“To combine social goal with
investment goal for today and
future shareholders wealth”
The Social Investment forum (1999) report that the assets insocial responsible portfolios increasing from $1.2 trillion in1997 to $2.2 trillion in 1999 from the result of increasing inUS social security fund
The stocks in social security funds are under the
social responsible screen.
The raising of stock calling for the Social Security Plan
from $650 billion to $1.2 trillion over the next 15 years
as the alarm in the market.
Jesse Jackson mentioned about denying to invest in
weapon, tobacco and liquor companies.
Margaret Thatcher sell of government enterprise
President Clinton to buy private equities to be U.S.
enterprises.
Is the index of social responsible companies, and the
performance of social responsible mutual fund during
the year 1990-1998
By Kinder Lydenberg, Domini & Company (KLD) as
weigh index model consist of 400 stocks as following
: 250 stocks from S&P 500 companies
: 100 stocks from non-S&P selected companies
: 50 stocks from non-S&P with strong social
characteristic
The exclusionary Screens To eliminate the companies in Tobacco, Alcohol and
Weapon or Gaming business.
Result
The interest in South Africa was dropped in 1993
The Qualitative ScreensTo considered on the companies record on employee
relation, environment and diversity
Result
CSX Corp was deleted from DSI in March 1998 from
poor environment and safety
The Mutual fund that use the social screens
same as DSI but not all social responsible mutual
funds use DSI social screen.
Share common criterias with DSI to exclude
- tobacco (84%)
- gambling (72%)
- weapons (68%)
- Alcohol (68%)
Mostly investors (80%) assume that investment
in social responsible portfolio have lower return ,
at least same as conventional mutual funds.
By John Rekenthaler, research director of Morningstar
Classification on social conscious mutual fund
Morningstar excluded from the social classification fund from the liquidation of the organization as the second criteria on qualitative screen.
Morningstar list of 64 funds have some issues in duplication of fund, finally the lists have 31 finalist fund
Only 9 funds on the lists were establish before May 1990
To compare the performance of each fund must share the same period of time.
To compare the return of social responsible
funds with S&P500 could be bias because of
different style.
Social Responsible fund with DSI as the best
match of comparison from the similarity in the
concept of society consciousness.
Investor usually match the performance of
social responsible fund with conventional
fund with the size of the asset.
During the period of study from May 1990 to
September 1998
The performance of social responsible funds
relative to DSI better than relative to S&P500
Reasons of this different come from the
factor of the size of capital
# Small-cap = Mutual fund
# Large-cap = S&P500
Investment actions are swords in the social responsible battle by force the company to change their activities
Withdrawing capital from socially irresponsible companies as the sample of tobacco.
Social responsible investors sell the shares of the companies so the shift in supply function occur.
The cost of capital of the firm increase so the irresponsible company must lower the investment.
Political Actions as sword but Investment Actions only
the banner.
Political Actions include Law, Regulations, Tax and
Consumer boycotts
The case of Tobacco,
- The American Medical Association request investor
to divest in tobacco stock as the banners on tobacco
business
- The government as political actions in pattern to
taxes settlement reducing in the numbers of projects
in tobacco company.
Social Responsible Investment is the concerning
in benefit of the investor together with the benefit
for present and future shareholders.
To measure the return on investment from DSI or
S&P have different in style of the investment.
To compare the performance of social
responsible mutual funds with DSI quite effective
from sharing characteristics
Both investment actions and Politic actions can
affects the company to reduce the social
irresponsible activities in CAPM,