Socially screened investment assets in the US up by 7% in last 2 years

Socially responsible investing (SRI) in the United States remained robust during 2001 and 2002, even as the rest of the investment world was stagnant. Assets in socially screened portfolios climbed to $2.15 trillion in 2003, an increase over the $2.01 trillion counted in 2001. Screened portfolios grew 7 percent from 2001, while the broader universe of all professionally managed portfolios fell 4 percent during the same period, according to the Social Investment Forum’s 2003 Report on Socially Responsible Investing Trends in the United States.

The three core strategies of SRI are screening, shareholder advocacy, and community investing. Screened portfolios, with $2.15 trillion in assets, represent the largest amount of assets in SRI. Community investing and shareholder advocacy contribute additional assets, resulting in a total of $2.18 trillion in professionally managed assets for all SRI.

Social Investment Forum President Tim Smith said: “During 2001 and 2002, as the economy receded and the overall stock and bond markets lost ground, the assets in socially and environmentally responsible portfolios proved remarkably robust.
This is encouraging evidence that the increasingly popular strategies of screening, shareholder advocacy and community investing are working together to sustain and deepen the appeal of socially responsible investing. We are seeing the maturing of socially responsible investing from a smaller handful of issues and approaches to a broad universe of topics and tactics. SRI exerts an increasingly strong tug on the mind of informed investors.”

According to Calvert Senior Vice President and Chief Marketing Officer Reggie Stanley: “Several factors explain why socially responsible investing expanded during the last two years even as the overall financial world contracted. Part of that story is the strong performance of socially responsible investments. Another key element is the fact that social investors are loyal; they truly are in it for the long haul. Not only do social investors see compelling financial returns, they also have confidence that they are encouraging greater corporate responsibility. They increasingly see the tie between corporate integrity, reduced risk and better long-term sustainability.”


Mutual funds. Socially responsible mutual funds counted by the 2003 Trends Report increased in number to 200 in 2003, up from 181 in 2001, 168 in 1999, and 139 in 1997. Assets in socially screened mutual funds identified by the Trends Report grew by 19 percent, to $162 billion, up from $136 billion in 2001. More than half (51 percent) of this growth is attributed to both newly identified and newly created funds, and 49 percent represents growth in existing assets. In terms of attracting investor assets, socially screened mutual funds grew on a net basis in 2002 while the rest of the mutual fund industry contracted. According to Lipper, socially responsible mutual funds saw net inflows of $1.5 billion during 2002. Over the same time, U.S. diversified equity funds posted outflows of nearly $10.5 billion.

Separately managed accounts. Of the $2.15 trillion in socially screened portfolios, $1.99 trillion are found in separate accounts (portfolios privately managed for individuals and institutions) with the remaining $162 billion residing in mutual funds. Assets in socially screened separate accounts grew by seven percent since the “2001 Report.” Screened private portfolios climbed to $1.99 trillion in 2003, as compared with $1.87 trillion in 2001, $1.34 trillion in 1999, and just $433 billion in 1997.

Shareholder advocacy. Between 2001 and 2003, shareholder advocacy activity increased by 15 percent, growing from 269 social and crossover resolutions (which combined aspects of both “social” and traditional corporate governance issues) filed in 2001 to 310 in 2003. Likewise the average percentage of votes received on these resolutions increased from 8.7 percent in 2001 to 11.4 percent in 2003. Of the total $2.15 trillion in all socially screened portfolios, $441 billion are in portfolios controlled by investors who are also involved in shareholder advocacy on various social issues.

Community investing. Community investing climbed 84 percent between 2001 and 2003. Assets held and invested locally by community development financial institutions (CDFIs) based in the United States totaled $14 billion in 2003, up from $7.6 billion in 2001.

Jean Pogge, senior vice president of mission-based products of Shorebank, said: “Community investing has emerged in recent years as one of the fastest-growing and most interesting aspects of the constantly evolving story of socially responsible investing. Today, community investing is an important alternative for socially responsible investors with a ‘hands-on’ philosophy to how their money is put to work in the world. For investors who want to be able to trace their dollars directly into specific child care, small business, job and nonprofit programs, community investing is definitely the way to go.”

Social Investment Forum Research Manager Elizabeth Beauvais said: “The Trends Report, which is the most comprehensive survey of SRI assets, demonstrates that SRI is an increasingly persuasive strategy that provides a growing number of investors with tools to promote corporate social responsibility.”

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