Socially Conscious Funds That Do More
These do-gooder offerings deserve recognition beyond socially responsible preferences.
In the wake of events like the Gulf oil spill, some investors have become increasingly proactive about making sure their investment philosophies align with their environmental and social values. Stock investors can craft portfolios that align with their beliefs, while fund investors can invest in managed socially conscious investments. According to US SIF: The Forum for Sustainable and Responsible Investment, the socially responsible investing market (which includes both individual and institutional clients) now holds about $3.07 trillion in total assets under management.
These investments are far from one-size-fits-all, however. They use a number of socially responsible investing strategies, including screening, shareholder advocacy, and community investing. Moreover, funds vary widely in the types of values-based screens they apply. Some funds will use broad-based secular screens--eliminating all businesses involved in alcohol, gambling, weapons manufacturers, military, and tobacco companies, for example--while other socially responsible funds will screen out just one or two of the aforementioned company types. Other funds look for companies that align with religious tenets; the Amana funds, for example, are managed in accordance with Islamic principles. So note that you will need to do your homework on individual funds to make sure that a fund's screening approach aligns with your values.
To home in on some topnotch domestic funds with socially conscious mandates, we turned to the Premium Fund Screener. We began by screening for funds that have been tagged as socially responsible by Morningstar based on the information we find in each fund's prospectus. To help home in on funds with good fundamentals, we added a screen for Morningstar Ratings for funds of at least 3 and screened for managers who have helmed the fund for at least five years. On the fees front, we sought no-load funds sporting expenses below the category average. Finally, we called up offerings with Analyst Reports available. When we eliminated institutional funds as well as multiple share classes of the same funds, the screener yielded six funds, three of which we've highlighted below. To replicate this screen, Premium members can click here.
Esther Pak does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.