Profit from your principles.

• Author: Brill, Jack
• Position: Socially responsible investments - Includes related article - Personal Financial Planning

Can you be socially responsible and still make a profit? At first blush, you might be tempted to say no. It's tough enough to get good returns without forcing every investment decision through the social-criteria wringer, you reason. And what do peaceniks and treehuggers know about making money?

Plenty, as it turns out. Socially responsible asset managers and mutual funds have been racking up impressive numbers -- and not just once, but year after year. By its third anniversary last April, the Domini Social Index -- an index fund of 400 socially screened stocks designed to be sort of an ethical Standard & Poor's 500 -- had a total return of 56.38 percent, compared with 46.54 percent for the S & P. The Parnassus Fund, which is screened for a broad range of social issues, increased 57.2 percent in 1991 alone, much better than the average fund in its small-company growth category. In 1992, it increased another 36.8 percent to place it second among 233 funds sharing its financial objective.

These performances aren't aberrations. Most socially responsible investment mutual funds do as well or better -- sometimes much better -- than average. The New Alternatives Fund, which invests in alternative energy, energy conservation and efficiency, as well as utilities that aren't coal or nuclear, generally outperforms the conventional funds to which it is compared. New Alternatives boasts a 10-year return averaging 12.2 percent. The Pax World Fund, the first U.S. fund to be broadly screened, is one of the most respected funds in the country. Although in the last year and a half it has turned in an uncharacteristically flat performance, it still received Business Week's highest ranking ("superior performance") in the publication's latest annual ratings, based on a long-term risk-adjusted record. In the same issue, Calvert Managed Growth, which, like Pax, is a balanced fund, received the second highest ranking of very good performance.

After conducting its own study of socially responsible mutual funds, the CDA/Weissenberger Mutual Fund Update concluded that "Over the longer term, social equity funds have done as well on a risk-adjusted basis as general equity funds." Money magazine has also acknowledged the impressive performance of SRI mutual funds.

UNVEILING A MYTH

In short, the performance of socially responsible mutual funds and portfolios has debunked the notion that money and conscience don't mix. A closer look at SRI shows why it's such a...