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5 March 2008

Socially Responsible Investing Assets In U.S Surged 18 Percent From 2005 To 2007

Source: www.socialinvest.org

by Patrick Mitchell

Report: Socially Responsible Investing Assets In U.S Surged 18 Percent From 2005 To 2007, Outpacing Broader Managed Assets

Spurred by such factors as rising institutional investor interest, growing demand for climate-related renewable energy alternatives, concerns about the Sudan humanitarian crisis, and the emergence of new products, socially responsible investing (SRI) in the United States is now growing at a much faster pace than the broader universe of all investment assets under professional management, according to the new edition of the Report on Socially Responsible Investing Trends in the United States published by the nonprofit Social Investment Forum (SIF). The report found that, from 2005 to 2007, SRI assets increased more than 18 percent while all investment assets under management edged up by less than 3 percent.

The Trends report identifies $2.71 trillion in total assets under management using one or more of the three core SRI strategies -- screening, shareholder advocacy, and community investing. In the past two years, social investing has enjoyed healthy growth from the $2.29 trillion documented in the 2005 Trends report. Today, nearly one out of every nine dollars under professional management in the United States today is involved in socially responsible investing -- 11 percent of the $25.1 trillion in total assets under management tracked in Nelson Information’s Directory of Investment Managers.

Highlights of the new Social Investment Forum Trends report include the following:

SCREENED FUNDS: Assets in all types of socially and environmentally screened funds – including mutual funds and exchange-traded funds (ETFs) – rose to $201.8 billion in 260 funds in 2007, a 13 percent increase over the $179.0 billion in the 201 tracked in 2005. Eight socially and environmentally screened exchange-traded funds (ETFs) with $2.25 billion in total net assets were available through the end of 2006 – the first time SRI-focused ETFs have been a factor in a Social Investment Forum Trends report.

INSTITUTIONAL INVESTORS: At more than $1.9 trillion in assets, socially screened separate accounts managed for institutional investors and high net worth individual clients constituted the bulk of SRI assets tracked in 2007, up 28 percent from $1.5 trillion in 2005. Institutional investors have also used the stock they hold to increasingly participate in shareholder resolutions.

SHAREHOLDER RESOLUTIONS: The average level of shareholder support for resolutions on social and environmental issues increased 57 percent from 9.8 percent in 2005 to 15.4 percent in 2007, a record high.

COMMUNITY INVESTING: Assets in community investing institutions rose nearly 32 percent from $19.6 billion in 2005 to $25.8 billion in 2007.

Social Investment Forum Board Chair Cheryl Smith CFA, Ph.D., executive vice president and senior portfolio manager at Trillium Asset Management Corporation, said: “Thanks to growing institutional investor demand and a wide range of issues that are driving stronger retail investor interest, socially responsible investing is thriving today as never before. Increasingly, money managers are incorporating social and environmental factors into their investing practices, acknowledging the demand for social investing products and services from institutional and individual investors, socially concerned high-net-worth clients, individuals seeking SRI options in their retirement and college-savings plans, and ‘mission-driven’ institutions including foundations, endowments, labor unions, and faith-based investors.”

Social Investment Forum Board Member/Trends Committee Chair Alisa Gravitz, executive director, Co-op America, said: “SRI mutual funds remain a significant piece of what socially responsible investing is about for individual investors and retirement plans. The big news is that in this most recent period, we also saw unprecedented innovation in terms of products and issues. New investment products and fund styles are driving growth in socially and environmentally screened funds, especially ETFs and alternative investment funds such as social venture capital, double- and triple-bottom-line private equity, and hedge funds. Examples of how issues are driving SRI investments include the fast-growing numbers of institutional investors, fund families, and money managers that are incorporating criteria related to climate change and the crisis in the Sudan into portfolio management and shareholder advocacy.”

Walden Asset Management Senior Vice President Tim Smith, immediate past chair of the Social Investment Forum, said: “Shareholder resolutions on environmental, social and related corporate governance questions are now enjoying major mainstream acceptance and the vote totals that go with that. Part of that is due to widespread investor concerns about such issues as climate change, the Sudan crisis and CEO compensation. For example, a large and expanding number of institutional investors are actively supporting shareholder resolutions on social, environmental, and corporate governance issues and joining investor coalitions, such as the Investor Network on Climate Risk, to make their concerns known about the risks and opportunities associated with issues such as climate change.”

