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Socially Responsible Funds Outperform Benchmarks

Socially responsible investment funds outperformed their benchmarks in almost all asset classes last year, as investors look for companies that align with their values and also provide good returns.

The Social Investment Forum released its analysis last week of 160 socially responsible mutual funds from 22 members of the forum, revealing that 65% of the funds in all asset classes, including balanced, large-cap, small-cap and global funds, as well as bonds, outperformed their benchmarks by significant margins last year. The data SIF used for its analysis was provided by Thomson Reuters.
SIF’s mutual fund performance chart shows that more than half of SIF member mutual funds consider the executive pay practices at companies when developing their portfolios. More than two-thirds look for companies with good records on climate change issues and community development. And, virtually all exclude tobacco companies altogether from their portfolios or restrict their involvement in such firms.

“In the wake of the financial crisis more and more consumers are concerned about runaway executive pay practices and other forms of corporate misconduct and sustainability risks,” said Lisa Woll, the chief executive officer of the Social Investment Forum. “The SIF’s Mutual Fund Performance Chart allows retail investors to explore which SRI funds incorporate these and other sustainability issues into their investing and proxy voting practices.”  
Cheryl Smith, chairman of the board at SIF and president at Boston-based Trillium Asset Management Corporation, said in a phone interview last week that investors are attracted to SRI funds because they do not want to use their resources to support values they do not believe in. And profit matters too.


“There is now a 20 year history of academic studies indicating that you can look at all of these social and environmental issues and have the same competitive returns,” Smith said. “There is some sense that by looking at these factors you are actually avoiding major market pitfalls. One of issues that SRI funds identified at least five years ago is the issue of predatory lending and subprime mortgages. SRI funds said this is another huge bomb waiting to go off in the financial markets and it did explode in 2007, 2008 and 2009.”

SIF said that among the 73 large-cap funds, the largest single category of SIF member funds, 72.6% outperformed the S&P 500. On average, large-cap SRI funds beat the S&P 500 by more than 6%. A majority of the large-cap funds offered by SIF members also outperformed the S&P 500 over three years and over 10 years, the forum said.  

“This analysis underscores the reality that socially responsible investments offer what are genuinely competitive returns,” Smith said.  
The 22 fund families represented in the SIF analysis are: Access Capital Strategies; AHA; Appleseed; Ariel; Azzad; Calvert; Community Capital Management; Domini; Gabelli; Green Century; Integrity; Legg Mason; Meeder Asset Management; MMA Praxis; Neuberger Berman; New Alternatives; Parnassus; Pax World; Portfolio 21; Sentinel; Walden; and Winslow.

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