DES MOINES, Iowa – Buying a stock because the company is eco-friendly or promotes social programs is a priority for a small but dedicated segment of investors. And events like the Gulf oil spill tend to prompt even more people to at least consider socially responsible investing.

“BP, of course, did a lot to heighten interest in our industry” and in some of these larger environmental risks, said Peter DeSimone, director of programs at the Social Investment Forum. “It just made people more aware.”

The forum is a trade group that includes banks, investment groups, consultants, and mutual funds participating in SRI.

Socially responsible investors traditionally support funds investing in companies that steer clear of alcohol, tobacco and weapons. But, increasingly investors are seeking out positive attributes such as a good environmental record or proactive human rights policies.

Indeed, more investors are backing a cause. In the 1990s barely 100 SRI mutual funds existed. That’s doubled to about 200 funds now, DeSimone said. Still, that’s a small fraction of the more than 4,600 stock mutual funds on the market.

Notably, SRI investors remained committed to the principles they supported through even the worst market turbulence.

Inflows for socially responsible funds remained positive throughout 2008 when investors were pulling out of stock funds in massive numbers.

All told, SRI funds managed to capture $700 million, while nearly $96 billion was pulled from stock mutual funds. That’s a relatively small figure, but significant in that it ran counter to the stock selling trend, said Kathryn Young, a fund analyst with Morningstar Inc.

The trend continued during the market rebound.

Last year SRI funds took in $4 billion while investors pulled nearly $25 billion from stock mutual funds.

SRI mutual funds typically fall into three categories: faith-based, environmentally conscious and secular funds.

An index that measures the performance of companies screened for environmental and social issues shows returns comparable to the S&P 500 over three and five years.

However, the index has fallen slightly behind the broader market over the past year and continues to lag slightly in recent quarters by less than 1 percentage point.

The social index is maintained by KLD Indexes, a subsidiary of RiskMetrics Group Inc., which was acquired June 1 by MSCI Inc.

 

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