Responsible Investment Forum with Steve Schueth

Responsible Investment Forum with Steve Schueth

Social Investment Forum, the national nonprofit trade association for the social investment industry, recently published its biennial report on socially responsible investing trends in the United States. The 2005 Trends Report marks the tenth anniversary of the forum's efforts to track the growth and expanding reach of the industry. Of course, calling SRI an "industry" ten years ago would have been a bit of a stretch. But now, with $2.29 trillion in assets in professionally managed portfolios that embrace socially responsible investment practices, I think the term is more than appropriate.

Trends in Socially Responsible Investment

Socially responsible investing (SRI) is an investment process that considers the social and environmental consequences of investments, both positive and negative, within the context of rigorous financial analysis. The ranks of socially conscious investors now include individuals, businesses, universities, hospitals, foundations, pension funds, corporations, religious institutions, and other nonprofit organizations.

"SRI has become a major force in the U.S. financial marketplace," said Tim Smith, president of the Social Investment Forum and senior vice-president at Walden Asset Management. "Mainstream money managers are increasingly incorporating social, environmental and governance factors into their investing. A growing number of institutional investors are embracing the philosophy of active ownership with the companies in their portfolios… And community investing is surging at a meteoric rate as an option for investors who want to see their assets make a direct and tangible difference in the U.S. and around the world."

Total socially responsible investment assets grew from $639 billion in 1995 to $2.29 trillion in 2005, a 258% increase. At the same time, the full universe of assets under professional management in the U.S. increased a little less than 249%, from $7 trillion to $24.4 trillion.

The $2.29 trillion involved in screening, shareholder advocacy, and community investing is up from $2.16 trillion in 2003. SRI portfolios now account for 9.4% of all investment assets under professional management in the U.S.

Between 2003 and 2005 the SRI industry saw an 18.5% increase in assets invested in socially screened mutual funds, a 40% boost in funds invested in community investing, and a 16% jump in social and corporate governance shareholder resolutions, with significantly higher levels of support (votes) for such proxy measures.

Alisa Gravitz, vice president of the Social Investment Forum and executive director of Co-op America, said: "SRI mutual funds have grown from $12 billion in 1995 to $178.7 billion in 2005, far outpacing the overall growth of mutual funds in the U.S. More and more investors are turning to SRI mutual funds because they protect investors' needs better than the conventional industry -- providing competitive returns, protecting them from unethical and irresponsible corporate conduct, and mobilizing their investments for a better future."

Other highlights of the 2005 Trends Report include the following:
  • Assets in socially screened mutual funds and other pooled products rose to $179 billion in 2005, an 18.5% increase over the $151 billion tracked in 2003. Ten years ago, $12 billion in assets were found in socially screened funds.
  • With more than $1.5 trillion in assets, socially screened separate accounts managed for individual and institutional clients constituted the bulk of SRI assets tracked in 2005, including $17.3 billion managed for individual clients and another $1.49 trillion under management in institutional client accounts. SRI separate account assets have increased 10-fold from the $150 billion identified in 1995.
  • Shareholder resolutions on social and environmental issues increased more than 16% from 299 proposals in 2003 to 348 in 2005. Social resolutions reaching a vote rose more than 22%, 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% increase over the $448 billion in assets counted in 2003.
  • Assets in community investing institutions rose 40% from $14 billion in 2003 to $20 billion in 2005. Community investing assets have nearly quintupled from the $4 billion identified a decade ago.
The full report can be downloaded in PDF format online.

Steven J. Schueth is president of First Affirmative Financial Network, LLC. An independent investment advisory firm registered with the SEC. First Affirmative provides asset management and consulting services to socially conscious individual and institutional investors nationwide. He is a former director and president of the Social Investment Forum.