Socially responsible investment funds outperformed their benchmarks last year in almost all asset classes.
The Social Investment Forum released its analysis last week of results at 160 socially responsible mutual funds from 22 members of the forum, showing that 65% of the portfolios in all asset classes, including balanced, large-cap, small-cap and global funds, as well as bonds, outperformed their benchmarks by significant margins. Thomson Reuters supplied the data the forum used for its analysis.
Its mutual fund performance chart showed that more than 50% of forum-member mutual funds considered executive pay practices at companies when developing their portfolios. More than two-thirds look for companies with good records on climate change and community development. And virtually all excluded tobacco companies from their portfolios or restricted their involvement in such firms.
Cheryl Smith, the forum's chairman and president of Trillium Asset Management Corp. in Boston, said in an interview Friday that investors are attracted to socially responsible funds for their values but also because profit matters.
"There is now a 20-year history of academic studies indicating that you can look at all of these social and environmental issues and have the same competitive returns," Smith said. "There is some sense that by looking at these factors you are actually avoiding major market pitfalls. One of the issues that [socially responsible] funds identified at least five years ago is the issue of predatory lending and subprime mortgages. [The] funds said this is another huge bomb waiting to go off in the financial markets, and it did explode in 2007, 2008 and 2009."
The forum pointed out that, among the 73 large-cap funds, the forum's largest single category, 72.6% outperformed the S&P 500. Most of the large-cap funds offered by forum members also outperformed the S&P 500 over three and 10 years, it said.