Socially responsible investing
Encyclopedia
Socially responsible investing (SRI), also known as sustainable, socially conscious, or ethical investing, describes an investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

 strategy
Strategy
Strategy, a word of military origin, refers to a plan of action designed to achieve a particular goal. In military usage strategy is distinct from tactics, which are concerned with the conduct of an engagement, while strategy is concerned with how different engagements are linked...

 which seeks to consider both financial return and social good.

In general, socially responsible investors encourage corporate
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

 practices that promote environmental stewardship
Environmentalism
Environmentalism is a broad philosophy, ideology and social movement regarding concerns for environmental conservation and improvement of the health of the environment, particularly as the measure for this health seeks to incorporate the concerns of non-human elements...

, consumer protection
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...

, human rights
Human rights
Human rights are "commonly understood as inalienable fundamental rights to which a person is inherently entitled simply because she or he is a human being." Human rights are thus conceived as universal and egalitarian . These rights may exist as natural rights or as legal rights, in both national...

, and diversity
Diversity (business)
The "business case for diversity" stems from the progression of the models of diversity within the workplace since the 1960's. The original model for diversity was situated around affirmative action drawing strength from the law and a need to comply with equal employment opportunity objectives...

. Some (but not all) avoid businesses involved in alcohol
Alcohol
In chemistry, an alcohol is an organic compound in which the hydroxy functional group is bound to a carbon atom. In particular, this carbon center should be saturated, having single bonds to three other atoms....

, tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...

, gambling
Gambling
Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods...

, weapon
Weapon
A weapon, arm, or armament is a tool or instrument used with the aim of causing damage or harm to living beings or artificial structures or systems...

s, and/or the military. The areas of concern recognized by the SRI industry can be summarized as environment, social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...

, and corporate governance -- as in environmental social governance (ESG) issues. In addition to stock ownership either directly or through mutual funds, the other key aspects of SRI include shareholder advocacy and community investing. .

The term "socially responsible investing" sometimes narrowly refers to practices that seek to avoid harm through negative screening of companies included in an investment portfolio. However, the term is also used more broadly to cover more proactive practices such as impact investing
Impact investing
Impact investing refers to investments made based on the practice of assessing not only the financial return on investment, but also the social and environmental impacts of the investment that happen in the course of the operations of the business and the consumption of the product or service which...

, shareholder advocacy and community investing. Amy Domini
Amy Domini
Amy Domini is an American investment adviser and author known for her work in "social investing". As one of the founders of KLD Research & Analytics, Inc., she helped created the Domini 400 Social Index, a stock market index selected according to a set of social and environmental standards...

, a prominent member of the socially responsible investing community and the founder of Domini Social Investments, has stated that shareholder advocacy and community investing are pillars of socially responsible investing and that only doing negative screening is "not what I would consider adequate."

History

The origins of socially responsible investing may date back to the Religious Society of Friends
Religious Society of Friends
The Religious Society of Friends, or Friends Church, is a Christian movement which stresses the doctrine of the priesthood of all believers. Members are known as Friends, or popularly as Quakers. It is made of independent organisations, which have split from one another due to doctrinal differences...

 (Quakers). In 1758, the Quaker Philadelphia
Philadelphia, Pennsylvania
Philadelphia is the largest city in the Commonwealth of Pennsylvania and the county seat of Philadelphia County, with which it is coterminous. The city is located in the Northeastern United States along the Delaware and Schuylkill rivers. It is the fifth-most-populous city in the United States,...

 Yearly Meeting
Yearly Meeting
Yearly Meeting is a term used by members of the Religious Society of Friends, or Quakers, to refer to an organization composed of a collection of smaller, more frequent constituent meetings within a geographical area. These constituent meetings go by various names such as Quarterly Meetings, which...

 prohibited members from participating in the slave trade–buying or selling humans.

One of the most articulate early adopters of SRI was John Wesley
John Wesley
John Wesley was a Church of England cleric and Christian theologian. Wesley is largely credited, along with his brother Charles Wesley, as founding the Methodist movement which began when he took to open-air preaching in a similar manner to George Whitefield...

 (1703–1791), one of the founders of Methodism
Methodism
Methodism is a movement of Protestant Christianity represented by a number of denominations and organizations, claiming a total of approximately seventy million adherents worldwide. The movement traces its roots to John Wesley's evangelistic revival movement within Anglicanism. His younger brother...

. Wesley's sermon
Sermon
A sermon is an oration by a prophet or member of the clergy. Sermons address a Biblical, theological, religious, or moral topic, usually expounding on a type of belief, law or behavior within both past and present contexts...

 "The Use of Money" outlined his basic tenets of social investing – i.e. not to harm your neighbor through your business practices and to avoid industries
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...

 like tanning
Tanning
Tanning is the making of leather from the skins of animals which does not easily decompose. Traditionally, tanning used tannin, an acidic chemical compound from which the tanning process draws its name . Coloring may occur during tanning...

 and chemical production
Chemical industry
The chemical industry comprises the companies that produce industrial chemicals. Central to the modern world economy, it converts raw materials into more than 70,000 different products.-Products:...

, which can harm the health of workers
Occupational safety and health
Occupational safety and health is a cross-disciplinary area concerned with protecting the safety, health and welfare of people engaged in work or employment. The goal of all occupational safety and health programs is to foster a safe work environment...

. Some of the most well known applications of socially responsible investing were religiously motivated. Investors would avoid “sinful” companies, such as those associated with products such as guns, liquor, and tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...

.

