If you want to support solar power, hybrid cars, family entertainment or good old fashioned recycling, you can invest in the companies that create the technology.
Socially responsible investing, in the form of mutual funds and index funds, has been around for a long time. According to financial information website Morningstar.com, the first two funds devoted to companies with a cause opened in the early 1970's. Today dozens of these funds exist. An estimated $2 trillion dollars is chasing stocks of the responsible companies. Although the level of social goodness varies with each fund, investors can have their pick of save the world investments.
What qualifies as a socially responsible fund is pretty much an objective choice made by the managers. Examples of what might qualify include:
- Respectable employee relations
- Community involvement
- Environmental practices
- Global human rights record
- Products that are safe and useful
One problem with SRI investing: it is very difficult to make money. The return of most of these funds is mixed to poor. According to a commentator at research firm TheStreet.com, SRI funds often have such high fees, it makes it hard for an investor to walk away with a good return. TheStreet even says conscious investors would be better off putting their money into an index fund and than donating the profits to charity.
But some funds have performed decently. Morningstar says funds focusing on SRI growth stocks, technology and health care seem to do the best. For example, according to SRI research organization SocialInvest.org, the Bridgeway Ultra Small Company Tax Advantage fund has a 26.41% average annual five-year return. The fund managers say they apply financial criteria first followed by social screening.