Socially responsible investing possible

In past columns we have written about the philosophy of portfolio management known as SRI, or socially responsible investing. This approach incorporates selected “value,” or non-financial screens, in addition to the traditional fundamental, technical or top-down methods of evaluating investments.

These “value” screens encompass a wide spectrum of choices, because each of us have different ideas as to what social objectives should be promoted and encouraged by our investments, in addition to the goal of making money.

While using value screening to select individual company stocks has been around for a long time, more recently many mutual funds and investment vehicles have been organized to provide a variety of choices for investors who want to invest with a purpose, whether it be religious, social or environmental.

There are a number of mutual fund families that base their investment policy on religious principles, often including social and environmental concerns as well. The Ave Maria Funds, (www.avemariafund.com) and the LKCM Aquinas Funds (www.aquinasfunds.com) are two that seek out investments in companies that support, promote, and conduct their business activities in accordance with Catholic religious values.

The Amana Funds (www.amanafunds.com) manages a group of portfolios that follow the principles of Sharia, or Islamic law, including among other things, not charging interest.  Investors who want to reflect conservative Christian principles in their investments can investigate the Timothy Plan, (www.timothyplan.com) which characterizes itself as America’s first pro-life, pro-family, biblically-based mutual fund group.

Many traditional SRI funds, whether from a religious or social perspective, are essential exclusionary in their investment discipline. They screen out companies or even industries that participate in what they deem to be unacceptable business practices or behaviors.

As traditional SRIs have evolved in the 21st century and embraced sustainable investing, it has also become characterized by a more proactive approach, deliberately seeking out companies that follow sustainable practices themselves, or that are involved in industries that promote sustainable growth. These can include clean or alternative energy, environmental services, green technology, transportation, construction and water resources. Some funds also look for companies that follow particular benefit policies with regard to their employees, or require certain standards and practices from outside suppliers.
Investors who want to participate in sustainable investment can start by researching individual companies on their own, or make use of a mutual fund to provide diversification and research. Two selected companies involved in sustainable technology are Cree, Inc. (Cree), and Vestas Wind Systems (VWSYF). Cree manufactures energy-efficient, environmentally-friendly LED lighting, as well as semiconductor solutions for wireless and power applications. Vestas Wind Systems, a global company based in Denmark, is the world's leading supplier of wind power solutions, with a 20 percent market share, and more than 39,000 wind turbines installed throughout the world.

One mutual fund company that embraced investment in green and sustainable companies early on is the Winslow Group, (www.winslowgreen.com), whose investment philosophy incorporates the belief that companies providing green solutions will benefit from a combination of ecological, regulatory and economic factors in the market place and provide superior returns to investors.

The Winslow Fund group offers two funds to green-conscious investors, the Winslow Green Growth Fund, (WGGFX), launched in 2001, and the Winslow Green solutions fund (WGSLX) started in 2003, which incorporates a more global green strategy.

Another mutual fund strongly committed to investment in sustainable resources is Portfolio 21 (www.portfolio21.com) (PORTX) based in Portland, Ore. Portfolio 21 uses its own proprietary evaluation criteria to identify companies that it feels recognize the enormous opportunity that exists by saving natural resources, as well as by providing the products, services and technologies that are needed to create a sustainable society. Portfolio 21 seeks to invest in companies that are developing cleaner and more efficient energy solutions, products designed to be reused and recycled, and processes that eliminate the need for toxic inputs.

The discipline of sustainable and socially responsible investment offers tremendous opportunity to become more active in both the financial and social implications of our investment decisions. Still, investors should always exercise special caution when investing in any fund with significant exclusionary selection criteria, whether economic sector, social, environmental or religious. Strict screening criteria can effectively shut out large industries or economic sectors, thereby reducing the diversification normally considered to be a significant advantage of investment in mutual funds.

In addition, many green and environmentally active firms are smaller companies, and many are located overseas, both of which may add additional risk factors associated with size and currency.

With these cautions in mind, the proponents of sustainable investment make a strong case: Companies that engage responsibly in their businesses and do business in an moral and environmentally sensitive way can prove to be financially rewarding investments as well.

Steven Weber is the senior investment advisor and Frank Weber Director of Operations for The Bedminster Group, providing investment management, estate, and financial planning services. The information contained herein was obtained from sources considered reliable. Their accuracy cannot be guaranteed. The opinions expressed are solely those of the author and do not necessarily reflect those from any other source. The discussion of securities in this article should not be construed as a recommendation or solicitation to purchase.