On The Money

Socially responsible investing by Matthew Demet, senior vice president – wealth services market manager for Johnson Bank in Milwaukee.

There was a time not too long ago when investors were limited in their ability to invest with their hearts – to build a portfolio that reflected their personal, social or political beliefs. Those who looked into socially responsible investing (SRI) often discovered it meant sacrificing returns for social goals; many SRI funds had difficulty keeping up with the returns generated by other funds because, by their nature, there was a smaller pool of companies they could invest in compared with non-SRI funds.

According to the Social Investment Forum, there were 55 socially screened mutual fund products in the U.S. with assets of $12 billion in 1995; in 2007 the number had grown to 260 with $201.8 billion in assets. This expansion reflects a greater diversification and signals a new potential investment option for anyone who wanted to make socially responsible investments in the past but was put off by poor performance. Whereas socially responsible investors used to know their funds would be performing at the bottom 10 to 20 percent in their category, some companies have gotten exceedingly savvy at picking solid performers, resulting in certain SRI funds placing in the top 10 to 20 percent today.

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