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Responsible Investing Yields Spiritual, Financial Returns

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More Americans are turning to socially responsible investing in the stock market, a concept that has been around for decades, according to recent studies.

Between 1997 and 1999, portfolios screened for social responsibility grew from $1.2 trillion to $2.16 trillion, primarily in private stock accounts, according to the Social Investment Forum.
“The previous doubt was that you couldn’t [invest responsibly] without giving up returns, but funds like Domini show that you can,” Catherine Hickey, an analyst with Morningstar, told the New York Times.
The New York-based Domini fund is one of dozens of investment groups with a moral investing code. Domini social equity fund picks companies that maintain generous retirement benefits, good relationships with unions and strong environmental protection programs. The group also launched a social bond fund in June, aimed at community development.
Socially responsible funds are not just a fashionable, value-added form of investing, but also a spiritual statement for those who put their trust in them.
The United Methodist Church (UMC), one of the big players in such investing, said it holds its entire $13-billion pension fund in “socially responsible” markets. Among the guiding principles of the UMC pension board is a ban on investing in companies that derive 10 percent or more of their gross revenues from products related to alcohol, tobacco, gambling, pornography or firearms, according to United Methodist News Service.
Socially responsible investors are also gaining clout in the business community. When Yahoo!, a popular Internet company, backed out of its plan earlier this year to promote and sell pornography on its Web site, socially responsible investors were largely credited with the victory.
The concept of socially responsible investing dates back to the Vietnam era and the creation of a now well-known Pax World Balanced Fund.
The company founders Luther Tyson and Jack Corbett worked for the UMC in Washington, D.C. during the late 1960s. Because of their perspective on issues of peace, housing and employment, they once received a letter with an inquiry about a pension fund that would not invest in war-related industries.
Out of this question came the Pax World Fund. Introduced in 1971, it was the first publicly available mutual fund using both social and financial criteria in its investment decisions.
Since then, over 175 funds have sprung up nationwide, having invested over two trillion dollars by the end of 1999.
Today’s investors are seeking companies that fit their carefully outlined ideals.
In 1994, MMA/Praxis, an independent arm of the Mennonite church, started its own mutual fund. Today the group holds $300 million in four mutual funds, keeping one eye on the stock market and making sure it invests responsibly.
The Timothy Plan, founded in 1995, avoids investing in companies whose practices run contrary to Judeo-Christian principles. “We are America’s first pro-life, pro-family, biblically-based mutual fund group,” it claims on its Web site, www.timothyplan.com.
Even when times are tough on the stock market, some investors are learning to stick to the moral principles they set forth; and they say it doesn’t make their job harder.
Philip Calpers, responsible for California’s $165 billion public employees pension fund, told the Times, “People in the investment industry often want to put up a wall between [good practices and good investment results], but they are related.”
 
Alex Smirnov is BCE’s research associate.