Fueled in part by a backlash against tobacco, assets in socially responsible investments have jumped 85 percent to $1.185 trillion since 1995, according to a report released yesterday.
Socially responsible investing now accounts for about 9 percent of the $13.7 trillion in U.S. funds under professional management, says the study by the Social Investment Forum, a nonprofit group based in Washington, D.C."Social investing is spreading by word of mouth," said Alisa Gravitz, vice president of the Forum. "People are saying, `hey, I know a way to do investing where I can provide for my family and sleep well at night.' "
While socially responsible investing can be abstract at times, the well-publicized health risks of tobacco products have crystallized the concept for many investors, Gravitz said. "Investors don't want to make money on products that kill people."
Socially responsible investing includes or excludes publicly traded stocks or bonds based on social and environmental criteria as well as financial criteria. The most widely used screens are tobacco, alcohol and gambling, the study says.
The $1.185 trillion in socially responsible investments includes $529 billion in screened portfolios, $652 billion in assets run by institutions active in shareholder advocacy, and $4 billion in community-based investments.
With shareholder advocacy, institutional inVestors submit shareholder resolutions and vote proxies that reflect socially responsible concerns. Some institutional investors also directly approach companies to encourage responsible behavior.
Community-based investments include money deposited by socially responsible investors in community development banks and cred-it unions, community development loan funds and micro-enterprise loan funds.
The surge in socially responsible investing is linked to the move against profiting from the sale of tobacco products. Over the past two years major institutions have divested $157 billion in tobacco-related investments, the study found.
The study says that 84 percent of the $529 billion in screened portfolios are screened for tobacco. In addition, the number of tobacco-free mutual nunds has risen to 55, although that number is probably higher since others that exclude tobacco don't advertise that fact.
A long-standing criticism of socially responsible investing is that screening for social and environmental concerns has a negative affect on returns.
Proponents of socially responsible investing say that's no longer the case. For example, the Domini Social Equity Index, a stock market index of 400 companies that uses screens, has posted a three-year annual return of 31.03 percent compared to 29.89 for the Standard & Poor's 500 index.