Monday, May 08, 2006

Socially Responsible Investing, Part 2: Some SRI Options

So, you read Part 1 and are wondering how you can get involved in Socially Responsible Investing (SRI)? It really depends on your values and what you want to accomplish.

Mutual Funds

[Note: This link is so incredibly useful; it has all kinds of information about dozens of SRI mutual funds in a great, easy format. If you don't want to bother with my commentary, just go straight here!]

Are you only concerned about social screening, and not about shareholder activism? You might like the Vanguard FTSE Social Index Fund (VFTSX), with a cheap 0.25% expense ratio, which follows an index with a fairly typical set of progressive screens (environment, labor practices, human rights, etc).

However, for me personally, I feel that shareholder activism is absolutely vital, and so I wouldn't be comfortable with VFTSX. Instead, I looked for funds that had similar broad progressive screening policies, but were located at mutual fund companies dedicated to serious shareholder activism. The most active ones I found were Calvert and Domini, with the runners up including (but not limited to) Citizens, Parnassus, and Pax World Funds. If you are interested, I recommend looking into all of these. All my IRA money is at Domini so far, and I love it-- it has less variety than many of the other fund families (just an index fund, a European fund, and a bond fund plus the money market account), but is no-load and keeps expenses low while staying seriously committed to shareholder activism. Claire over at Tired but Happy recently picked some Parnassus funds, which has prompted me to think about some of them for the future as well.

There are also some funds which focus especially or exclusively on single issues-- like the Winslow Green Growth Fund (WGGFX), a highly-rated small-cap fund focusing on the environment (other environmental funds include Green Century's balanced (GCBLX) and equity (GCEQX) funds, and Portfolio 21, which is a global fund); Women's Equity Fund (FEMMX), which supports the advancement of women in the workplace and other women's issues; and the Parnassus Workplace Fund (PARWX), which focuses on outstanding workplaces. If these issues are particularly important to you, you might be interested in these more targeted funds.

Religious Mutual Funds

The Timothy Plan funds screen against direct or indirect involvement in alcohol, tobacco, and gambling, but also abortion, pornography, "anti-family entertainment", or "alternative lifestyles". The LCKM Aquinas funds, designed to promote "Catholic family values," look at a broader spectrum of issues, while keeping a distinct religious perspective: "abortion, contraceptives, weapons of mass destruction, gender and race discrimination, human rights, economic priorities, environmental responsibility and fair employment practices," and the MMA Praxis funds, which are affiliated with the Mennonites, take a similar approach. (They are also the only religious SRI fund to have 1% of assets in community investing.) The Catholic Equity Fund (CTHQX) actually doesn't really do social screening at all and just focuses on shareholder advocacy. And the Muslim Amana funds not only avoid alcohol, gambling, and pornography, but because interest is against Muslim principles, they also do not invest in banks or hold bonds.

Non-Mutual Fund Options

The obvious non-mutual fund options are community development banks and credit unions. At this link, you can search for ones in your area. ShoreBank is one which has many locations in the Midwest and Pacific Northwest, and includes an innovative eco-bank. I actually invest in ShoreBank via a money market account at Domini which I cannot say enough good things about (see my earlier post from back in March).

But there are many other options. For example, there are dozens of loan funds out there, which usually let you set your own interest rate (from 0% to somewhere below market rate) with the idea that the amount you are giving up in interest is like a charitable donation-- a great place to start is the Calvert Foundation's set of a half-dozen or so different types of Community Investment Notes (and they even have this funky money market/Community Investment Note hybrid). I also came across a terrific-looking 3-year, 4.20% APR CD that supports Equal Exchange's work in promoting fair trade and supporting farmer cooperatives.

In Conclusion

I know I've mentioned dozens of options and your eyes are probably glazed over, but in reality
I've just scratched the surface of the choices that are out there, too many for me to possibly list or summarize here. I would love to assist any and all of you who are interested in looking into your SRI options by helping you do some research-- I really believe in this stuff and want to see more dollars going into it, and since I only have a limited supply of aforementioned dollars myself, I'd consider any time helping others as time well spent!

Here are a few more links for you (as if the ones above aren't enough!):

I hope this has been helpful, and please don't hesitate to ask if you have any questions, to add in any of your suggestions or experiences, or ask some tough questions if you disagree with this approach. Good luck!


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