The modern era of socially responsible investing movement evolved during the political climate of the 1960s. During this time, socially concerned investors increasingly sought to address equality for women, civil rights, and labor-management issues. Economic development projects started or managed by Dr. Martin Luther King, like the Montgomery Bus Boycott and the Operation Breadbasket Project in Chicago, established the beginning model for socially responsible investing efforts. King combined ongoing dialog with boycotts and direct action targeting specific corporations. Concerns about the Vietnam War
Vietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...

 were incorporated by some social investors. Many people living during the era remember a picture in June 1972 of a naked nine year-old girl, Phan Thị Kim Phúc, running towards a photographer screaming, her back burning from the napalm
Napalm
Napalm is a thickening/gelling agent generally mixed with gasoline or a similar fuel for use in an incendiary device, primarily as an anti-personnel weapon...

 dropped on her village
Village
A village is a clustered human settlement or community, larger than a hamlet with the population ranging from a few hundred to a few thousand , Though often located in rural areas, the term urban village is also applied to certain urban neighbourhoods, such as the West Village in Manhattan, New...

. That photograph channeled outrage against Dow Chemical, the manufacturer of napalm
Napalm
Napalm is a thickening/gelling agent generally mixed with gasoline or a similar fuel for use in an incendiary device, primarily as an anti-personnel weapon...

, and prompted protest
Protest
A protest is an expression of objection, by words or by actions, to particular events, policies or situations. Protests can take many different forms, from individual statements to mass demonstrations...

s across the country against Dow Chemical and other companies profiting from the Vietnam War.

During the 1950s and 1960s, trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...

s deployed multiemployer pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...

 monies for targeted investments. The United Mine Workers
United Mine Workers
The United Mine Workers of America is a North American labor union best known for representing coal miners and coal technicians. Today, the Union also represents health care workers, truck drivers, manufacturing workers and public employees in the United States and Canada...

 fund invested in medical facilities, for example, and the International Ladies' Garment Workers' Union
International Ladies' Garment Workers' Union
The International Ladies' Garment Workers' Union was once one of the largest labor unions in the United States, one of the first U.S. unions to have a primarily female membership, and a key player in the labor history of the 1920s and 1930s...

 (ILGWU) and International Brotherhood of Electrical Workers
International Brotherhood of Electrical Workers
The International Brotherhood of Electrical Workers is a labor union which represents workers in the electrical industry in the United States, Canada, Panama and several Caribbean island nations; particularly electricians, or Inside Wiremen, in the construction industry and linemen and other...

 (IBEW) financed union-built housing projects. Labor unions also sought to leverage pension stocks for shareholder activism on proxy fight
Proxy fight
A proxy fight or proxy battle is an event that may occur when a corporation's stockholders develop opposition to some aspect of the corporate governance, often focusing on directorial and management positions. Corporate activists may attempt to persuade shareholders to use their proxy votes A proxy...

s and shareholder resolutions. In 1978, SRI efforts by pension funds was spurred by The North will Rise Again: Pensions, Politics, and Power in the 1980s and the subsequent organizing efforts of authors Jeremy Rifkin
Jeremy Rifkin
Jeremy Rifkin is an American economist, writer, public speaker, political advisor and activist. He is the founder and president of the Foundation On Economic Trends...

 and Randy Barber. By 1980, presidential candidates Jimmy Carter
Jimmy Carter
James Earl "Jimmy" Carter, Jr. is an American politician who served as the 39th President of the United States and was the recipient of the 2002 Nobel Peace Prize, the only U.S. President to have received the Prize after leaving office...

, Ronald Reagan
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....

 and Jerry Brown
Jerry Brown
Edmund Gerald "Jerry" Brown, Jr. is an American politician. Brown served as the 34th Governor of California , and is currently serving as the 39th California Governor...

 advocated some type of social orientation for pension investments.

From the 1970s to the early 1990s, large institutions avoided investment in South Africa under apartheid. International opposition to apartheid strengthened after the 1960 Sharpeville massacre
Sharpeville massacre
The Sharpeville Massacre occurred on 21 March 1960, at the police station in the South African township of Sharpeville in the Transvaal . After a day of demonstrations, at which a crowd of black protesters far outnumbered the police, the South African police opened fire on the crowd, killing 69...

. In 1976 the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...

 imposed a mandatory arms embargo against South Africa. In 1971, Reverend Leon Sullivan
Leon Sullivan
Leon Howard Sullivan was a Baptist minister, a civil rights leader and social activist focusing on the creation of job training opportunities for African-Americans, a longtime General Motors Board Member, and an anti-Apartheid activist. Sullivan died on April 24, 2001, of leukemia at a Scottsdale,...

 (at the time a board member for General Motors
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...

) drafted a code of conduct for practicing business in South Africa which became known as the Sullivan Principles
Sullivan Principles
The Sullivan principles are the names of two corporate codes of conduct, developed by the African-American preacher Rev. Leon Sullivan, promoting corporate social responsibility:...

. Reports documenting the application of the Sullivan Principles discovered that U.S. companies were not attempting to lessen discrimination within South Africa. Because of these reports and mounting political pressure; cities, states, colleges, faith-based groups and pension funds throughout the United States began divesting from companies operating in South Africa. The subsequent negative flow of investment dollars eventually forced a group of businesses, representing 75% of South African employers, to draft a charter calling for an end to apartheid. While the SRI efforts alone didn't bring an end to apartheid, it did focus persuasive international pressure on the South African business community.

The United States Social Investment Forum (US SIF) was incepted in 1982 as the first organization serving social investors.

