SRI Screens Don't Catch All Verboten Investment Targets

October 4, 2004 ( - Where many investors know social responsible mutual funds as those that strictly invest in enterprises such as environmentally friendly companies, the investing approach doesn't always work, according to one commentator.

In an article in the US magazines published by San Anselmo, California-based Dragonfly Media, environmentalist and author Paul Hawken reported that a soon-to-be-released report by the Natural Capital Institute (NCI) asserts that the SRI industry has no standards or definitions, is unregulated and too often invests in the same companies as non-SRI mutual funds.

Hawken, director of the San Francisco-based NCI said the industry’s use of “negative” screens does not exclude companies involved with weapons manufacturing, extractive and polluting resource development and many with poor records on equal opportunities for women and minorities.

According to the report and the article, more than 90% of Fortune 500 companies are included in SRI portfolios. Pressure to perform as well as traditional mutual funds leads to what Hawken labeled “portfolio creep — porous and spurious criteria about what is a socially responsible company.”

Among the findings, the article lists the holdings of SRI funds that are not in alignment with socially responsible principles. As of December 30, 2003, 23 SRI funds are invested in Haliburton; Wal-Mart was held by 33 funds; tobacco-maker Altria (formerly Phillip Morris) was held by 12 SRI funds; weapons manufacturer Raytheon was held by 12 funds; ExxonMobil was held by 40 SRI funds; and Monsanto, maker of genetically modified seeds and Round Up weed killer, was held by 19 SRI funds.

“We found that the advertising for the SRI funds was less than transparent,” said Hawken. “We found no external or common standards by which a consumer could measure their fund — there was no accountability. We also found that there was no commonality in definitions and terms. The fund companies don’t have to tell their investors what the standards are, how they are applied or what the process is.

The full report, which also outlines steps the industry can take to improve its social responsibility, will be available after October 15, 2004, at .

The Dragonfly Media article is available at .