Social Investment Forum CEO Lisa Woll said: “Community investing remains one of the fast-growing strategies of socially responsible investing. The expansion of market-rate opportunities and other industry developments are making it easier for a broad range of investors to participate in the expanding field of community investing. Institutional investors are proactively allocating portions of their portfolio to community investing options in order to deepen the social impact of their investments. Investors are also increasingly embracing international microfinance opportunities to promote positive social and economic development abroad.”

OTHER KEY FINDINGS

Mutual Funds: The largest share of socially and environmentally screened funds are mutual funds, with $171.7 billion in total net assets invested in 173 different funds available in 358 different share classes. Of these socially and environmentally screened mutual funds, 19 of them with $12.5 billion underlay variable annuity products.

Other Screened Funds: Three socially and environmentally screened closed-end funds with assets of $850 million were tracked separately for the first time. Also, an estimated $5.3 billion in capital were identified under the management of 46 different socially or environmentally screened alternative investment vehicles, such as social venture capital, double- and triple-bottom-line private equity, and hedge funds, typically organized as unregistered limited partnerships or limited liability companies and available only to accredited institutional and high-net-worth investors. Nearly 11 percent of the total assets in all socially screened funds – $21.7 billion – were invested through 30 other pooled products, typically commingled portfolios managed primarily for institutional investors and high-net-worth individuals.

Large Investors: $1.88 trillion in assets are managed in institutional client accounts, a 27 percent increase over the $1.49 trillion identified in 2005. Additionally, investment advisers managed $39.5 billion for individual high net worth clients, a $22.2 billion increase over the $17.3 billion identified in 2005.

Shareholder Resolutions: The total number of resolutions increased from 360 in 2005 to 367 in 2006. Institutional investors that filed or co-filed resolutions on social or environmental issues controlled $739 billion in assets in 2007, a more than 5 percent increase over the $703 billion in assets counted in 2005.

For the full text of the executive summary of the 2007 Trends report, go to www.socialinvest.org/resources/research on the Web.

The Forum has issued periodic Trends reports on the world of SRI since 1995, most recently in 2005.

EDITOR’S NOTE: A streaming audio recording of a related news event will be available on the Web as of 6 p.m. ET on March 5, 2008 at http://www.socialinvest.org. Copies of the Trends will be available to journalists on request. The full Trends report is available at no cost to members of the Social Investment Forum and for a fee to non-Forum members.

ABOUT THE FORUM AND THE REPORT SPONSORS

The Social Investment Forum (http://www.socialinvest.org) is the national membership association for the social investment industry. It is dedicated to advancing the concept, practice, and growth of socially responsible investing. The Forum''s 500 members include financial planners, banks, mutual fund companies, research companies, foundations, and community investing institutions.

The 2007 Trends report was made possible through the generous support of a number of companies and organizations that specialize in socially responsible investing TIAA-CREF was a “benefactor” sponsor for the report. The following organizations were “leader” supporters of the Trends report: Calvert Group, Ltd., www.calvert.com; ClearBridge Advisors, a Legg Mason Company, www.ClearBridgeAdvisors.com; Co-op America, www.coopamerica.org; Self-Help Credit Union, www.self-help.org. The following organizations were “general sponsor” supporters of the Trends report: Access Capital Strategies LLC, www.AccessCapitalFunds.com; Bridgeway Capital Management, Inc., www.bridgeway.com; Christian Brothers Investment Services, Inc., www.cbisonline.com; Citizens Advisers, Inc., www.citizensfunds.com; Domini Social Investments LLC, www.domini.com; First Affirmative Financial Network, www.firstaffirmative.com; KLD Research & Analytics, Inc., www.kld.com; Neuberger Berman, LLC, www.nb.com; RiskMetrics Group, www.riskmetrics.com; The Spectra Funds, www.spectrafund.com; Trillium Asset Management Corporation, www.trilliuminvest.com; and United Methodist Church General Board of Pension and Health Benefits, www.gbophb.org.

