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What Are SRI Funds?

Aug 17, 2007
SRI is an acronym for Socially Responsible Investing. According to one source over $2 trillion of money managed professionally is currently being invested according to some type of "social criteria". There are now hundreds of different mutual funds utilizing social screens to select investments. By definition SRI funds try to integrate social and environmental objectives, community investing, and shareholder action into their investment strategies. Of course, Socially Responsible Funds can still means different things to different people and to different funds and index managers as well.

Try to make sure that you are involved in SRIs that are right for you but figuring out what SRIs include can vary. Some funds will exclude any stock whose company might be involved in animal testing. Some funds put more emphasis on how a company treats its employees. This process of inclusion or exclusion is called screening, and each fund has its own screening criteria. Knowing the screening criteria can be a big help in deciding which fund is right for your style of investment.

Well known SRI indexes

The completion of the series extended the availability of information on Socially Responsible Investments to cover 90 percent of the worlds financial markets. According to FTSE The FTSE4Good index series was created to provide SRI Investors with an independent and accurate tool to measure the performance of companies meeting international CSR standards. FTSE for good and the Dow Jones Sustainability Index are the most commonly known SRI indexes.

Dow Jones Sustainability Group Indexes

Companies have been screened by the Dow Jones Sustainability Group Indexes based on certain things since 1999. The foundation for them is a cooperation.

Does SRI lower your investing returns?

There is plenty of debate among expert whether investing using SRI funds provides you with lower returns and unfortunately there is no clear answer to that question. In general SRI equity mutual funds have held their own in recent years. According to one SRI Fund company out of 16 of their funds 14 received top marks from well known mutual fund rating company. A recent article on the site of this same well know mutual fund rating company noted that of 38 SRI funds that it tracked, 9 had beaten the S&P 500 index over the previous five years (as of May 2000). So can we draw any sweeping conclusions based on these results... no we cannot, but, the results do look promising and it will be interesting to see how SRI funds do in the future.
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