FEATURED ARTICLE

Not so long ago, business owners concerned about the environment, equality in the work place and social justice issues might have felt largely precluded from finding investments that jibed with their belief systems and made financial sense at the same time.

No longer. Socially responsible investing, or SRI as it is known in the investment trade, has exploded in recent years. As more and more companies begin to equate responsible business practices with a healthy bottom line, as America works to wean itself from foreign oil and toward alternative energy sources, as shareholders begin to recognize their clout in turning around corporate policy, SRI is becoming more and more attractive.

Joanne Dowdell, vice president of corporate responsibility at Citizens Fund. Photo by Amy Root-Donle

According to the online investment research site Morningstar.com, while there were only 25 SRI mutual funds 10 years ago and 42 such offerings five years ago, today there are now more than 60 on the market.

"People are better informed today," said Joanne Dowdell, vice president of corporate responsibility at Citizens Fund, an SRI mutual fund based in Portsmouth. "The amount of information available far outpaces where we were 20 years ago. With all the things that have taken place around the world, the war notwithstanding, people are starting to feel an interest in investing with their values."

SRIs have been around since 1971, when another Portsmouth-based SRI, Pax World Fund, began offering investors an alternative to standard mutual funds on the market. SRIs work in essentially the same way, by subjecting companies to a rigorous screening process. Many begin with the first rule: No tobacco, no gun or gun parts manufacturing, no gambling. Most screen out nuclear energy companies and utilities, as well as oil companies.

Rozanna Patane is an independent financial adviser working out of her home in York, Maine. Photo by Amy Root-Donle

"If you don't invest in ExxonMobil, if energy companies are off your list, that will affect a fund's performance," said Rozanna Patane, an independent investment adviser from York, Maine. "Energy companies are rolling in the profits, so you're going to suffer. But that's a tradeoff that most investors make willingly."

If it passes that test, then the company is subjected to another screen: What are its corporate business practices? Companies that don't have at least one woman or one minority on its board or in the top tiers will be excluded from the fund, for instance. But it doesn't stop there. Is the company responsible to consumer concerns? Does it market its products responsibly? What is its environmental, human rights and labor record?

"If they're dealing with toxic substances, how are they handling them? Are they using animals in their research and development? These are the kinds of things that could be red flags for us," said Marianne Murphy, vice president of marketing at Pax World Funds.

Happily for those who want to invest in SRI funds, more and more companies are seeing the merit of passing SRI muster. According to both Dowdell and Murphy, companies that even 10 years ago wouldn't consider undergoing the SRI screening process are now willing and even eager.

The two point to another factor, what Dowdell calls "shareholder activism." SRIs work together, pooling their stocks to be a force at shareholder meetings and with corporate leaders at other times of the year. Their combined clout "helps move companies in the right direction. Companies understand the importance of disclosure, they just don't know how, where and when to do it," said Dowdell.

"Look for companies making products for green industries -- wind turbine parts, solar cells. Look for a mutual fund that specializes in clean energy products," said Patane. "We're right on the cusp of a solar market explosion. The only thing that's needed is a pull from the consumer for that to happen. If we make solar and wind financially feasible, people will flock to it. It's a field in its infancy, but it's going to grow."

"I do think that we may see a new era of innovation. The rising cost of oil has spurred more research and development dollars to flow into alternatives," said Dowdell.