Skyrocket Rise of Socially
Responsible Funds
“Green” mutual funds have flourished in the three
decades since the August 8, 1971 launch of the Pax World Balanced
Fund, the first mutual fund in the U.S. to use broad-based social
and financial criteria for screening purposes. A report, entitled
“Socially Responsible Mutual Funds in the U.S.: A Look
Back . . . and Ahead,” was recently issued by Pax World
Funds, citing extensive Wiesenberger tracking data that shows,
in part, that the assets of socially responsible mutual funds
grew about five times faster than those of all other funds in
its 30-year existence. |
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The report also notes that assets in socially and environmentally
responsible funds reached the $100 billion milestone for the first
time in mid-2001. The universe of 192 socially and environmentally
responsible mutual funds tracked by Wiesenberger had total assets
of $103 billion by the summer of 2001—the highest level ever.
In addition to the Wiesenberger data, the Pax World Funds’
report includes the speculation of a worldwide team of futurists
who were asked to outline the social and environmental issues that
the investors of tomorrow are likely to face.
Pax World Funds president, Thomas W. Grant, said, “The world
of today’s socially responsible mutual funds started in 1971
when no one was sending e-mail, Federal Express and Microsoft were
yet to open their doors, a gallon of gasoline cost 36 cents and
there were fewer than 200 mutual funds of any kind in existence.
From the vantage point of 30 years later, it is apparent that socially
and environmentally responsible mutual funds not only are here to
stay, but they are also likely to undergo considerable expansion
in the coming years.”
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“Socially
responsible mutual funds have earned the respect of hundreds
of thousands of new investors in the past decade.”
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“Socially responsible mutual funds have earned the respect
of hundreds of thousands of new investors in the past decade,”
commented Steve Schueth, spokesperson for the Social Investment
Forum and president of First Affirmative Financial Network, a nationwide
network of investment professionals that specializes in serving
socially conscious investors. “With almost 200 socially and
environmentally responsible funds in existence, a high quality portfolio
can be developed to meet the needs of almost every socially aware
investor. Today, socially responsible mutual funds are widely accepted
as value-added investing tools.”
Understanding the Rise of SRI
To mark the 30th anniversary of socially and environmentally responsible
mutual funds in America, Pax World Funds commissioned Wiesenberger,
a division of Thomson Financial, to track the rise of the industry:
• Assets of socially responsible mutual funds grew about five
times faster than those of all other funds. From the $150 million
in assets in 1971, they reached a record $103 billion by mid-2001.
This is a growth rate of slightly more than 68 times (68,581 percent)
compared to the more than 13.5 times (13,685 percent) for the assets
of all other mutual funds, which rose from $50.1 billion in 1971
to $6.9 trillion as of mid-2001.
• The ranks of socially responsible mutual funds grew more
than twice as rapidly as those of all other funds. From 1971 to
the emergence of a total of 192 such funds in mid-2001, the number
of socially responsible mutual funds now tracked by Wiesenberger
has grown by 9,500 percent (from two to 192). This compares to a
4,074-percent increase for all other funds in the same period (from
280 to 11,688).
• The surge in socially responsible mutual fund assets has
remained relatively close to those of all other funds in recent
years. Even with the unprecedented growth of the last decade in
the mutual fund world, the growth rate in the assets of socially
responsible and all other funds remained relatively close in the
last 10 years (392 percent versus 410 percent).
• Assets in socially and environmentally responsible mutual
funds reached the $100 billion milestone for the first time in 2001,
reaching $103 billion by the first half of 2001.
• The total assets of socially responsible mutual funds could
rise to $278.1 billion in just 10 years. That level, which is based
on the growth rate over the last 30 years, would mean that, in one
short decade, socially responsible mutual fund assets would grow
to become 1.5 times larger than the amount it took the industry
30 years to accumulate.
SRI View from Futurists
What does the future hold for socially responsible investing? Although
Pax World Funds has no ability to predict the future, it consulted
with several futurists about what the world of tomorrow may look
like. The futurists forecasted the following trends for investors:
• Infotech—Information is the primary commodity in more
and more industries today. By 2005, 83 percent of American management
personnel will be knowledge workers. Europe and Japan are not far
behind. In the U.S., five of the 10 fastest-growing careers between
now and 2005 will be computer-related. The emphasis of socially
responsible funds on selecting “software” over “hardware”
companies will position them well to participate in the worldwide
growth in this sector.
• Health—Emphasis on preventive medicine will continue
to grow. By the end of 2001, some 90 percent of insurance carriers
in the U.S. will expand coverage or reduce premiums for policyholders
with healthy lifestyles. Two-thirds of those answering a recent
Louis Harris poll claimed to have changed their eating habits in
the past five years. Americans today eat lighter fare than in 1970,
consuming nearly twice as much chicken, 25 percent more fish and
four times as much low-fat and skim milk per capita. Smoking is
also in general decline. The avoidance of liquor and tobacco stocks
by socially responsible mutual funds positions them well for a future
in which consumption of such products will likely decline even further.
Socially responsible mutual funds have an established record of
seeking out companies producing healthy lifestyle products, having
been quick to understand the future impact of this industry.