COMPANY DESCRIPTIONS

Access Capital Strategies LLC:

Access Capital Strategies LLC, based in Boston, MA, is an independent, investment management firm with a 10-year history of creating, identifying and managing socially responsive investments. We offer clients the ability to invest in underserved communities with the potential for competitive and geographically diversified returns. Our Community Investments support low and moderate income individuals and communities across the U.S and include affordable homeownership and rental housing, community health centers, small business loans, and rural enterprises. We currently have over $600M in assets under management.
www.AccessCapitalFunds.com

Bridgeway Capital Management:

Bridgeway Capital Management, incorporated in 1993, is the adviser to all Bridgeway Funds. Our fundamental belief is that long-term, market-beating performance can be achieved through strict adherence to quantitative stock selection. At all times, Bridgeway strives to put investors’ interests first by stressing process and results over titles and status. This philosophy fosters a unique culture of financial stewardship, exemplified by our core business values: integrity, performance, cost efficiency, and service. Bridgeway donates 50% of its investment advisory fee profits to charitable and non-profit organizations.
www.bridgeway.com

Calvert Group, Ltd.:

Calvert, based in Bethesda, MD, has been setting industry standards for asset management excellence since 1976, in both the way we serve our clients'' interests and how we select companies for our portfolios. Today, more than 400,000 investors have approximately $16 billion in total assets with Calvert. These investors chose our investment approach, with its emphasis on rigorous fundamental research that goes beyond traditional measures to seek to uncover companies strongly positioned for potential long-term success.
www.calvert.com

Christian Brothers Investment Services, Inc:

Christian Brothers Investment Services, Inc., manages $4.3 billion for Catholic institutions, combining faith and finance in the responsible stewardship of financial assets. CBIS'' combination of premier institutional asset managers, diversified product offerings, and careful risk-control strategies constitutes a unique investment approach for Catholic institutions and their fiduciaries. CBIS strives to integrate faith-based values into the investment process through a disciplined approach to socially responsible investing that includes principled purchasing (stock screens), active ownership strategies (proxy voting, dialogues, and shareholder resolutions) and community investment.
www.cbisonline.com

Citizens Advisers, Inc.:

Citizens Advisers, Inc., located in Portsmouth, New Hampshire, is the investment adviser to Citizens Funds and owner of mutual fund distribution company Citizens Securities, Inc. Citizens Funds has been a leader in serving the socially responsible needs of retail investors and institutional clients since 1982. For more than two decades, Citizens has focused on investing in companies that are fundamentally strong and socially responsible to meet the financial goals of our shareholders.
www.citizensfunds.com.

ClearBridge Advisors, a Legg Mason Company:

ClearBridge Advisors, the largest equity manager of Legg Mason Inc., is well known for its research-driven, fundamental approach to investing. ClearBridge’s mission is to deliver consistently superior investment performance. With $101 billion in assets under management (as of 12/31/07), the firm offers actively-managed U.S. equity products in a wide range of capitalizations and styles. ClearBridge seeks to fulfill its commitment to socially aware investing through active integration of environmental, social and governance [ESG] research at the fundamental level in the stock-selection process, as well as diligence through direct company engagement, advocacy in proxy voting, and open access to clients. www.ClearBridgeAdvisors.com

Co-op America:

Co-op America is one of the leading resources for information about socially responsible investing in the US. It is a not-for-profit membership organization whose mission is to harness economic power—the strength of consumers, investors, businesses, and the marketplace—to create a socially just and environmentally sustainable society. Through its social investing program, it provides resources to investors looking to put their saving and investing dollars to work for a more just and environmentally sustainable economy. Co-op America also generates media attention and provides support for initiatives to educate all investors about trends in SRI.
www.coopamerica.org

Domini Social Investments LLC:

Domini Social Investments manages $1.5 billion in assets for individual and institutional investors, and is dedicated to the fundamental belief that the way you invest matters. Domini helps investors to pursue their financial goals, and to create positive social change in three ways: by applying standards of human dignity and environmental sustainability to every investment, by engaging in focused dialogue with the companies it invests in, and by directing capital to communities where the need is greatest.
www.domini.com.

