Indeed more investors are backing a cause. In the 1990s barely 100 SRI mutual funds existed. That’s doubled to around 200 funds now, DeSimone said. Still, that’s a small fraction of the more than 4,600 stock mutual funds on the market.
Notably, SRI investors remained committed to the principles they supported through even the worst market turbulence.
Inflows for socially responsible funds remained positive throughout 2008 when investors were pulling out of stock funds in massive numbers. All told, SRI funds managed to capture $700 million, while nearly $96 billion was pulled from stock mutual funds. That’s a relatively small figure, but significant in that it ran counter to the stock selling trend, said Kathryn Young, a fund analyst with Morningstar Inc.
The trend continued during the market rebound. Last year SRI funds took in $4 billion while investors pulled nearly $25 billion from stock mutual funds.
SRI mutual funds typically fall into three categories: faith-based, environmentally conscious and secular funds.
An index that measures the performance of companies screened for environmental and social issues shows returns comparable to the S&P 500 over three and five years.
However, the index has fallen slightly behind the broader market over the past year and continue to lag slightly in recent quarters by less than 1 percentage point.
The social index is maintained by KLD Indexes, a subsidiary of RiskMetrics Group, which was acquired June 1 by MSCI Inc.
A look at a few SRI mutual funds shows some of the more diversified funds can perform well even during economic and market uncertainty, but more narrowly focused funds — such as those concentrated in developing energy sectors — can be risky.
Investors whose conscience guides them to put their money into companies they feel make a difference need not expose themselves to more risk.
It will take some research, however, to ensure funds match their criteria and have reasonable performance.
