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“During the recent downturn in the stock market, with all the controversies, SRI funds didn’t suffer the outflows that other mutual funds did,” says Cliff Feigenbaum, publisher of Green Money Journal, a newsletter that focuses on SRI. “They actually got an inflow because people didn’t want to be part of the corporate irresponsibility.”

Pax World Funds is one SRI mutual fund company that saw increased investment. “We saw within our shareholder base what the other [SRI] funds were reporting: new money coming in, even as the market was going down,” says Anita Green, vice president of social research for Pax World. “A lot of this had to do with corporate scandals. People were fed up, so they moved to socially responsible funds. And among the shareholders we already had, they stayed with us through the downturn. That’s typical for our shareholders. We have high loyalty.”

SRI Choices

All SRI funds begin with the principle of investing with your values, but that’s where the similarities end. “Different funds take different approaches to SRI,” says Feigenbaum, who is co-author of Investing With Your Values. “So it does take a little research.”

If the return on your investment is as important as whether it’s going to socially responsible companies, it pays — literally — to read between the lines when perusing an SRI fund’s advertisement or prospectus. In fact, SRI has been criticized for playing up performance only when the numbers are good. According to a study by the Natural Capital Institute: “If the performance is lower than accepted benchmarks such as the S&P [Standard & Poor’s 500-stock index] or Dow Jones, the language will focus on the fund’s mission. If the performance is as good or better than standard indices, the language will highlight returns.” That’s something to keep in mind when picking an SRI fund.

Another place to start is by looking at your existing options. For example, if your employer offers a 401(k), ask if you have the option of investing in SRI mutual funds. The same applies if you have an Individual Retirement Account (IRA). All investors, socially responsible or not, should expect their investment advisor to help them pick the mutual funds or individual stocks that best match their priorities and risk tolerance.

Nevertheless, you shouldn’t rely entirely on the advice of others. In order to make informed investment decisions, it helps to have a basic sense of which way the winds are blowing in terms of politics and the economy. Case in point: the re-election of President Bush, whose administration favors fossil fuels, created a buying opportunity for investors interested in renewable energy.

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