First Affirmative Financial Network:

First Affirmative Financial Network, LLC is an independent Registered Investment Adviser that specializes in offering Sustainable Investment Solutions for socially conscious investors. Based in Colorado Springs, Colorado, First Affirmative supports a nationwide network of investment professionals who provide local clients with investment consulting, financial advice, and asset management services. First Affirmative has over $700 million in client assets under management and produces the annual SRI in the Rockies Conference for the social investment industry.
www.FirstAffirmative.com

KLD Research & Analytics, Inc:

KLD Research & Analytics, Inc. is an independent social investment research firm. Since 1988, institutional investors, managers, trustees, consultants and advisors have depended on the quality and expertise of KLD. Today, 31 of the top 50 institutional money managers worldwide use KLD''s research to integrate environmental, social and governance factors into their investment decisions. KLD provides portfolio screening tools, research reports and ratings based on social and environmental factors for over 3,000 companies. Today, more than $10.5 billion is invested in funds based on KLD’s family of indexes.
www.kld.com

Neuberger Berman, LLC:

Neuberger Berman has successfully managed investments for individuals, families and institutions since 1939. We offer a comprehensive suite of products in a diverse array of investment styles delivered through a full complement of distribution channels. As a Lehman Brothers company, we have access to a broad range of financial solutions, from trust and fiduciary services to structured financial products to alternative investments. We are committed to being a partner of choice for financial intermediaries. Today we manage more than $150 billion in assets.
www.nb.com

RiskMetrics Group:

RiskMetrics Group is a leading provider of risk management and corporate governance products and services to participants in the global financial markets. By bringing transparency, expertise and access to the financial markets, RiskMetrics Group helps investors better understand and manage the risks associated with their financial holdings.
www.riskmetrics.com

Self Help Credit Union:

Self-Help is a community development lender founded in 1980 that creates and protects ownership and economic opportunity for minority, women-headed, rural and low-wealth families through home and small business lending. It has provided over $5 billion in financing to help more than 55,000 low-wealth borrowers. Self-Help’s affiliate, the Center for Responsible Lending (www.responsiblelending.org), is a policy organization addressing predatory lending issues. Self-Help and the Center for Responsible Lending are national organizations with offices in Washington DC and California. Self-Help’s work is made possible by federally insured CD, Money Market, and IRA deposit accounts from socially responsible individuals and institutions.
www.self-help.org

The Spectra Funds:

For more than thirty years, the Spectra Funds have been managed by Fred Alger Management with a rigorous research process, a consistent investment style and one core philosophy: Find dynamic, innovative companies creating change and invest in them. All Spectra mutual funds are no-load and offer a range of investment alternatives managed by analysts and portfolio mangers dedicated to original, fundamental research of innovative companies.
www.spectrafund.com

TIAA-CREF:

TIAA-CREF is a national financial services organization and the leading provider of retirement services in the academic, research, medical and cultural fields with $437 billion in combined assets under management (9/30/07). TIAA-CREF has a longstanding commitment to socially responsible investing (SRI) that is consistent with our non-profit heritage and historical commitment to serving those who serve the greater good. Our SRI program encompasses three key strategies: Social Screening, Shareholder Advocacy and Corporate Engagement and Community Investing. As of December 31, 2007, our total assets in comprehensively screened investments are $9.74 billion.
www.tiaa-cref.org

Trillium Asset Management Corporation:

For twenty-five years and with $1 billion in assets under management, Trillium Asset Management Corporation (“Trillium”) has been a leader in social and environmental investing. Trillium seeks to offer investors the strongest combination of personalized service, a history of competitive investment results, and a long and unique tradition of committed social activism. Clients include high net worth families, foundations, churches, endowments, and other non-profit organizations. Trillium is employee owned and is Co-founder of Ceres and the Social Investment Forum.
www.trilliuminvest.com

United Methodist Church General Board of Pension and Health Benefits:
The General Board of Pension and Health Benefits is a not-for-profit administrative agency of The United Methodist Church, responsible for the general supervision and administration of the retirement, health and welfare benefit plans, programs and funds for more than 74,000 active and retired clergy and lay employees of the Church. All General Board plans, programs, services and policies are designed to serve and support the financial well-being of participants and their families in accordance with the values and principles of The United Methodist Church. The General Board manages and invests over $16 billion in assets, as the largest faith-based pension fund in the U.S., and ranks among the top 100 pension plans in the country.
www.gbophb.org

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