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Banking / Financial Services



Individuals and corporations can invest money in socially conscious funds that provide positive returns.

By Liese Hutchison

The stock market soars and individual investors reap the benefits. In this investing climate, many investors realize they can buy stock in companies that are socially responsible while still maintaining a high rate of return on their investments. A 1997 study conducted by the Social Investment Forum says that nearly one out of every 10 dollars under management in the United States is part of some type of social investment portfolio.

Michelle Camp, a financial consultant with Salomon Smith Barney, explains what it traditionally means to invest responsibly. “The historical way of thinking about socially-conscious investing would be to exclude certain companies within certain industries such as weapons, tobacco, nuclear power and gambling,” she notes.

Another method used by investors, says Erwin Gergorio, financial advisor, Prudential Securities, is to invest in companies that help society. “Some mutual funds invest in companies that contribute to the welfare of the world—recycling, cleaning up the environment, water purification for third-world countries,” he states. Gergorio notes that most mutual funds tend to combine the two philosophies—avoiding certain industries while embracing others.

Camp points out another method of investing responsibly—shareholder activism. She says that individual shareholders can try to influence the company in behaving more socially responsible by enhancing its environmental efforts, employee benefits, diversity, global human rights stance or community involvement. “An individual isn’t going to have that much of an impact on the overall voting shares of the company, but if he or she is using a money manager who has a greater number of shares, the money manager can vote in certain ways and try to influence the company,” she remarks. “Individuals can hire a professional money manager who doesn’t manage a mutual fund but will manage that individual’s account and look for socially responsible companies.” For as little as $50,000, investors with Salomon can have a professional money manager handle their accounts.

Camp says socially responsible investing is embraced by many, and it works. “It appeals to a large part of our investor population—religious groups, health associations, labor unions, schools, foundations, retirement funds, environmental organizations, women’s groups and individual investors who are concerned,” she notes. “Through recent studies, we haven’t found there to be trade off between socially responsible investing and greater return.” A mutual fund that only buys socially conscious companies, the Domini Social Index, has outperformed the S&P 500 for an average annual rate of return of 24.29 percent against the S&P’s 23.06 percent average annual growth from May 1990 through June 1998.

Ed Curtis, a former financial advisor at Prudential, agrees that there isn’t a trade off with investing responsibly and high returns. “Socially responsible companies tend to do better, because they stress service and technology and tend to be a less traditional business,” he notes. Curtis says socially responsible companies are typically classified as growth funds, which do well historically.

Curtis notes, that in addition to the Domini Fund, many funds are emerging that have a religious philosophy. “The Dow Jones Islamic Index only includes companies that have been certified by religious scholars to have sound Islamic principles,” he says. Curtis also points out that the Aquinas Fund follows Catholic principles.

Where does a company turn to when it wants to be a socially responsible investor? Tim Berry says companies have to look no further then the St. Louis Equity Fund and Housing Missouri. Berry, president of the Fund, says companies that invest in the fund help provide low-cost housing while receiving state and federal tax credits. These invested funds are used to build or renovate housing for people meeting low-income eligibility requirements. As long as the property is maintained and the residents meet the requirements, investors in the fund can reduce federal and state tax liabilities.



Allegiant Bank
Bank of America
Cass Bank & Trust
Citizens National Bank
Commerce Bank
CPI Corp.
Emerson Electric
Enterprise Bank
Equality Commodity Corp.
Fannie Mae
First Bank
First National Bank of St. Louis
General American Life Insurance
General Dynamics
Heartland Bank
Jefferson Bank & Trust
Jefferson Heritage Bank
Laclede Gas
Lindell Bank & Trust
Mallinckrodt Medical
May Department Stores
Mercantile Community Development Corp.
Missouri State Bank & Trust Co.
Ralston Purina
The Reliable Life Insurance Co.
St. Johns Bank & Trust Co.
South Side National Bank in St. Louis
Southwest Bank of St. Louis
Union Planters Bank


He explains that the Missouri Housing Commission allocates the state and federal credits. “The Missouri Housing Commission may allocate $90,000 in tax credits to one unit. Then the investor may invest $65,000 up front to start building the unit. Every year for 10 years the investor will receive $9,000 worth of state credit and $9,000 worth of federal credit,” Berry states. “So if that investor had a federal tax liability of $10,000, his or her liability would be reduced to $1,000.” A similar reduction would take place with the company’s state tax liability.

The St. Louis Equity Fund was founded in 1988 by Civic Progress. In 1994, the State of Missouri asked the fund to provide housing for low-income people throughout the state and the Housing Missouri Fund was started. The two funds recently merged.

Over the last 11 years, the St. Louis Equity Fund and Housing Missouri has funded the building of 1,501 homes with a total investment of $51 million from 35 corporate investors. In 1998 alone, the fund financed the building of 143 homes.

Liese L. Hutchison is an assistant professor in the department of communication at Saint Louis University and a free-lance writer.



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