There is a sizable and fast-growing number of "socially responsible" or "socially-minded" investors -- individual and institutional " that, according to the Social Investment Forum (SIF) now represents more than $2.3 trillion in corporate equity investments (estimated in 2003).  That's roughly $1 in $9 invested in the stock market today in the United States.  The Forum reported in 2005 that "social investing" grew at a faster rate than all other investing trends in 2005, with three primary styles being applied to portfolio management:  (1) stock screening, (2) shareholder advocacy, and (3) community investing.

From 1995 to 2005, Social Investment Forum reports, the total of SRI managed assets rose 258 percent " from $639 billion to $2.29 trillion " while the broader universe of SRI assets under professional management ("managed accounts") increased 250%, from $7 trillion to $24.4 trillion in the same 10 years.

Tim Smith, president of the Social Investment Forum and Senior Vice-President at Walden Asset Management, reported to the media: "Over the past decade, SRI has become a major force in the U.S. financial marketplace. Socially and environmentally screened mutual funds experienced substantial growth in their number and diversity of products as well as the social issues considered. Mainstream money managers are increasingly incorporating social, environmental and governance factors into their investing.

"A growing number of institutional investors are embracing the philosophy of active ownership with the companies in their portfolios. There has been real growth in the number of shareholder resolutions filed on social, environmental and corporate-governance issues and support for them rose dramatically over the last ten years. And community investing is surging at a meteoric rate as an option for investors who want to see their assets make a direct and tangible difference in the U.S. and around the world." (See www.socialinvest.org for details on the SRI marketplace and the SIF report, which is on line.)

Social Investing Growth

What is fueling interest in SRI?  Growth factors include:

• Graying of the Baby Boom generation " 77 million Americans born 1946-1964, with the first wave turning 60 in January 2006.  Thereafter, about 4 million Boomers will move into their 60^th year for the next 18 years!  (That's 11,000 per day, 77,000 every week!) Many are social minded and striving now to do well (financially) by doing good (in choosing responsible companies to invest in).
   

• The waves of scandals engulfing business " involving corporate accounting and financial reporting; late timing and other anti-investor practices of some mutual fund advisors; slanted, biased financial research and analysis from major investment bankers and brokers; bid rigging by insurance brokers, and others in the headlines " have seriously shaken investor trust and confidence in the markets.  For some investors, SRI is a solution. Socially-minded, "responsible" companies [in their view] make better equity or mutual fund investments.
   

• Continued spotlighting by media of corporate decisions, actions, behaviors " negative and positive " has created a higher level of awareness of the importance of "good" behavior and good corporate citizenship is pulling investors toward companies demonstrating social responsibility.
   

• Powerful tools are available in increasing number from researchers, advisors and service firms to help investors, money managers, portfolio managers and financial advisors to select both in a negative and positive screening companies to add to and remove from stock portfolios.
   

• SRI mutual funds have grown to be a sizable force in the market; and, a number of these "social" funds have outpaced their benchmarks and mainstream funds. (There are about 200 of these types of funds, including well-known brand names such as Domini, Calvert, Trillium, Pax, Working Assets, Dreyfus.)  These funds offer a wide range of investment styles, values (reflected in investments) and other characteristics; total investment in managed funds is approaching $200 billion.  

By Any Name...

Social investing by the various names could be known as:

• Faith-based Investing (religious organizations, especially those represented in the Interfaith Center on Corporate Responsibility, set the pace.  Many individuals follow the investments of their faith, denomination, affiliation).

• Social Investing (investing in companies that recognize the need to serve the common good / greater good).

• Values Investing " investing in companies that share or reflect the values of the investor.

• Responsible Investing " making sure that investments are not made in irresponsible companies, or, in responsible companies.  (For some investors, an irresponsible practice may be the marketing of tobacco products.  Responsible companies could be those with admirable diversity practices for employees.)

What Social Investors Do

SRI investors usually practice the following:

• Screen investments " researching and selecting stocks to put in or take out of their portfolio (and certain stocks to avoid altogether, such as tobacco companies or weapons manufacturers).

• Divest stocks for a variety of reasons, depending on their own criteria and value systems; this could be a very dynamic process as companies improve behavior or slip into unfavorable practices and operations. 

• Add stock to the portfolio for positive reasons (vs. a long-term standard of negative screening).

