In 1987 Calvert Funds launched two socially responsible mutual funds that screened out companies with activities in tobacco, alcohol, gambling and weapons – the “sin” stocks. Investors wanted to align their social beliefs with their investment choices. Today SRI (Socially Responsible Investing) and ESG (environmental, social and governance) investing is a growing segment of investment options.

There are many funds that avoid or favor investments for moral, social, environmental or religious reasons. There are 100 SRI or ESG funds in the Morningstar database, but that number does not include religious oriented mutual funds. The market has grown from around $200 billion in 2007 to over a $1 trillion in 2012.

Fund families tend to specialize in SRI or ESG investing. Some of the largest fund families are Parnassus, Domini and Walden. Beyond the sin avoidance categories, the industry has widened out to avoid pornography, poor labor practices, fossil fuels, and countries with poor social and environmental records. Other funds have screens that favor shareholder advocacy, community investing, companies that consider social and environmental issues in their decision-making, countries with good social and environmental policies. Some funds align with the principles of religious beliefs. Other funds are focused on one issue such as alternative energy, environment, clean water, etc.

Most of these SRI and ESG fund families also use shareholder advocacy programs, such as letter writing, proxy voting and resolutions to influence corporate behavior.

Socialfunds.com is a good information source on SRI and ESG funds. Sustainablebusiness.com, Morningstar and Lipper also have information on these funds.

A few funds in the wide variety of SRI and ESG funds are:

Portfolio21 – ESG fund family

Amana Funds – Islamic principles

Praxis Mutual Funds – stewardship investing

Eventide Funds – biblical principles.

Green Century – Environmental fund family

Guggenheim Solar ETF – solar energy companies

WilderHill Index – Clean Energy Index 

So you can invest with your conscience. As always, it is up to you as the CFO of your life to do the research on your investment choices.

There is no good evidence that SRI and ESG funds as a group do better or worse than the market in the long run. Some funds outperform the market and others do not.  Investors need to be satisfied with the balance between social, moral, religious beliefs and financial considerations.

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