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Socially Responsible Investing
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9/14/07. The Wages of Sin Beat Those of Virtue, Business, NY Times. The “Vice Fund” outperforms the S&P Index and several SRI funds such as Domini. Comment: As of August 31, 2007 the Winslow Green Growth Fund, twice as big as the Vice Fund, outperformed the Vice Fund year-to-date (12.2% vs. 11.6%), over 3 years (24% vs. 20.9%) and over 5 years (23.3% vs. 18.1%). It’s sad when SRI investors sacrifice return, but it doesn’t have to be so.
| SRI - Proxy Issues - Shareholder Rights. Socially responsible investing is the attempt to coinstrain investment choices to companies that meet certain standards of socially responsible behavior.
Some funds simply screen out companies based on what they sell - alcohol, cigarettes, gambling, military armaments. Others attempt to find CSR leaders in each industry sector.
Socially responsible mutual funds are operated by financial intermediaries such as Neuberger Berman, Calvert, Domini, Dreyfus... on behalf of individuals, private pension funds and municipal employee pension funds, of which the largest are those of California, New York State and New York City.
Pension funds collectively own a large portion of the shares of American corporations and seek to influence corporate executives through "social" proxy resolutions.
One issue that has emerged is how binding social proxies are. Some proxies have won a majority of shareholder votes but have not been acted on. A response of institutional investors advocating change by proxy has been to pass resolutions requiring changes in by-laws that would mandate greater responsiveness to shareholder majorities. Another response has been to seek changes in corporate charters.
A recent development has been the creation of "Vice" funds to invest in companies that have been screened out of social funds. Two stories have appeared in the New York Times in 2007 noting the good performance of these funds relative to the socially responsible funds.
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