Posted on: Sunday, December 14, 2003

Socially responsible stocks gain ground

By Jay Loomis
Westchester (N.Y.) Journal News

When Karin Chamberlain talks with friends, she finds that corporate profits and sales are not the only things they consider in their investment decisions. Some hate polluters. Others steer clear of defense contractors, cigarette manufacturers or casino operators.

"People can get really emotional about these issues," she said.

Chamberlain is manager of indexes for KLD Research & Analytics Inc., which produces the KLD Domini 400 Social Index. The index screens companies for social responsibility.

"It is interesting to look at a company and see how their policies affect the environment and society. Certainly, these issues are becoming important to more investors," Chamberlain said.

Money in socially responsible investment vehicles has risen from 5 percent in 1997 to 15 percent of total investment assets today, she said.

Assets in socially responsible mutual funds rose to $14.8 billion last year from $8.8 billion in 1998, according to Boston researcher Cerulli Associates. Such investors tend to hold onto the stocks for better or for worse, said Cerulli's Thomas Marsh.

To choose the KLD index, researchers throw out companies in the S&P 500 with ties to tobacco, alcohol, gambling, nuclear power, adult entertainment, firearms and military weapons.

After those and other screens, about half of the S&P 500 remains. KLD picks its final 150 firms by seeking a broad mix of industries and including companies "that are particularly strong models of corporate behavior."

Some experts aren't sold on the idea. By systematically throwing out companies "you tie a fund manager's hand," said Paul Levis of Summit Financial Consultants.

But KLD officials say a social conscience and profits are not opposed. The KLD index was up 22.64 percent this year through October, beating the S&P 500's 21.19 percent, according to KLD.