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Wednesday, January 12, 2000

Decade of The Responsible Investor

Reported by Paul Braverman

SocialFunds.com, a personal finance web site devoted to social investing, has named its top news in socially responsible investing for the previous decade and year. In general, the company sees the 1990's as the decade that social investing gained mainstream acceptance. That acceptance was driven by strong fund performance, and the mainstreaming of issues, like the environment, child labor and diversity, that concern social investors.

Specifically, SocialFunds.com sees the decade's top stories as:

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1. The Domini Social Index. This equity index, which launched in 1990, is comprised of 400 companies with positive records in community involvement, the environment, employee relations, and hiring practices. The index avoids companies with significant revenues from alcohol, tobacco, gambling, nuclear power, and weapons contracting. During the '90's, the Domini Social Index achieved a total return of 534.9%, well ahead of the S&P 500 for the same period. SocialFunds.com sees this as proof that screening companies for social considerations doesn't hinder performance.

2. Shareholder activism. By asserting their rights as equity owners, shareholders took on a newfound activism. Shareholders are now proposing and voting on hundreds of socially-motivated corporate resolutions each year. "Issues raised by social investors are now on the corporate radar screen," says Jay Falk, the founder of SocialFunds.com.

Shareholders won a number of battles during the 90's. For example, the Coalition for Environmentally Responsible Economies developed a set of standards for the disclosure of environmental data. Some of the world's largest corporations, including Coca-Cola, GM, ITT and Bank of America have adopted the CERES Principles. Shareholder activists also played a critical role in forcing the apparel industry to face the problem of child and sweatshop labor.

3. Retirement plans, 401k's, and institutional accounts added social funds. Many employees now have a socially responsible investment option in their company retirement plans, something that was almost unheard of just 10 years ago.

4. Community investing. Investors can now put their money in hundreds of loan funds, credit unions, and banks that help re-build communities by supporting affordable housing, small business and community development.

5. The Vanguard-Calvert Social Index. Just last December, Vanguard launched its first SRI fund based on a new index from the Calvert Group. And in September, Dow Jones partnered with Zurich-based Sustainability Asset Management to launch the Dow Jones Sustainability Group Index, the first socially responsible global equity index. "With these developments, social investing is poised for greater acceptance and broader distribution," says Falk.

For the year, SocialFunds sees the top investing stories as:

1. The Vanguard-Calvert partnership.

2. Competitive performance. Social investors saw more of their funds yield excellent returns, comparable with non-screened funds.

3. The Dow Jones-Sustainability Asset Management Index.

4. The Seattle World Trade Organization meeting. In November, 40,000 people protested (and some rioted) the effect of corporate globalization on human rights and the environment. "Social investors have made great strides in making companies aware of these issues, but WTO brought them to the front burner, on full blast," says Falk.

5. The Community Investing Tax Credit. President Clinton's proposal to include a New Markets Tax Credit in the FY2000 budget promises big benefits for low and moderate income communities. 

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