The major SRI emphasis on apartheid did not mean that socially responsible investing disappeared with that issue. To the contrary, the mid and late 1990s saw the rise of SRI’s focus on a diverse range of other issues, including tobacco stocks, mutual fund proxy disclosure, and other diverse focuses.
Since the late 1990s, socially responsible investing has become increasingly defined as a means to promote environmentally sustainable development. Many investors consider effects of climate change a significant business and investment risk. CERES
Ceres (organization)
Ceres is a non-profit, American network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges, such as global climate change....

 was founded in 1989 by Joan Bavaria and Dennis Hayes as a network for investors, environmental organizations, and other public interest groups interested in working with companies to address environmental concerns.

Representatives from the SRI industry have gathered at the annual SRI in the Rockies Conference
SRI in the Rockies Conference
SRI in the Rockies is the annual national conference of the sustainable and responsible investing industry. The conference was founded in 1990 by George R. Gay , and has grown from 45 to 650 participants...

 since 1989 to exchange ideas and gain momentum for new initiatives. This conference is produced by First Affirmative Financial Network, an investment advisory firm that specializes in sustainable and responsible investing. The conference has attracted over 550 persons annually since 2006.

The first sell-side brokerage in the world to offer SRI research was a Brazilian bank called Unibanco. The service was launched in January 2001 by Unibanco SRI analyst Christopher Wells from the São Paulo headquarters of the bank and was targeted at SRI funds in Europe and the US, although it was sent to non-SRI funds both in and out of Brazil. The research was specific about Brazilian listed companies on environmental, social but not governance issues. It was sent for free to Unibanco's clients. The service lasted until mid 2002.

Two good things came out this research:
1) The idea was picked up by Mike Tyrrell, who worked at Jupiter, an SRI fund manager in London, and who developed it into something much bigger and better at HSBC and then Citigroup.
2) ABN AMRO's operation in Brazil used this research to create the first SRI fund in an emerging market, launched in November 2001. As of late 2008, this fund, called Fundo Ethical, was the Brazilian operation's biggest and best performing stock fund of any kind. (ABN AMRO's operation in Brazil was bought by Santander in 2007.)

Drawing on the industry's experience using divestment as a tool against apartheid, the Sudan Divestment Task Force was established in 2006 in response to the genocide occurring in the Darfur region of the Sudan. Support from the US government followed with the Sudan Accountability and Divestment Act of 2007.

More recently, some social investors have sought to address the rights of indigenous peoples around the world who are affected by the business practices of various companies. The 2007 SRI in the Rockies Conference
SRI in the Rockies Conference
SRI in the Rockies is the annual national conference of the sustainable and responsible investing industry. The conference was founded in 1990 by George R. Gay , and has grown from 45 to 650 participants...

 held a special pre-conference specifically to address the concerns of indigenous peoples. Healthy working conditions, fair wages, product safety, and equal opportunity employment also remain headline concerns for many social investors.

Modern applications

Socially responsible investing is a booming market in both the US and Europe. Assets in socially screened portfolios climbed to $3.07 trillion at the start of 2010,, a 34 percent increase since 2005 according to the US SIF's 2010 Report on Socially Responsible Investing Trends in the United States. 2007-2010 alone, SRI assets increased more than 13 percent while the broader universe of professionally managed assets increased less than 1 percent.[11] As of 2010 nearly one out of every eight dollars under professional management in the United States is involved in socially responsible investing—12.2 percent of the $25.2 trillion in total assets under management tracked by Thomson Reuters Nelson.

Research estimates by financial consultancy Celent predict that the SRI market in the US will reach $3 trillion by 2011. The European SRI market grew from €1 trillion in 2005 to €1.6 trillion in 2007.

Ethical investment in the UK

In 1985, Friends Provident launched the first ethically screened investment fund with criteria which excluded tobacco, arms, alcohol and oppressive regimes. Since 1985, over 90 investment funds have launched offering a wide range of investment criteria; both negatively screened and with positive investment criteria i.e. investing into companies involved in promoting sustainability.

Barchester Green Investment also launched in 1985 and is the UK's longest established ethical investment specialist IFA (Independent Financial Adviser) firm . According to the Ethical Investment Research Service (EIRIS) GBP 6.7 billion is invested in ethical and environmental investment funds in the UK.

Since 1985, most of the major investment organizations have launched ethical and socially responsible funds although this has led to a great deal of discussion and debate over the use of the term "ethical" investment. This is because each of the fund management organizations tend to apply a slightly different approach to running their funds. The large Dutch insurance group AEGON, for example, run very tightly screened ethical funds whereas the Standard Life and AXA "ethical" funds operate with less strict exclusion criteria.

This variation in the types of ethical and sustainable investment on offer has created considerable growth in the ethical specialist IFA sector with a number of firms now operating.

Government-controlled funds

Government-controlled funds such as pension funds are often very large players in the investment field, and are being pressured by the citizenry and by activist groups to adopt investment policies which encourage ethical corporate behavior, respect the rights of workers, take environmental concerns into account, and generally avoid violations of human rights. One outstanding endorsement of such policies is The Government Pension Fund of Norway
The Government Pension Fund of Norway
The Government Pension Fund of Norway comprises two entirely separate sovereign wealth funds owned by the Government of Norway:* The Government Pension Fund - Global...

, which is mandated to avoid "investments which constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damages."

Many pension funds are currently under pressure to disinvest from the arms company BAE Systems
BAE Systems
BAE Systems plc is a British multinational defence, security and aerospace company headquartered in London, United Kingdom, that has global interests, particularly in North America through its subsidiary BAE Systems Inc. BAE is among the world's largest military contractors; in 2009 it was the...

, partially due to a campaign run by the Campaign Against Arms Trade (CAAT)
Campaign Against Arms Trade
Campaign Against Arms Trade is a UK-based NGO and campaigning organisation working towards the abolition of the international arms trade. Founded in 1974 by a broad coalition of peace groups, CAAT is united in opposition to the military industrial complex and the growth of the private military...

