Socially responsible investors blend beliefs, portfolios

The concept of socially responsible investing is gaining popularity in the investment world.

Socially responsible investing is supporting, or refusing to support, specific companies on the basis of personal values and beliefs, said Paula Dougherty, financial advisor with American Express Financial.

Socially responsible investing is an option for investors who have strong moral convictions and do not want to invest in companies that promote, for example, animal testing or the sale of alcohol or tobacco.

Dougherty said that there are now 230 socially responsible funds in the United States.

"So the chances of finding a fund that meets individual requirements are probably quite good," she said.

Assets in socially screened investment portfolios under professional management grew by 36 percent from 1999 to 2001, surpassing the $2 trillion mark, Dougherty said.

John Calhoun, financial planning consultant with Morgan Stanley, said there are only a handful of investor companies in the Springfield area that are involved in the concept of socially responsible investing.

Calhoun's office works with Roxbury Capital Manage-ment, based in Santa Monica, Calif., on socially responsible investment issues.

Claire McTernan, a managing director at Roxbury, is the primary manager on the socially responsible investment portfolio.

"Socially responsible investing is going mainstream. I think there is a lot of credence to that," McTernan said.

"I think people are realizing that there is not a performance penalty. There have been a lot of studies done showing that socially screened portfolios have performed at least as well as, if not better than, nonscreened portfolios."

Barbara Rae Hall, financial consultant with Salomon Smith Barney, is not so quick to agree.

"The bottom line is that investors want to make money," Hall said. "I feel sometimes the socially responsible companies have not been the profit makers that other companies have been. So it depends on how devoted you are to being socially responsible versus making money."

McTernan said socially responsible investing has evolved, at least on the West Coast, in the past 10 years, and is gaining in popularity as the concept receives more attention.

"I think, as of late, we've developed it into more proactive screening as well," she said.

Dougherty agreed, and said that socially responsible investors often consider a broad range of issues and use several different strategies. One such strategy is shareholder activism, which includes a shareholder using his or her influence to try to change the practices of a publicly held company, she said.

There are four basic proactive screens used by Roxbury and other investment firms.

Community Does the company actively contribute to its community and region?

Environment How does the company respond to environmental issues? Does it use a recycling program?

Employee relations How well does the company treat its employees?

Do they have access to 401(k) programs, maternity/paternity leave, and other benefits?

Diversity: How many women and minorities are in management and on the board of directors?

McTernan said socially responsible investing is often an option for animal activists, because screens can detect, for instance, which pharmaceutical companies perform testing on animals.

Those that tend to be socially responsible with their investments include younger people in their 20s and middle-aged environmentally conscious people, Hall said.

She said she has also worked with investors of all ages who have strong religious convictions, and do not want to invest in companies that produce or promote cigarettes and alcohol.

"We're becoming a more conscientious society, and therefore it makes sense that it spills over into the investment world," Hall said.

She added that people are able to make socially responsible investment decisions without going through a standardized program. Investors and their financial advisors can discuss which companies are good moneymakers while keeping beliefs and moral objectives in mind, Hall said.

"That might be a more sensible approach," Hall said.

Dougherty said her advise regarding socially responsible funds is the same as it is for any other type of investment.

"Start slowly, invest responsibly and do your homework," Dougherty said. "Buying socially responsible funds should not alter your overall approach to the investment process. Just because an investment is socially responsible doesn't mean it will meet your other financial criteria, such as your overall goals, investment timeline and tolerance for risk."