The underperformance myth has been busted,” says Steven Schueth, president and chief marketing officer of First Affirmative Financial Network, an independent investment advisory firm specializing in socially responsible investing. “The belief that you automatically have to give up return if you want to invest in a socially or environmentally responsible manner is simply not valid.”
Schueth, Thomas Grant, president of Pax World Funds, and Anita Green, director of social research for Pax World Funds, came together in Manhattan recently to mark the 30th anniversary of the launch of the Pax World Balanced Fund.
The Balanced Fund’s existence is due largely to two friends, Luther Tyson and Jack Corbett, both Methodist ministers. The pair were working on peace, housing, and employment issues for the Board of Church and Society of the United Methodist Church in 1967 when Tyson received a letter from a woman in Ohio. She asked, “Is there a mutual fund which will manage my pension money without investing in war-related industries?” To his surprise, Tyson discovered there were no such funds, and while he resumed his work, the idea for such a fund stuck with him.
A year later, Tyson was in France as part of a delegation monitoring the Paris Peace Talks, which negotiated an end to the Vietnam War. On the flight home, he decided it was time to create a fund for that woman in Ohio and other investors like her.
Neither Tyson nor Corbett had experience in starting or running a mutual fund. After various failed attempts to get a fund manager to run such a fund, the duo turned to two brothers from Portsmouth, New Hampshire: Paul Brown, a lawyer, and Anthony Brown, a businessman, to help them organize the fund.
In 1971, there were only 280 mutual funds in existence. The Pax World Balanced Fund became the first fund in the U.S. to screen for socially and environmentally responsible companies on August 8, 1971.
According to a report conducted for Pax World Funds by Wiesenberger, the growth of socially responsible mutual funds has flourished since then.
Over the last three decades, the assets of SRI funds grew five times faster than all other funds, from $150 million in SRI assets at year-end 1971 to $1.2 billion in mid-2001, according to Wiesenberger. The number of SRI funds grew twice as rapidly as other funds over the same period, from two funds in 1971 to 192 such funds.
The growth in SRI assets has largely tracked that of other funds in recent years. The surge in the assets of SRI funds and all other funds has remained relatively close over the last 10 years–392% for SRI funds versus 410% for all other funds, according to Wiesenberger. This comparison is instructive because it shows that SRI funds did not just have an enormous surge in the 1970s and then die out.