Ron –
I suppose that you know by now that the answer was delayed because you
put the magic word ("Google") in the question. It causes the question
to be locked for review by the Google editors.
But I started some research on it before it unlocked, as the topic is
very interesting. When I was at the University of Chicago’s Graduate
School of Business eons ago, a professor contended that discriminatory
investing of this type would yield lower returns because more dollars
would be chasing a select pool of securities. Thus, the select pool
would have lower prices and lower returns. But it sounded like voodoo
economics (even if based on reasoning behind the capital-asset pricing
model).
That, of course, was back in the days when the main issue was
investments in companies doing business in apartheid-era South Africa.
Today, socially responsible investing is considered to cover
objectionable products, often tobacco, alcohol or weapons or companies
with operations in particular areas such as Asian sweatshops.
In an extension of management responsibility groups, which have long
existed, social responsibility can cover companies with management
diversity or more open financial reporting practices.
Some socially responsible investing is also defined to include venture
capital, which is typically higher risk but carries the possibility of
higher rewards. And some also includes local investing, such as banks
that make it a practice to loan money locally.
That’s 5 paragraphs already, so let’s get to the answer:
Q: Socially Responsible Investing - will it cost me money?
A: Results of studies are mixed but two University of Calgary
professors, Michael Ilnycky and Norma Nielsen, write that "general
trend shows that screened funds are at the very least competitive."
University of Calgary Haskayne School of Business
"Can Socially Responsible Investments Compete" (undated)
http://www.ucalgary.ca/MG/inrm/finplan/investment/compete.htm
They, and others, use the Domini Social Equity Fund for comparison to
the Standard & Poor’s 500 and results during the 1990’s were similar.
However, the Domini Fund waived certain fees for investors during that
period which would have made its returns lower than the S&P 500
normally.
From the standpoint of risk, the May-June 2000 Financial Analysts
Journal said that socially responsible mutual funds performed better
at a modest risk premium -- 14.19% standard deviation vs. 13.23% for
the S&P 500.
REFERENCES
-----------
A Google search strategy using these terms yields thousands of
responses from websites advocating the strategy:
"socially responsible" + investing
Instead I used Thomson-Gale’s “Expanded Academic ASAP” to see journal
articles, where more critical analysis was likely to be found. What
follows are some key articles and web resources, where available.
---
Journal of Accountancy
January, 2003
"Socially Responsible Investing"
A summary of the impact on accountants, including how to focus on
socially responsible investing in an accounting practice. The article
cites the Social Investment Forum, http://www.socialinvest.org for
data showing that the investments continue to grow. It also includes
a list of 7 such funds and recommends two other websites on the
issue:
Social Investment Forum
http://www.socialinvest.org
Socially Responsible Investing
http://www.socialfunds.com
---
University of Calgary
“Socially Responsible Investing”
http://www.ucalgary.ca/MG/inrm/finplan/investment/social_investing.htm
Part of the school’s Risk Management area of study, this includes
critiques and a bibliography with several studies on SRI.
---
Studies in the Field of SRI (Lloyd Kurtz, November 2002)
http://www.sristudies.org/
This is an excellent site, including an annotated bibliography and a
list of 12 studies that the author believes are key. From the site,
there’s also a complete copy of the September, 2002 article by Kurtz
on SRI and its returns in "Journal of Investing":
http://www.sristudies.org/essay_frameset.html
Best regards,
Omnivorous-GA |
