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July 24, 2002 at 08:00 PM
July 23, 2002 — Mutual funds that aim to promote environmental or social goals have not seen their assets increase much lately.
But growth in coming years will be spurred as more companies offer the products in retirement plans, industry executives and others say. Recent corporate scandals have also made socially responsible funds more attractive to investors, observers say, by demonstrating the need to look beyond financial results in evaluating a company.
According to the Social Investment Forum Foundation, a trade association, the number of U.S. funds that incorporate social screens in their investment process rose to 230 from 168 between 1999 and last year. But assets in this category of funds inched up only $1 billion to $154 billion in that period, largely because of the stock market’s decline, the organization said in a report last year.
Socially conscious mutual funds now account for 2% of total fund assets but could make up 10% by 2012, said Barbara Krumsiek, chief executive officer of the Calvert Group, whose funds invest along socially responsible lines.
The increase will be driven primarily by the greater availability of these funds in 401(k) plans, which in turn will lead more people to put money into them, Krumsiek said.
The number of plans offered by large mutual fund companies like Fidelity that provide at least one socially screened fund as an option has risen from one in 10 to nine in 10 in the past few years, according to Krumsiek.
Until about four years ago, plan sponsors were reluctant to offer socially conscious funds, she said, because of concerns about their performance and worries about potential legal liability if the products were seen as investing in too narrow a range of companies. Both objections have since been overcome, however, she said.
Thomas Grant, president of Pax World Funds, which also incorporates social values into its investment decisions, agreed with the projected growth rate cited by Krumsiek. “I don’t know anything that’s attracting more assets, other than hedge funds, right now,” he said.
