For over 35 years investors have been pouring money into socially responsible mutual funds hoping that their principles would also bring them profits. Over the last three years this adherence to avoiding the so called socially irresponsible companies has clipped returns as the average socially responsible fund has returned 8.5% versus the 10.4% return of the S & P 500. On a $10,000 investment that means the socially responsible investor gave up close to $800 so that he or she could have a cleaner conscience. That would put a lot of gas in the hybrid.
So besides the below average returns that these funds have had for the past three years, the funds sometime wind up with investing dilemmas. For instance the granddaddy of socially responsible funds, the $2.5 billion Pax World fund was forced to drop Starbucks from its portfolio in 2005 because they licensed their name to a Jim Beam coffee liqueur.
The real shocker though could be the $13 billion Calvert fund family who is considering updating their criteria to allow investments in nuclear power companies, since their technology may slow global warming. It also doesn’t hurt that in a period of relatively low interest rates, utility companies offer a good return.
It will be interesting to see how many other companies that are considered very socially responsible will need to be dropped as they expand their businesses and how many investors will flee Calvert should they proceed to invest in the nuke industry which has been considered one of the great evil businesses for a long time.
So who is more socially responsible now?