| Not so long ago, the phrase "socially responsible | | | | capital from investors to communities that lack |
| investing" might have brought to mind | | | | traditional financial services such as credit, equity, |
| environmentalists keeping their investment dollars out | | | | capital and basic banking products (services that a |
| of companies they believed to be damaging the | | | | community needs to grow and thrive). |
| Earth or animal rights activists rejecting companies | | | | According to the Social Investment Forum's study, |
| who tested their products on harmless creatures. | | | | socially screened mutual fund assets grew 15-fold |
| As the socially responsibly investing, or SRI, sector | | | | over the same 10-year period from $12 billion to $179 |
| has grown, its definition has also diversified. Today | | | | billion, outpacing the growth percentage of the |
| the phrase encompasses any investment strategy | | | | mutual fund industry, as a whole, in the U.S. |
| targeted at aligning an individual's portfolio with their | | | | However, financial professionals who specialize in |
| personal convictions. The Social Investment Forum's | | | | socially responsible investing point out that excluding |
| 2005 Report on Socially Responsible Investing Trends | | | | certain companies (or in some cases, certain sectors) |
| in the United States identified $2.29 trillion under | | | | from an investment plan can result in potential |
| professional management involved in one or more of | | | | financial consequences. Performance, benchmarking, |
| the three primary socially responsible investment | | | | implementation and diversification issues may make |
| strategies. | | | | these investments more difficult to evaluate. In some |
| Screening, shareholder advocacy and community | | | | cases, that may mean an investor has to choose |
| investing are the three most common SRI strategies. | | | | between his beliefs and his bottom line. |
| Screening (the practice of choosing or excluding | | | | If you do choose to factor your personal definition |
| investments from a portfolio based on the investor's | | | | of social responsibility into your financial plan, keep |
| personal criteria) may be the most commonly known. | | | | that trade-off in mind. Trying to compare your |
| Individuals may choose to invest, for example, only in | | | | SRI-screened portfolio's performance to general |
| companies headed by women or individuals of a | | | | indexes like the Dow and S&P 500 may not be |
| particular ethnicity. Or, they may choose not to | | | | accurate comparisons. The Domini 400 Social Index, |
| invest in companies that conflict with their personal | | | | run by KLD Research & Analytics Inc., attempts to |
| beliefs. In addition to the traditional "sin" stocks of | | | | provide a SRI-related benchmark but again, index |
| gambling, pornography and alcohol, an investor's "anti" | | | | results may not adequately reflect the result of |
| list might include tobacco, nuclear weapons, defense, | | | | including or excluding specific investments. |
| companies with poor records on labor relations or the | | | | If aligning your investments is important to you, talk |
| environment, religious issues, animal testing or any | | | | to your financial advisor about socially responsible |
| other issue. | | | | investment strategies and their potential impact on |
| Shareholder advocacy uses the voting rights | | | | your portfolio. If your objection to a company's |
| associated with stock ownership to promote change | | | | practices or politics doesn't keep you up at night, you |
| within the company. Anti-apartheid organizations used | | | | may be better off donating cash or time to the |
| this strategy to get companies to pull out of South | | | | organization than weeding through thousands of |
| Africa in the early 1980s. Community investing directs | | | | investments looking for a soul mate. |