More investors become 'socially responsible'

PERSONAL FINANCE

February 21, 1993|By Chau Lam | Chau Lam,New York Bureau

New York -- More and more people are putting their money where their conscience is -- by investing in companies that fit their view of a socially responsible world.

One measure of the trend: The amount of money held by managers promising "socially responsible investing" jumped from $40 billion in 1984 to about $700 billion last year, according to the Minneapolis-based Social Investment Forum.

Such investors generally screen out companies that offend their values. The result: no investments in the nuclear and defense industries, or in polluters. No "sin stocks," such as tobacco, alcohol and gambling. And South Africa is a nearly universal taboo.

At the same time, the investors look for companies with policies that they support, such as promoting women to top management, maintaining good safety records or recycling waste.

But not all the criteria fit traditionally liberal causes. The Catholic Church, for example, does not invest in companies involved in birth control or abortion.

Many money managers believe that socially responsible investments are likely to do better in the long run because the targeted companies have fewer financial and social risks. For example, a company that doesn't pollute will not be saddled with high cleanup costs or fines for violating environmental laws.

And short-term investment performance doesn't necessarily suffer, because "we choose good stocks first," said Doug Salvati, senior portfolio manager for Shearson Lehman Bros. Inc. "Social screening is a second focus, otherwise you are not investing."

Shearson's portfolio in socially responsible investing has grown from $2 million in 1987 to more than $70 million.

Statistics compiled by the Social Investment Forum seem to support that contention. The 12 socially responsible funds analyzed by the forum had an average rate of return last year of 7.6 percent, vs. the average 6.7 percent for all mutual funds.

Another 12 socially responsible mutual funds exist, but two were not studied by the forum and the other 10 are so new that there is little relevant data.

In all, $12 billion is invested in socially responsible mutual funds. Most of the rest of the $700 billion is invested by public pension funds, universities, religious groups and foundations.

Some investors have always had political criteria for investing their money.

But the recent boom has been sparked by growing concern about the environment and social issues,said Steve Schueth, vice president of the $900 million Calvert Family of Social Funds. Women have been a major factor in the trend; they make up about 65 percent of Calvert's socially responsive investors, he said.

"They're activists in the arts, the environment, in battered women. They do more than just write checks to charitable causes," said Amy Domini, whose Domini Social Index Trust nearly doubled its assets in the last six months to $12 million.

Companies favored by Ms. Domini include Rubbermaid Inc., because it uses recycled materials and has strong policies for promoting women and minorities. Procter & Gamble Co. also gets the nod because of strong environmental programs, despite its production of disposable diapers.

Still, the standards of socially responsible investing can be confusing.

While South Africa is shunned by almost all socially responsible investors, countries with arguably worse human rights records are not. Countries such as Burma, China and Zaire are not mentioned by any fund as investment criteria.

Money managers say they're just responding to what their clients want. Catherine White, president of the $10 million Massachusetts-based Financial Architects, "It has come down to that the squeaky wheel gets heard."

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