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April 30, 2003
Simulated Institutional SRI Portfolios Continue to Outperform Benchmarks
    by William Baue

Institutional investors take note: four out of five mock portfolios in the Triple Bottom Line Simulation performed better than their benchmarks over the last three quarters

The Capital Missions Company (CMC) launched the Triple Bottom Line (TBL) Simulation seven quarters ago to demonstrate to institutional investors the competitive performance of portfolios that use socially responsible investment (SRI) strategies. The portfolio that is focused on shareholder advocacy outperformed its benchmarks by 4.38 percent in cumulative returns over the past seven quarters.

The remaining four portfolios were reallocated at the last TBL Simulation conference in June 2002 at the behest of the 40 institutional treasurers there, including representatives of the Rockefelle r Foundation and the John D. & Catherine T. MacArthur Foundation. The $100 million portfolios were originally structured to model typical SRI strategies, such as screening and community development. The treasurers decided that it would be more useful to have the portfolios reflect the different types of institutional investors participating in the simulation. Other institutional investors could then compare the performance of their own portfolio with that of the simulation that matched their type of institution closest.

The endowments and foundations portfolio fared the best over the past three quarters, outperforming its benchmarks by 6.73 percent in cumulative returns. The next-best performer over the past three quarters was the above-mentioned shareholder advocacy portfolio, which outperformed its benchmarks by 3.91 percent cumulatively. The family offices portfolio, which simulates investments appropriate for high net-worth individuals and families, outperformed its benchmarks by 1.91 percent. And the not-for-profit institutions portfolio beat out its benchmarks by 0.89 percent.

Only the religious institutions portfolio underperformed its benchmarks, by 0.46 percent in cumulative terms.

These latest results of the Triple Bottom Line Simulation should not be surprising. Some large institutional investors have been successfully applying SRI strategies for years. The General Board of Pensions and Health Benefits of the United Methodist Church, which manages $10 billion in assets, has applied social screens to its portfolio for over 20 years. For the five year period ending January 31, 2003, the General Board's largest fund, which contains 90 percent of Board's total assets, returned 3.9 percent annually while its benchmark returned 1.9 percent.

"The bottom line is that no treasurer can afford to ignore this important new information," said Susan Davis, CMC's president. Over a dozen years ago, Ms. Davis founded CMC, which is based in Wisconsin, as a forum for launching networks of social investors. "Our message to treasurers is simple: Doubt all you want, but also get the facts."


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