• Recycling—The long-feared “garbage glut” that
threatened to fill the world’s landfills to overflowing has
been stayed off by increased recycling, but the issue has not been
resolved. Americans now produce 4.3 pounds of trash per-person-per-day,
which is twice as much as they did a generation ago. Add in durable
goods such as tires, appliances and furniture, and the U.S. waste
stream has tripled since 1970. The “green” orientation
of socially responsible mutual funds means that they are likely
to grow with the emerging industries of tomorrow that will delay
the growing pollution problem. Increased “tipping” fees
and stricter environmental regulations will increase operating costs
for companies that are not aggressively managing their waste streams.
• Sustainability—The world’s population will double
in the next 40 years. However, birthrates below the replacement
level mean that populations will decline significantly in much of
the developed world, not counting the uncertain effects of immigration.
To meet human nutritional needs over the next 40 years, global agriculture
will have to supply as much food as has been produced during all
of human history. Increasingly scarce resources will mean an even
greater reliance on sustainability practices by major corporations.
The encouragement of such wise-use measures is already a major focus
of a number of socially responsible mutual funds.
FTSE Unveils Companies in New SRI Indexes
FTSE, the global equity index specialist, unveiled the first set
of companies in its long-awaited FTSE4Good indexes for socially
responsible investing. FTSE4Good is made up of four tradable indexes
created by screening a wide array of corporations with the first
standardized, transparent set of global criteria for corporate social
responsibility. These indexes and the associated criteria will,
for the first time, give money managers and individual investors
a broadly agreed upon way to make investment decisions that reflect
current thinking in corporate citizenship. Complete listings of
companies in each index can be found at www.ftse4good.com.
The four tradable FTSE4Good indexes are the flagship FTSE4Good Global
100, the FTSE4Good US 100, the FTSE4Good UK 50 and the FTSE4Good
Europe 50. In the flagship global index, six of the top 10 companies
are U.S.-based, including Microsoft, AOL Time Warner, Intel, Johnson
& Johnson, Merck and Verizon Communications.
For inclusion in the FTSE4Good indexes, corporations must meet specific
criteria in three main areas: environmental sustainability, social
and stakeholder relations and human rights. The criteria falling
under each of these areas are based on a comprehensive set of measures
developed by the FTSE4Good advisory committee in conjunction with
FTSE and EIRIS, an independent research entity in the UK.
Dow Jones STOXX Launches
Dow Jones Indexes, STOXX Ltd. and SAM Group announced the launch
of a new set of sustainability indexes for European portfolios.
The Dow Jones STOXX Sustainability Indexes will track leading European
companies in terms of economic, environmental and social criteria
presented and introduced on September 17. Based on the sustainability
assessment of SAM Research, the Dow Jones STOXX will be part of
the family of Dow Jones Sustainability Indexes, which were launched
as the first global sustainability benchmarks in 1999.
Detailed information about the Dow Jones STOXX Sustainability Indexes
can be found at www.sustainability-indexes.com;
also, call +41 1 395 2829 or +41 1 229 2302; or e-mail: alex@sustainability-index
es.com or scott.stark@stoxx.com.
Religious Values and Money Overlap in Investing?
A national survey conducted by MMA Praxis Mutual Funds shows that
the intersection of faith and money is hardly new. Thousands of
years ago in biblical times, people of faith were guided by their
religious beliefs on questions of wealth and how it was to be used.
Today, how does belief in the divine influence the practical world
of finance and investing? The results of this scientific survey
of more than 1,000 investors lends new knowledge about how the spiritual
lives of people affect their financial decisions.
• The respondents show great interest in combining their religious
values with their financial decisions. More than 60 percent of those
who describe themselves as religious say they either try now or
would like to try to incorporate their religious values into their
decisions about money.
• The potential for action is much larger. If they learned
more about religiously oriented mutual funds, more than half of
the religious respondents indicated they would be somewhat or very
likely to invest in them.
• The five most important corporate ethical issues for religious
respondents were identical to those most important to non-religious
respondents. Collectively, respondents were most likely to avoid
investing in companies associated with a poor product safety record,
sweatshop involvement, a poor environmental record, a poor labor
relations record or a poor equal employment opportunity record.
Domini Targets Global Warming
Domini Social Investments, manager of the Domini Social Equity Fund,
has launched a campaign urging some 37,000 shareholders to sign
and mail postcards to the U.S. Environmental Protection Agency (EPA)
asking EPA secretary Christine Todd Whitman to take action against
global warming.
The postcards urge Whitman to determine that carbon dioxide (CO2)
and other greenhouse gases are pollutants under the Clean Air Act
and request that the EPA use its regulatory authority to place limits
on greenhouse gas emissions from new motor vehicles.
Amy Domini, founder and managing principal of Domini Social Investments,
comments, “The Bush Administration’s unfortunate decision
to sit out the Kyoto Protocol means that it is more important for
consumers, investors, businesses and other citizens get involved
and urge our nation’s leadership to adopt more sensible priorities.”
In launching the postcard campaign, Domini teamed with the International
Center for Technology Assessment (CTA), a bi-partisan policy group
working on science and technology issues, and Sustain, a non-profit
organization working on environmental communications strategies.
The postcards are being submitted pursuant to a “request for
comments” on a petition filed by the CTA and other groups asking
the EPA to regulate greenhouse gas emissions from automobiles under
the Clean Air Act (EPA Docket No. A-2000-04).
“One of the goals of socially responsible investing is to promote
more sustainable business strategies and economic policies,”
continues Domini. “Our shareholders are strongly committed
to the environment, and Domini Social Investments will continue
to make climate change a priority issue.”
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