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Socially Responsible Investment Assets Growing Faster Than Other Funds

(Feb. 20, 2006) Socially Responsible Investment (SRI) assets grew faster than all managed assets in the United States over the last 10 years, according to the latest biennial report on SRI funding by the Washington, D.C.-based Social Investment Forum.

The Socially Responsible Investment Trends Report 2005 found that total SRI assets rose more than 258 percent, from $639 billion in 1995 to $2.29 trillion in 2005, while the entire range of assets under professional management increased less than 249 percent, from $7 trillion to $24.4 trillion, over the same period.

According to the Forum report, the $2.29 trillion in total assets under management using one or more of the three core socially responsible investing strategies—screening, shareholder advocacy, and community investing—is up from a total of $2.16 trillion in 2003. Among the signs of an ongoing growth from 2003 to 2005 in socially responsible investing are the following:

  • an 18.5 percent increase in assets invested in SRI mutual funds
  • a 16 percent jump in social and corporate governance shareholder resolutions (and significantly higher levels of support for such proxy measures)
  • a 40 percent boost in funds invested in community investing

Socially responsible investing involves integrating the investor’s personal values and societal concerns into his or her financial decisions. There are three basic strategies of socially responsible investing:

1) Screening involves the inclusion or exclusion of certain corporate securities from an investment portfolio based on the corporation's philosophy, attitudes and actions towards various social issues. Investors might decide to invest only in companies that support environmental or labor causes or, conversely, reject companies that are supportive of certain industries, such as tobacco, gambling, alcohol, etc.

2) Shareholder advocacy describes investor efforts to submit and vote corporate proxy resolutions as a means of influencing company behavior. This strategy was successful in pressuring corporations to pull out of South Africa. It also has been instrumental in reporting minority-hiring practices and improving environmental practices through adoption of the CERES principles (an environmental code of conduct).

3) Community investing is capital from investors that is directed to communities underserved by traditional financial services. It provides access to credit, equity, capital and basic banking products that these communities would otherwise not have. Community investors accept at- or below-market rates of return in exchange for the opportunity to make a difference in these communities.

Other Data

The survey also revealed the following data:

  • Nearly one out of every 10 dollars under professional management in the United States today is involved in socially responsible investing. The $2.29 trillion in SRI identified in 2005 reflects 9.4 percent of the $24.4 trillion in total assets under professional management tracked in Nelson Information’s Directory of Investment Managers.
  • Socially and environmentally screened mutual funds have experienced substantial growth in the number and diversity of products and screens offered. Mainstream money managers are increasingly incorporating social and environmental factors into their investing.
  • Shareholder resolutions on social and environmental issues increased more than 16 percent from 299 proposals in 2003 to 348 in 2005. Social resolutions reaching a vote rose more than 22 percent, from 145 in 2003 to 177 in 2005. Institutional investors that filed or co-filed resolutions on social or environmental issues controlled $703 billion in assets in 2005, a 57 percent increase over the $448 billion in assets counted in 2003.
  • Assets in community investing institutions rose 40 percent from $14 billion in 2003 to $20 billion in 2005. Community investing assets have nearly quintupled from the $4 billion identified a decade ago.

“While the rise in socially responsible investing doesn’t necessarily affect fundraising directly, it is a strong sign of a public still very interested and engaged in working with organizations that strive to make a difference in the world,” said Paulette V. Maehara, CFRE, CAE, president and CEO of the Association of Fundraising Professionals (AFP). “In addition, growth in SRI is creating more opportunities for lower-income and disadvantaged communities in the United States, and that is a very positive trend that complements the work that we do.”

The Social Investment Forum is a national nonprofit membership association based in Washington, D.C., dedicated to promoting the concept and practice of socially responsible investing. The forum is made up of more than 500 financial professionals and institutions. Membership is open to any organization or practitioner who wishes to participate in the socially responsible investing field.

The Socially Responsible Investment Trends Report 2005 (PDF format, 74 pages) is available on the Social Investment Forum website.

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