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“I’ve become a little disenchanted with how modest a lot of the screens are and the fact that a lot of these funds are still including a lot of the megacorporations,” says Jim Cummings, a veteran SRI investor.

Some companies may rate well in one screen, but rate poorly in another. To make choosing an SRI mutual fund easier, it may help to identify which criteria are the most (or least) important to you. Your mutual fund manager will help with these decisions. And if you want to do additional research on specific companies, a good resource is this site from Co-op America.

Shareholder Activism

Sometimes an SRI fund may hold shares in a company specifically so it can influence that company’s business decisions. In other cases, a company might pass a fund’s screens, but later be subject to shareholder activism when its practices counter the fund’s objectives.

“We’ll get calls from shareholders who are upset that we hold shares in a specific company,” Green says. “Then in their next breath, they’ll say, ‘Why aren’t you doing something about what this company is doing?’ The answer is, we are. We have to hold shares in order to get the company to come to the table and talk. If you’re not an investor, you don’t have leverage.”

That’s why you shouldn’t automatically dismiss a fund with a portfolio containing companies that fall outside your screen. If you have doubts, contact your fund manager — it’s your money, you have the power to decide which companies do and do not make you feel comfortable. Also keep in mind that, like investing itself, shareholder activism often takes time before you start to see results.

Indeed, the fact that SRI already is making an impact says a lot about what can be accomplished — and what’s left to be done. “Say we’re choosing the better half of companies out there,” Brill says. “That still leaves an awful lot of room for improvement.”

But if SRI limits your investment options by half, does that mean you won’t be as financially secure at retirement as if you’d focused only on companies and funds that offered the greatest potential return in investment? The answer is, it depends. Any investment’s payoff hinges largely on risk. If renewable energy turns out to be the next big thing, you might get a better return than an investor who bought shares of long-standing corporations simply because they seemed like safe investments.

Some studies suggest that SRI can produce returns at least as good as conventional investments. That’s a mark in SRI’s favor, but keep in mind that not all investments are created alike. Be sure to research a fund’s historical performance, not just whether it’s an SRI fund. For example, over the past decade, the Ariel Appreciation (SRI) mutual fund has offered a better return than the S&P 500. Some other SRI funds have not performed as well. The bottom line, though, is that SRI not only allows you to make money for a secure retirement, it empowers you to make a difference with your money.

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