. Liverpool council has passed a successful resolution to disinvest from the company, however a similar attempt by the Scottish Green Party
Scottish Green Party
The Scottish Green Party is a green party in Scotland. It has two MSPs in the devolved Scottish Parliament, Alison Johnstone, representing Lothian, and Patrick Harvie, for Glasgow.-Organisation:...

 in Edinburgh was blocked by the Liberal Democrats
Liberal Democrats
The Liberal Democrats are a social liberal political party in the United Kingdom which supports constitutional and electoral reform, progressive taxation, wealth taxation, human rights laws, cultural liberalism, banking reform and civil liberties .The party was formed in 1988 by a merger of the...

.

Mutual funds and ETFs

Socially responsible mutual funds counted by the 2010 Trends Report increased in number to 250 in 2010, up from 173 in 2005 & 2007, 189 in 2003, and 167 in 2001. The overall number of mutual funds incorporating ESG has increased 45 percent since 2007. Additionally, 26 exchange-traded funds (ETFs) that incorporate ESG criteria were identified with $4 billion in assets at the end of 2009, a 76 percent increase from the eight ETFs with $2.25 billion in net assets identified at the end of 2007 [11].
US SIF maintains charts describing the socially responsible mutual funds offered by its member firms.
Key: X = No investment; P = Positive investment; R = Restricted investment; NS = No screens.
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Mutual Fund Alcohol Tobacco Gambling Defense/ Weapons Animal Testing Products/ Services Environment Human Rights Labor Relations Employment/ Equality Community Investment Proxy Voting
Access Capital Strategies Community Investment Fund NS NS NS NS NS NS NS NS NS NS P X
AHA
American Hospital Association
The American Hospital Association is an organization that promotes the quality provision of health care by hospitals and health care networks through such efforts as promoting effective public policy and providing information related to health care and health administration to health care...

 Balanced Fund - Instiutional Class
NS X NS NS NS NS NS NS NS NS NS V
AHA Diversified Equity Fund - Institutional Class NS X NS NS NS NS NS NS NS NS NS V
AHA Diversified Equity Fund - N Class NS X NS NS NS NS NS NS NS NS NS V
AHA Full Maturity Fixed Income Fund - Institutional Class NS X NS NS NS NS NS NS NS NS NS V
AHA Full Maturity Fixed Income Fund - N Class NS X NS NS NS NS NS NS NS NS NS V
AHA Limited Maturity Fixed Income Fund - Institutional Class NS X NS NS NS NS NS NS NS NS NS V
AHA Limited Maturity Fixed Income Fund - N Class NS X NS NS NS NS NS NS NS NS NS V
AHA
American Hospital Association
The American Hospital Association is an organization that promotes the quality provision of health care by hospitals and health care networks through such efforts as promoting effective public policy and providing information related to health care and health administration to health care...

 Socially Responsible Equity I
X X X X NS P P P P P NS V
AHA Socially Responsible Equity N X X X X NS P P P P P NS V
Appleseed Fundhttp://www.appleseedfund.com/ R R R R NS NS P P P NS P V
Ariel Appreciation Fund http://www.arielinvestments.com/ NS X NS X NS NS NS NS NS NS NS V
Ariel Focus Fund NS X NS X NS NS NS NS NS NS NS V
Ariel Fund NS X NS X NS NS NS NS NS NS NS V
Azzad Ethical Income Fund http://azzad.net/ X X X X NS NS NS NS NS NS NS V
Azzad Ethical Mid Cap Fund X X X X NS NS NS NS NS NS NS V
Calvert
Calvert Investments
Calvert Investments, Inc., established in 1976, is an investment management company that is headquartered in Bethesda, Maryland and led by Barbara Krumsiek, the firm’s President and Chief Executive Officer. In addition to providing traditional investment management services, Calvert is one of the...

 Aggressive Allocation Fund http://www.calvert.com/
X X X R R P P P P P P V
Calvert Capital Accumulation A http://www.calvert.com/ X X X R R P P P P P P V
Calvert Capital Accumulation B http://www.calvert.com/ X X X R R P P P P P P V
Calvert Capital Accumulation C http://www.calvert.com/ X X X R R P P P P P P V
Calvert Conservative Allocation Fund http://www.calvert.com/ X X X R R P P P P P P V
Calvert
Calvert Investments
Calvert Investments, Inc., established in 1976, is an investment management company that is headquartered in Bethesda, Maryland and led by Barbara Krumsiek, the firm’s President and Chief Executive Officer. In addition to providing traditional investment management services, Calvert is one of the...

 Global Alternative Energy Fund A http://www.calvert.com/
NS NS NS NS NS P P P P P NS V
Calvert
Calvert Investments
Calvert Investments, Inc., established in 1976, is an investment management company that is headquartered in Bethesda, Maryland and led by Barbara Krumsiek, the firm’s President and Chief Executive Officer. In addition to providing traditional investment management services, Calvert is one of the...

 Global Water Fund http://www.calvert.com/
X NS NS X NS X NS P NS NS NS V
Calvert
Calvert Investments
Calvert Investments, Inc., established in 1976, is an investment management company that is headquartered in Bethesda, Maryland and led by Barbara Krumsiek, the firm’s President and Chief Executive Officer. In addition to providing traditional investment management services, Calvert is one of the...

