September 24, 2003
SRI Money Market Accounts Earn Competitive Financial Returns
by William Baue
In addition to offering social and environmental returns, socially responsible investing money
market accounts generate competitive financial returns compared to their non-SRI counterparts.
Retail socially responsible investing (SRI) is most often associated with mutual funds, but
investors can support social and environmental progress with their more basic investments as well.
For example, many SRI firms offer money market accounts that provide social and environmental
returns without compromising financial returns.
"If you're going to put money in
the bank, you may as well put it in an SRI money market account, because you can earn market-rate
returns while helping communities," said Michael Hanbridge, director of communications for Domini
The Domini Money Market
Account (DMMA), which focuses on community development as its social return, generates an
annual percentage yield of 1.00 percent (as of July 31, 2003.) The DMMA is managed by ShoreBank,
the oldest and largest community development bank in the US. ShoreBank converts assets in the
DMMA, which currently amount to $58.1 million, into community development loans that support
underserved communities, low-income individuals, and minority- and women-owned businesses, among
The Domini Money Market Account functions like a traditional savings
account, complete with Federal Deposit Insurance Corporation (FDIC) coverage up to $300,000,
according to Domini's website. Banking regulations require performance to be disclosed in terms of
Money market funds that function more like a mutual fund, however, disclose
performance in terms of annual return as stipulated by Securities and Exchange Commission (SEC)
regulations. One such fund is the Calvert Social Investment Fund Money
Market (CSIXX), which invests in companies with proactive social and environmental practices
while avoiding companies that lag behind on these issues, like an SRI mutual fund.
don't have to give up performance to invest in your values," said Elizabeth Laurienzo, director of
corporate communications at Calvert. "You can have both."
The CSIXX, which currently has
$184.2 million in assets, has generated a one-year average annual rate of return of 0.69 percent
for the period ending August 31, 2003. The average rate of return for all money market funds
tracked by Lipper is 0.60 percent for this same period, while the Lipper Money Market Index for
this period stands at 0.83 percent.
The Pax World Money Market Fund (PWMMF), which also functions
more like a mutual fund, uses the same social screens as it does for its mutual funds.
"One of our guiding questions is, 'What are we funding?'," said Anita Green, vice president of
Pax World Funds. "In the PWMMF, that question leads us to exclude the large investment banks,
since that's where projects like the 3 Gorges Dam in China are bankrolled." Pax views those who
invest in the 3 Gorges Dam as taking on a huge environmental liability.
"On the other
hand, you will see auto makers names show up more in the MMF than in our other funds," Ms. Green
told SocialFunds.com. "This is because we will buy paper from their credit departments, where the
consumer auto loans are made." Supporting consumer loans generates a social as well as a financial
Pax's SRI money market differs from non-SRI money market accounts in terms of its
"The PWMMF differs from non-SRI money market accounts in that the
list of permitted issuers is smaller," said Molly Flewharty, portfolio manager of the PWMMF. "The
fund is required by the SEC to invest in issuers of the highest credit quality and liquidity, and
the social screens further restrict this list somewhat."
The PWMMF further distinguishes
itself from non-SRI money market accounts in ways that may create advantages.
is permitted to purchase U.S. government instrumentalities, such as
Freddie Mac and Fannie Mae,
and these securities comprise a substantial
percentage of the portfolio," Ms. Flewharty told
SocialFunds.com. "Most of the non-SRI Tier I money funds will not have as high a percentage of
agencies in their portfolio."
"The agencies provide excellent credit quality and
liquidity and very recently they have been trading at levels close to that of commercial paper,"
The PWMMF's average annual return for the one-year period ended December
31, 2002 was 1.34 percent.
"Although it may seem that a smaller buy list would hurt
returns, that's simply not the case," said Ms. Green. "Our returns are about the same as