• Advocate on their issues -- individually and in concert with other SRI investors address issues head-on by a variety of means " communicating positions to corporate management, publicizing concerns and positions to other investors, sponsoring or supporting shareholder resolutions for proxy votes, and creating coalitions for action.

• Invest in SRI mutual funds (about 200 to select from); invest in managed accounts that are socially screened; these various types of accounts familiar to mainstream investors are now also a sizable portion of SRI investments (exceeding $2 trillion, reports SIF) and include hedge funds and pools.  

Comments on SRI

The Gabelli Asset Management Company said (in its January 2005 Socially Responsible Investing Newsletter):  "The history of SRPI dates back several centuries as one of faith-based investment decision-making.  From these roots, SRI continued to evolve and during the turbulent 1960s and 1970s investors began actively screening their investments, focusing primarily on military and environment issues.  Today, SRI encompasses much more...and is about more choice...with more investors making a conscientious decision to allocate capital in accordance with personal social guidelines."  (For information: www.gabelli.com.  Christopher Desmarais is Director of Socially Responsible Investments " email: cdesmarais@gabelli.com 1-800-331-7266.)

Creative Investment Research explains that SRI describes a style of investing that combines a desire to maximize financial return with an attempt to maximize social good.  Many believe that social investing began with the Quakers (the Religious Society of Friends) back in 1758.  That year, the Philadelphia meeting prohibited members from participating in the business of buying or selling humans (slaves). Religious institutions have been at the forefront of SRI since. (For information: www.creativeinvest.com/sri.)

Faith-based Investing

Today's faith-based investors not only represent a significant force in the capital markets but also provide the cutting-edge research and thinking on societal issues that are addressed in socially responsible investing " including action through individual and collective shareholder advocacy. 

The important coalition to watch is the Interfaith Center on Corporate Responsibility (ICCR).  ICCR has 275 member organizations " and about 85 of these are coalitions themselves " with equity market investments of over $130 billion.  The 30-year old coalition influences other social investors (including its non-religious Associate and Affiliate member organizations) now represents more than $1 trillion in corporate equity investments.  Its activism began three decades ago with a focus on the South African Apartheid system and the role of American corporations in that nation.

In 2005 ICCR introduced an important research tool for investors, advisors, corporate management and academics to help them track the coalition's proxy advocacy "live" " EthVest(sm) the Ethical Investor Database.  (For updates and information: click here).  The Web-accessed database pulls selected fields from the internal ICCR member dataset and is available by subscription. [The publisher of Accountability Central is the marketing advisor to ICCR for EthVest.]  For information on ICCR activities:  www.iccr.org. 

The KLD Social Indexes for Investors

Check out the KLD Domini 400 Social Index (sm) created by KLD Indexes.  (KLD Indexes is a division of KLD Research & Analytics, Inc., a Boston-based independent investment research firm that provides investment management tools based on corporate social and environmental performance.)

KLD Domini 400 Social Index is a float-adjusted market cap weighted common stock index modeled on Standard & Poor's "S&P 500 ® Index."

Other KLD indexes include KLD Select Social Index (sm); KLD Global Climate Change 100 (sm) Kindex; KLD Broad Market Social (sm) Index.

For information:  www.KLDIndexes.com.  By telephone: 617-426-5270; Priya Khetarpal, extension 218. (Email: pkhetarpal@kld.com).

Accountability Central Attention on SRI

The editors of Accountability Central are focused on the various aspects of "faith-based," "socially-responsible," "social" and other styles of investment by individuals and institutions.  We're convinced, based on our monitoring and research that SRI will continue to outpace the broad market in terms of adopted investment styles. 

We're interested in hearing from you " send news or information on SRI, including your own perspectives, opinions and experience, to:  news@accountability-central.com.

# # #

-- From the Editors at AccountabilityCentral.

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Disclosure:

The publishers of Accountability Central " Governance & Accountability Advisors, Inc. " are consultants, advisors to the Interfaith Center on Corporate Responsibility (ICCR) and agents for marketing the EthVest (sm) Ethical Investor Database, the on-line, "live" resource for investors, professional managers, corporate executives, analysts, academics, libraries, and others interested in ICCR shareholder advocacy.

For subscription information on EthVest (sm), email:  kcynar@accountability-central.com