 International Opportunities Fund http://www.calvert.com/
R R NS NS NS P P P P P NS V
Calvert Large Cap Growth A X X X R R P P P P P P V
Calvert Large Cap Growth B X X X R R P P P P P P V
Calvert Large Cap Growth C X X X R R P P P P P P V
Calvert Large Cap Growth I X X X R R P P P P P P V
Calvert Mid Cap Value Fund X X X R R P P P P P P V
Calvert Moderate Allocation Fund X X X R R P P P P P P V
Calvert New Vision Small Cap A X X X R R P P P P P P V
Calvert New Vision Small Cap B X X X R R P P P P P P V
Calvert New Vision Small Cap C X X X R R P P P P P P V
Calvert Small Cap Value Fund X X X R R P P P P P P V
Calvert Social Index A X X X R R P P P P P P V
Calvert Social Index B X X X R R P P P P P P V
Calvert Social Index C X X X R R P P P P P P V
Calvert Social Index I X X X R R P P P P P P V
Calvert Social Investment Balanced A X X X R R P P P P P P V
Calvert Social Investment Balanced C X X X R R P P P P P P V
Calvert Social Investment Bond A X X X R R P P P P P P V
Calvert Social Investment Enhanced Equity A X X X R R P P P P P P V
Calvert Social Investment Enhanced Equity B X X X R R P P P P P P V
Calvert Social Investment Enhanced Equity C X X X R R P P P P P P V
Calvert Social Investment Equity A X X X R R P P P P P P V
Calvert Social Investment Equity C X X X R R P P P P P P V
Calvert Social Investment Equity I X X X R R P P P P P P V
Calvert World Values International A X X NS R NS P P P P P P V
Calvert World Values International C X X NS R NS P P P P P P V
CRA
CRA
-Organizations in California:* California Republican Assembly, a conservative California Republican activist group. It is the oldest and largest grassroots volunteer organization chartered by the California Republican Party...

 Qualified Investment http://www.ccmfixedincome.com/
NS NS NS NS NS NS NS NS NS NS P X
Domini European PacAsia Social Equity A http://www.domini.com X X X X NS P P P P P NS V
Domini European PacAsia Social Equity I http://www.domini.com X X X X P P P P P P NS V
Domini European Social Equity A X X X X NS P P P P P NS V
Domini European Social Equity I X X X X NS P P P P P NS V
Domini Institutional Social Equity X X X X NS P P P P P NS V
Domini PacAsia Social Equity A X X X X NS P P P P P NS V
Domini PacAsia Social Equity I X X X X NS P P P P P NS V
Domini Social Bond http://www.domini.com X X X X NS P P P P P P V
Domini Social Equity A X X X X NS P P P P P NS V
Domini Social Equity I X X X X NS P P P P P NS V
Epiphany Faith and Family Values 100 Fund - A Class http://www.investcatholic.com/http://www.epiphanyfund.com/ R R R R NS NS P P P P NS V
Epiphany Faith and Family Values 100 Fund - C Class R R R R NS NS P P P P NS V
Epiphany Faith and Family Values 100 Fund - N Class R R R R NS NS P P P P NS V
Gabelli
GAMCO Investors
GAMCO Investors, Inc formerly known as Gabelli Asset Management Company is a provider of investment advice and brokerage services to mutual funds, institutional and select investors. One of the companies key elements of their success is the investment research publishing. It is listed on the New...

 SRI Green Fund Inc]] A
R R R X NS P P NS NS NS NS V
Gabelli SRI Green Fund Inc AAA R R R X NS P P NS NS NS NS V
Gabelli SRI Green Fund Inc C R R R X NS P P NS NS NS NS V
Gabelli SRI Green Fund Inc I R R R X NS P P NS NS NS NS V
Green Century Balanced http://www.greencentury.com NS X NS R R P P NS NS NS NS V
Green Century Equity X X X R NS P P P P P NS V
Integrity Growth and Income Fund http://www.integrityfunds.com/ X X X NS R NS P R R R NS V
Legg Mason
Legg Mason
Legg Mason, Inc. is an American-based global investment management firm with a focus on asset management. The company’s business is divided in two divisions: Americas and International...

 Prt Social Awareness Fund A
NS R NS R NS NS P P P P NS V
Legg Mason Prt Social Awareness Fund B NS R NS R NS NS P P P P NS V
Legg Mason Prt Social Awareness Fund C NS R NS R NS NS P P P P NS V
M
Mennonite Church USA
The Mennonite Church USA, or MCUSA, is an Anabaptist Christian denomination in the United States. Although the organization is a recent 2002 merger of the Mennonite Church and the General Conference Mennonite Church, the body has roots in the Radical Reformation of the 16th century...

MA Praxis Core Stock Fund A http://www.mma-online.org/
X X X X R P P P P P P V
MMA Praxis Core Stock Fund B X X X X R P P P P P P V
MMA Praxis Growth Index Fund A X X X X R P P P P P P V
MMA Praxis Growth Index Fund B X X X X R P P P P P P V
MMA Praxis Intermediate Income A X X X X R P P P P P P V
MMA Praxis Intermediate Income B X X X X R P P P P P P V
MMA Praxis International A X X X X R P P P P P P V
MMA Praxis International B X X X X R P P P P P P V
MMA Praxis Small Cap Fund A X X X X R P P P P P P V
MMA Praxis Small Cap Fund B X X X X R P P P P P P V
MMA Praxis Value Index A X X X X R P P P P P P V
MMA Praxis Value Index B X X X X R P P P P P P V
Neuberger Berman
Neuberger Berman
Neuberger Berman Group LLC, through its subsidiaries is an investment management firm that provides financial services for high net worth individuals and institutional investors. With approximately $200 billion in asset under management, it is among the largest private employee-controlled asset...

