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Corporate Social Responsibility (CSR) is an idea that corporations have to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all
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Socially responsible investing (SRI) describes an investment strategy which combines the intentions to maximize both financial return and social good.
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green@work : Magazine : Back Issues : Nov/Dec 2001 : Top Marks

Feature Story
Top Marks

Two-thirds of socially responsible funds earn top performance marks in a down market.


Despite the recent stock market downturn, socially and environmentally responsible mutual funds are continuing to outperform all other mutual funds as a group, according to data released in July by the non-profit Social Investment Forum (SIF). Ten of the 15 screened funds with $100 million or more in assets earned top marks for performance from either or both Morningstar and Lipper Analytical Services for the one- and three-year periods ending June 30, 2001.

Of the broader universe of 46 socially screened funds with a three-year performance record that were tracked by the SIF, more than half received the highest marks from either Morningstar or Lipper. How do the SRI funds stack up to all other funds as a group? According to Morningstar data, just under a third of all mutual funds get either four or five stars, compared to 38 percent of the socially responsible funds mutual funds tracked by Morningstar.

Steve Schueth, spokesperson for the SIF and president of First Affirmative Financial Network, said, “This mid-year report tells an important story. Our continued strong relative performance shows that, even when the economy and the equity markets take a nosedive, socially and environmentally responsible funds remain sound choices.”

“Our continued strong relative performance shows that socially and environmentally responsible funds remain sound choices.”

Alisa Gravitz, executive director of the non-profit Co-op America, commented, “In recent years, the increasing mainstream acceptance of socially responsible investing has been driven by both the desire of people to do good things . . . and strong performance numbers. Now, there is indisputable and long-term evidence that socially responsible investing delivers the kind of results that all investors expect of their mutual funds. When you combine this impressive performance with community investing, shareholder activism and other activities, you have a very compelling case for socially responsible investing.”

Highlights
SIF assessed the performance of socially responsible mutual funds through mid-year 2001 by looking at broader data from three sources: Morningstar, Lipper Analytical Services and Wiesenberger. Major findings of its analysis were as follows:

• Two out of three large socially responsible funds get top ratings. Of the 15 socially screened funds with more than $100 million in assets receiving top rankings from either or both Lipper and Morningstar, 10 earned an “A” or “B” ranking from Lipper, based on one- and/or three-year total returns in its investment categories. Seven received either four- or five-star ratings from Morningstar. In addition, Wiesenberger placed nine of the 15 largest social funds in the top quartile of its investment categories based on three-year performance records, five of which ranked in the top 10 percent.

• Over half of the broader universe of social funds earn highest ratings. Of the 46 socially screened funds with a three-year performance record tracked by the SIF, 25 received the highest marks from either Lipper or Morningstar. According to the forum, 20 of the funds tracked received an “A” or “B” ranking from Lipper based on one- and/or three-year total returns within their investment categories. A total of 18 screened funds garnered either four or five stars from Morningstar for three-year risk-adjusted performance. (The Lipper and Morningstar totals add up to more than 25, since a number of the funds earned top rankings from both organizations.) Both analyses are based on time periods ending June 30, 2001. Wiesenberger, a third financial reporting organization, reported that 19 of the 46 socially and environmentally responsible mutual funds tracked by the forum ranked in the top quartile for performance in their respective categories for the three years ending June 30, 2001.

• Top-performing socially screened funds were found in key asset classes. Based on data from Lipper, Morningstar and Wiesenberger, socially and environmentally responsible mutual funds earned top ratings in most major sectors. Socially screened funds were represented in global/international, domestic equity, balanced and fixed-income categories.

When reviewing the tables, note that these lists include all mutual fund members of the SIF that are at least three years old. Its sources include only “A” shares of those funds with multiple classes of shares and does not include money market funds. Wall Street Journal/Lipper Analytical Services Quarterly Mutual Fund Review, April 9, 2001—for investment objectives, 12-month and three-year annual returns and A-E rankings. Wiesenberger—for investment categories and category ranking. Morningstar— for star ratings based on risk-adjusted three-year performance. Social Investment Forum Mutual Fund Performance Chart/Lipper—for assets/fund size.


Information provided by the Social Investment Forum, a Washington, DC-based national non-profit membership association dedicated to promoting the concept, practice and growth of socially and environmentally responsible investing. The forum’s membership includes more than 500 social investment practitioners and institutions. For more information, visit www.socialinvest.org.

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