies based on the diversity of their board of directors.

Shaking Up the Strategy Another

SRI fund, Calvert (CLGAX), with $13 billion under management, is now looking at nuclear power companies since that technology could be a means of slowing global warming. The technologyheavy fund Domini Social Equity (DSEFX), with $1.2 billion under management, has experienced slow growth over the past few years and in response has now engaged prestigious investment firm Wellington Management to handpick stocks in its portfolio.

It will be interesting to see if these new measures will help the overall growth of the SRI fund sector.