 Socially Resp Inv http://www.mma-online.org/
X X X X R P P P P P NS V
New Alternatives Fund http://www.newalternativesfund.com/ X X X X X P P P P P P X
Parnassus Equity Income Fund http://www.parnassus.com/ X X X X R P P P P P NS V
Parnassus Fund http://www.parnassus.com/ X X X X R P X P P P P V
Parnassus Income-Fixed Income http://www.parnassus.com/ X X X X R P X P P P NS V
Parnassus Mid-Cap Fund http://www.parnassus.com/ X X X X R P P P P P P V
Parnassus Small-Cap Fund X X X X R P X P P P P V
Parnassus Workplace Fund X X X X R P X P P P P V
Pax World
Pax World Funds
Pax World Funds is a socially responsible mutual fund founded in 1971.Pax World was founded by two Methodists, Rev. Dr. Luther Tyson and Rev. Dr. Jack Corbett, who did not want to financially support the Vietnam War.-External links:**...

 Balanced
R X R R R P P P P P P V
Pax World
Pax World Funds
Pax World Funds is a socially responsible mutual fund founded in 1971.Pax World was founded by two Methodists, Rev. Dr. Luther Tyson and Rev. Dr. Jack Corbett, who did not want to financially support the Vietnam War.-External links:**...

 Growth
R X R R R P P P P P NS V
Pax World High Yield R X R R R P P P P P P V
Pax World
Pax World Funds
Pax World Funds is a socially responsible mutual fund founded in 1971.Pax World was founded by two Methodists, Rev. Dr. Luther Tyson and Rev. Dr. Jack Corbett, who did not want to financially support the Vietnam War.-External links:**...

 Value Fund - Individual Investor
NS X R X R P P P P P NS V
Pax World Value Fund - Institutional Class NS X R X R P P P P P NS V
Pax World
Pax World Funds
Pax World Funds is a socially responsible mutual fund founded in 1971.Pax World was founded by two Methodists, Rev. Dr. Luther Tyson and Rev. Dr. Jack Corbett, who did not want to financially support the Vietnam War.-External links:**...

 Women's Equity Fund - Individual Investor
NS X R X R R R NS R R NS V
Pax World
Pax World Funds
Pax World Funds is a socially responsible mutual fund founded in 1971.Pax World was founded by two Methodists, Rev. Dr. Luther Tyson and Rev. Dr. Jack Corbett, who did not want to financially support the Vietnam War.-External links:**...

 Women's Equity Fund - Institutional Class
NS X R X R R R R R R NS V
Portfolio 21 http://www.portfolio21.com NS X R R R P P R R R P V
Portfolio 21 Institutional http://www.portfolio21.com NS X R R R P P R R R NS V
Sentinel Sustainable Core Opportunities Fund http://www.sentinelinvestments.com/ X X X R R P P P P P NS V
Sentinel Sustainable Emerging Companies Fund X X X R R P P P P P NS V
TIAA-CREF
TIAA-CREF
Teachers Insurance and Annuity Association – College Retirement Equities Fund is a Fortune 100 financial services organization that is the leading retirement provider for people who work in the academic, research, medical and cultural fields...

R R R R NS P P P P P NS V
Flex Total Return Utilities Fund http://www.meederfinancial.com/ X X X X X P P NS P P NS V
Walden
Walden Asset Management
Walden Asset Management is a division of Boston Trust and Investment Management Company. Founded in 1975, it has been described as a "leader in socially responsible investing" .. Walden Asset management employs in-house research to make its investments and also invests in commingled funds...

 Social Balanced Fund
X X R X R P P P P P P V
Walden Social Equity Fund X X R X R P P P R P X V
Winslow Green Growth Fund http://www.winslowgreen.com R R R R R P P NS NS NS NS V
xRussell 3000 NS NS NS NS NS NS NS NS NS NS NS X

Separately managed accounts

According to the 2010 Report on Socially Responsible Investing Trends in the United States, among separate account managers, 232 distinctive separate account vehicles or strategies, with $122.4 billion in assets, incorporated ESG factors into investment analysis.

Shareholder advocacy

Between 2001 and 2003, shareholder advocacy activity increased by 15 percent, growing from 269 social and crossover resolutions (which combined aspects of both "social" and traditional corporate governance issues) filed in 2001 to 310 in 2003. Likewise, the average percentage of votes received on these resolutions increased from 8.7 percent in 2001 to 11.4 percent in 2003. Of the total $2.15 trillion in all socially screened portfolios, $441 billion are in portfolios controlled by investors who are also involved in shareholder advocacy on various social issues.

Shareholder resolutions are filed by a wide variety of institutional investors, including public pension funds, faith-based investors, socially responsible mutual funds, and labor unions. In 2004, faith-based organizations filed 129 resolutions, while socially responsible funds filed 56 resolutions.

Regulations governing shareholder resolutions vary from country to country. In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, they are determined by the Securities and Exchange Commission, which also requires mutual funds to disclose how they voted on behalf of their investors. U.S. shareholders have organized various groups to facilitate jointly filing resolutions. These include the Council of Institutional Investors, the Interfaith Center on Corporate Responsibility
Interfaith Center on Corporate Responsibility
The Interfaith Center on Corporate Responsibility is a coalition of 275 faith-based institutional investors. Founded in 1973, the organization advocates for corporate social responsibility and files shareholder resolutions and engages in dialogue with corporate management on issues such as global...

, and the US SIF.

From 2008 through 2010, more than 200 U.S. institutions and investment management firms filed or co-filed proposals. These institutions and money managers collectively controlled $1.5 trillion in assets at the end 0f 2009. The top categories of environmental and social issues from 2007-2010 were political contributions and climate change and environmental issues (cite 2010 Trends).

Community investing

Community investing, a subset of socially responsible investing, allows for investment directly into community based organizations. Community investing institutions use investor capital to finance or guarantee loans to individuals and organizations that have historically been denied access to capital by traditional financial institutions. These loans are used for housing, small business creation, and education or personal development in the U.S., or are made available to local financial institutions abroad to finance international community development. The community investing institution typically provides training and other types of support and expertise to ensure the success of the loan and its returns for investors.

