The end of apartheid in South Africa did not signal the end of socially responsible investing.
There remain many other issues of conscience to keep the concept rolling. As a result, the number of "socially conscious" mutual funds more than doubled in the past three years, to 42, with assets of $3 billion.It's quite possible to find a good-performing fund espousing high moral values. But each fund's ideals vary, since there's no one "100 percent-approved" philosophy of right and wrong in the corporate world.
Investment strategies and performance also differ, depending on the portfolio manager. Furthermore, the many choices include stock, bond, balanced and money-market funds.
"Our elimination screens are based on deeply held personal standards that consider negative anything to do with alcohol, tobacco, gambling, nuclear power or military weapons," explained Amy Domini, portfolio manager of the 4-year-old Domini Social Equity Fund, which has seen assets double this year to $65 million. "Positives, such as safety and usefulness of products, are much harder to screen."
An index fund that includes 400 different stocks of companies that have passed through its screens, Domini Social recently added Odwalla Inc., a California juice manufacturer that emphasizes organically grown fruit and high nutrition. Home Depot is included because of its decision not to sell cement made from any kilns that also burn toxic waste.
"Socially oriented investors like good performance just as much as other people do," observed Jerome Dodson, portfolio manager of the $275 million Parnassus Fund, which has grown by $100 million this year and boasts a three-year average annual return of 22.58 percent to rank in the top 7 percent of the nation's growth funds.
A current Parnassus favorite based on positive social impact is CML Group, which makes Nordic Track exercise machines and runs The Nature Company retail stores. Toys "R" Us is included because it brings toys to people at a low price, does safety testing and has an extensive community relations program. Office furniture firm Herman Miller has excellent employee participation and uses non-polluting finishes.
Opinions on what's acceptable do vary.
Take Coca-Cola Co. It's the biggest holding of Domini Social Equity in part because of large grants it has given to organizations. It's also been honored by Black Enterprise magazine as one of the best workplaces for African Americans. It has two women, a black man and a Hispanic man on its board and buys large amounts of goods from minority-owned and women-owned businesses.
But Parnassus Fund doesn't invest in Coca-Cola, according to Dodson," because, even though the company may be an OK corporate citizen, we don't care for its product and don't feel the product really has all that positive an impact."
Always compare the specific screens of a fund with your own standards.
"It's going to be very difficult to find a fund with a portfolio that a socially responsible investor approves of in its entirety," noted Laura Lallos, associate editor of the Morningstar Mutual Funds investment advisory. "People who are very strict might not be satisfied with any of these funds and may prefer to screen and buy their own stocks."
Top-performing "socially conscious" funds in total return over the past 12 months, according to Morningstar, have been:
Citizens Emerging Growth; Citizens Trust; $12 million in assets; aggressive growth fund; toll-free number, (800) 223-7010; up 30.19 percent.
Dreyfus Third Century; Dreyfus Group; $396 million; growth fund; (800) 645-6561; up 28.62 percent.
Domini Social Equity; $65 million; growth and income fund; (800) 762-6814; up 27.95 percent.
MMA Praxis Growth; MMA Praxis Funds; $27 million; growth fund; (800) 977-2947; up 26.50 percent.
Neuberger Berman Socially Responsive; Neuberger Berman Group; $8 million; growth fund; (800) 877-9700; up 26.02 percent.
Aquinas Equity Growth, Aquinas Funds, $13 million; growth fund; (214) 233-6655; up 25.85 percent.
Aquinas Equity Income, Aquinas Funds; $37 million; equity-income fund; (214) 233-6655; up 28.91 percent.
All on the list are "no-load" (initial sales charge) funds, though MMA Praxis Growth has a 4 percent redemption fee.