by Mary Ann Mcgivern

Created on: November 13, 2009   Last Updated: November 18, 2009

Socially responsible investments make good returns, sometimes excellent returns. The Pax balanced mutual fund, begun in 1971, has had an average annual return of 8.37 percent. The Domini Social Bond Fund has had an average annual return of 7.02% since its inception in 1991. The Calvert Income Fund has had an average annual return of 8.29% since its inception in 1982.

These mutual funds use a variety of socially responsible indicators. These include promoting peace, protecting the environment, advancing equality, and fostering sustainable development (Pax); social and environmental standards (Domini), governance and ethics; workplace, environment and product safety and impact, international operations and human rights, indigenous peoples' rights, and community relations (Calvert).

Generally, investment researchers look for best in class by traditional measures within the companies that practice social responsibility.

In the beginning, many brokers and investors poo-pooed the idea of corporate responsibility. They saw the point of business as making money, not doing good. But gradually investment researchers have come to understand that the commitment to social responsibility in business practice indicates a deeper commitment to long-range sustainable planning, rigorous process and quality product.

It doesn't matter whether the company business is extraction, financial services or added value manufacturing. What matters is management's institutionalized dedication to doing profitable business not just for the next quarter but for the next hundred quarters and beyond.

Some examples of socially good corporate practice that benefit the bottom line:

Multinational firms in developing countries are learning that providing HIV positive employees with the cocktail of medications results in a stable workforce because workers live for a dozen years, not just two years. The local community is more stable as well because children are not orphaned so young, and so the community supports policies that benefit the corporation. Strong unions ensure a stable, skilled workforce and local community support. When a New York skyscraper architect's failsafe precautions against wind shear were misunderstood or ignored by contractors, then the architect, contractors, insurers and building owner worked together without law suits or arguments to reinforce walls with metal sheeting and double bolts.

The mutual funds look at big publicly traded companies. But if one can afford to take the risk, smaller privately owned firms can also bring good returns. Sometimes these investments take the form of startups by a relative. The investor puts in a thousand dollars or so and hopes for the best. Other times established local companies are looking for assistance to expand. An investigation of their commitment to sustainability and social responsibility is a place to begin research. But one must always remember that undergirding management's long range vision of social good, there must be a firm foundation of productive competence.

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