Community investing climbed more than 60% from 2007 to 2010. Assets held and invested locally by community development financial institution
Community development financial institution
Community development financial institutions are financial institutions which provide credit and financial services to underserved markets and populations, primarily in the USA but also in the UK...

s (CDFIs) based in the United States States totaled $41.7 billion at the start of 2010, up from $25 billion in 2007.

Investing in capital markets

Social investors use four basic strategies to maximize financial return and attempt to maximize social good. These strategies may satisfy the ethical principal of non-harming, but with the exception of shareholder activism, they do not necessarily create positive social impact.
  • Negative Screening

Negative Screening
Screening (economics)
Screening in economics refers to a strategy of combating adverse selection, one of the potential decision-making complications in cases of asymmetric information...

 excludes certain securities from investment consideration based on social and/or environmental criteria. For example, many socially responsible investors screen out tobacco company investments.

The longest-running SRI index, the Domini 400—now the MSCI KLD 400—was started in May 1990. It has continued to perform competitively —with average annualized total returns of 9.51 percent through December 2009 compared with 8.66 percent for the S&P 500.
Despite the impressive growth, the knock against SRI has long been that investors had to settle for lagging returns in exchange for assuaging their consciences. So-called "sin stocks," including purveyors of tobacco, alcohol, gambling and defense contractors, were banned from portfolios on moral or ethical grounds. And shutting out entire industries hurts performance, the critics said. However, in a comprehensive study, financial economists Lobe, Roithmeier, and Walkshäusl taking the position of the advocatus diaboli, answer the question whether to invest in a socially responsible way – or not? They create a set of global and domestic sin indexes consisting of 755 publicly traded socially irresponsible stocks around the world belonging to the Sextet of Sin: adult entertainment, alcohol, gambling, nuclear power, tobacco, and weapons. They compare their stock market performance directly with a set of virtue comparables consisting of the most important international socially responsible investment indexes. They find no compelling evidence that ethical and unethical screens lead to a significant difference in their financial performance, which is in contrast with the results of prior studies on sinful investing.
  • Divesting

Divesting
Divestment
In finance and economics, divestment or divestiture is the reduction of some kind of asset for either financial or ethical objectives or sale of an existing business by a firm...

 is the act of removing stocks from a portfolio based on mainly ethical, non-financial objections to certain business activities of a corporation. Recently, CalSTRS (California State Teachers' Retirement System) announced the removal of more than $237 million in tobacco holdings from its investment portfolio after 6 months of financial analysis and deliberations.
  • Shareholder activism

Shareholder activism
Activist shareholder
An activist shareholder uses an equity stake in a corporation to put public pressure on its management. The goals of activist shareholders range from financial to non-financial...

 efforts attempt to positively influence corporate behavior. These efforts include initiating conversations with corporate management on issues of concern, and submitting and voting proxy resolutions. These activities are undertaken with the belief that social investors, working cooperatively, can steer management on a course that will improve financial performance over time and enhance the well being of the stockholders, customers, employees, vendors, and communities. Recent movements have also been reported of "investor relations activism", in which investor relations firms assist groups of shareholder activists in an organized push for change within a corporation; this is done typically by leveraging their enhanced knowledge of the corporation, its management (often via direct relationships), and the securities laws as a whole.
  • Positive investing

Positive investing is the new generation of socially responsible investing. It involves making investments in activities and companies believed to have a positive social impact. Positive investing suggested a broad revamping of the industry's methodology for driving change through investments. This investment approach allows investors to positively express their values on corporate behavior issues such as social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...

 and the environment
Environment (biophysical)
The biophysical environment is the combined modeling of the physical environment and the biological life forms within the environment, and includes all variables, parameters as well as conditions and modes inside the Earth's biosphere. The biophysical environment can be divided into two categories:...

 through stock selection --- without sacrificing portfolio diversification or long-term performance. Positive screening pushes the idea of sustainability
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...

, not just in the narrow environmental
Environmentalism
Environmentalism is a broad philosophy, ideology and social movement regarding concerns for environmental conservation and improvement of the health of the environment, particularly as the measure for this health seeks to incorporate the concerns of non-human elements...

 or humanitarian sense, but also in the sense of a company's long term potential to compete and succeed.

Community investment

By investing directly in an institution, rather than purchasing stock, an investor is able to create a greater social impact: Money spent purchasing stock accrues to the stock's previous owner and may not generate social good, while money invested in a community institution is put to work. For example, money invested in a Community Development Financial Institution may be used by that institution to alleviate poverty or inequality, spread access to capital to under-served communities, support economic development or green business, or create other social good.

Impact investing

In Impact investing
Impact investing
Impact investing refers to investments made based on the practice of assessing not only the financial return on investment, but also the social and environmental impacts of the investment that happen in the course of the operations of the business and the consumption of the product or service which...

, an investor will actively seek to place capital in businesses and funds that combine financial and social returns. These businesses can thus provide social or environmental impact at a scale that purely philanthropic interventions usually cannot reach. This capital may be in a range of forms including equity, debt, working capital lines of credit, and loan guarantees. Examples in recent decades include many investments in microfinance, community development finance, and clean technology. Impacting investing has its roots in the Venture capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...

 community, and an investor will often take active role mentoring or leading the growth of the company or start-up. Impact investing has become prominent in international development
International development
International development or global development is a concept that lacks a universally accepted definition, but it is most used in a holistic and multi-disciplinary context of human development — the development of greater quality of life for humans...

, where funds and organizations such as the Acumen Fund
Acumen Fund
Acumen Fund is a non-profit global venture fund that uses entrepreneurial approaches to solve the problems of global poverty. Its aim is to help build financially sustainable and scalable organizations that deliver affordable critical goods and services that improve the lives of the poor...

, Rockefeller Foundation
Rockefeller Foundation
The Rockefeller Foundation is a prominent philanthropic organization and private foundation based at 420 Fifth Avenue, New York City. The preeminent institution established by the six-generation Rockefeller family, it was founded by John D. Rockefeller , along with his son John D. Rockefeller, Jr...

, the Grassroots Business Fund
Grassroots Business Fund
The Grassroots Business Fund is a non-profit based in Washington, DC. It has field offices in Ghana, Kenya, and India. Their mission is to build and support high-impact enterprises that provide sustainable economic opportunities to thousands of people at the base of the economic pyramid...

, the Skoll Foundation
Skoll Foundation
The Skoll Foundation is a social entrepreneurship foundation based in Silicon Valley, California, with a mission to drive large-scale change by investing in, connecting, and celebrating social entrepreneurs and other innovators dedicated to solving the world’s most pressing problems...

 and Verde Ventures are using this approach.

Global context

Socially responsible investing is a global phenomenon. With the international scope of business itself, social investors frequently invest in companies with international operations. As international investment products and opportunities have expanded, so have international SRI products. The ranks of social investors are growing throughout developed and developing countries. Trade organizations keeping track of some of this growth include the US SIF: The Forum for Sustainable and Responsible Investment in the U.S., the Social Investment Organization in Canada, EuroSIF in the E.U., the Associate for Sustainable and Responsible Investment in Asia, and the Responsible Investment Association of Australasia.
In 2006, the United Nations Environment Programme
United Nations Environment Programme
The United Nations Environment Programme coordinates United Nations environmental activities, assisting developing countries in implementing environmentally sound policies and practices. It was founded as a result of the United Nations Conference on the Human Environment in June 1972 and has its...

 launched its Principles for Responsible Investment. The Principles provide a framework to help investors incorporate environmental, social, and governance (ESG) factors into the investment process.

Ethical investment in the UK

In 1985, Friends Provident launched the first ethically screened investment fund with criteria which excluded tobacco, arms, alcohol and oppressive regimes. Since 1985, over 90 investment funds have launched offering a wide range of investment criteria; both negatively screened and with positive investment criteria i.e. investing into companies involved in promoting sustainability.
Barchester Green Investment also launched in 1985 and is the UK's longest established ethical investment specialist IFA (Independent Financial Adviser) firm. According to the Ethical Investment Research Service (EIRIS) GBP 6.7 billion is invested in ethical and environmental investment funds in the UK.[13]
Since 1985, most of the major investment organizations have launched ethical and socially responsible funds although this has led to a great deal of discussion and debate over the use of the term "ethical" investment. This is because each of the fund management organizations tend to apply a slightly different approach to running their funds. The large Dutch insurance group AEGON, for example, run very tightly screened ethical funds whereas the Standard Life and AXA "ethical" funds operate with less strict exclusion criteria.
This variation in the types of ethical and sustainable investment on offer has created considerable growth in the ethical specialist IFA sector with a number of firms now operating.
The European SRI market grew from €2.2 trillion at the end of 2007 to €5 trillion at year-end 2009.

See also

  • Business ethics
    Business ethics
    Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.Business...

  • Community wind energy
  • Corporate social responsibility
    Corporate social responsibility
    Corporate social responsibility is a form of corporate self-regulation integrated into a business model...

  • Disinvestment
    Disinvestment
    Disinvestment, sometimes referred to as divestment, refers to the use of a concerted economic boycott, with specific emphasis on liquidating stock, to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change...

  • Ethical banking
    Ethical banking
    An ethical bank, also known as a social, alternative, civic, or sustainable bank, is a bank concerned with the social and environmental impacts of its investments and loans. Ethical banks are part of a larger societal movement toward more social and environmental responsibility in the financial...


  • Interfaith Center on Corporate Responsibility
    Interfaith Center on Corporate Responsibility
    The Interfaith Center on Corporate Responsibility is a coalition of 275 faith-based institutional investors. Founded in 1973, the organization advocates for corporate social responsibility and files shareholder resolutions and engages in dialogue with corporate management on issues such as global...

  • Integrated reporting
    Integrated reporting
    Integrated reporting refers to the integrated representation of a company’s performance in terms of both financial and non-financial results. Integrated reporting provides greater context for performance data, clarifies how sustainability fits into operations or a business, and may help embed...

  • Impact investing
    Impact investing
    Impact investing refers to investments made based on the practice of assessing not only the financial return on investment, but also the social and environmental impacts of the investment that happen in the course of the operations of the business and the consumption of the product or service which...

  • Microfinance
    Microfinance
    Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....


  • Social finance
    Social finance
    Social finance is an approach to managing money that delivers a social dividend and an economic return.Social finance includes community investing, microlending, social impact bonds, and sustainable business and social enterprise lending...

  • Social responsibility
    Social responsibility
    Social responsibility is an ethical ideology or theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. Social responsibility is a duty every individual or organization has to perform so as to maintain a balance between the economy and the...

  • SRI in the Rockies Conference
    SRI in the Rockies Conference
    SRI in the Rockies is the annual national conference of the sustainable and responsible investing industry. The conference was founded in 1990 by George R. Gay , and has grown from 45 to 650 participants...

  • Sustainable development
    Sustainable development
    Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...

  • Terror-free investing
    Terror-free investing
    Terror-free investing describes an investment strategy which seeks to maximize financial return while assuring investors that the financial instruments in the portfolio are "terror-free"....



External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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