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November 05, 2003
Social Investment Forum’s Trends Report Tracks Rises and Falls in SRI
    by William Baue

Assets in screened portfolios grew since 2001, while overall assets in socially responsible investments fell during the same time period, according to SIF’s 2003 Trends Report.

Last week, the Social Investment Forum (SIF) released its biennial report tracking trends in socially responsible investing (SRI). The report, entitled 2003 Report on Socially Responsible Investing Trends in the United States, tells different stories depending on which results one considers.

SIF highlights the seven percent rise of assets in portfolios that apply one or more SRI screens, from $2.01 trillion in 2001 to $2.15 trillion in 2003. The report compares these results to the four percent decline of assets in the broader universe of all professionally managed portfolios in the US, from $19.9 trillion in 2001 to $19.2 trillion, according to the 2003 Nelson’s Directory of Investment Managers.

The report devotes less attention to the decline in overall assets invested using any of SRI’s three primary strategies (screening, shareholder advocacy, and community investing) from $2.32 trillion in 2001 to $2.18 trillion in 2003. The report compares these results to the above numbers for the broader universe of professionally managed assets, and notes that the percentage of SRI assets remains steady. Overall SRI assets accounted for 11.66 percent of the total invested market in 2001, and 11.35 percent in 2003, the report calculates.

SIF spokesperson Todd Larsen explains the rationale behind the forum’s focus.

“Reporters were confusing the overall SRI assets number with the screened assets number all the time and were misreporting that over and over again, so in 2001 we changed the focus to the screened assets number, and we’re still highlighting that statistic now,” Mr. Larsen told

In the past, some readers of the Trends Report have wondered aloud about the ballooning effect of counting large institutional investors who screen only tobacco. This year’s report remains mum on what percentage of screened separate accounts apply tobacco-only screens.

Although the report downplays the decline in overall assets, it does provide the reason behind it for those who connect the dots. The category comprising investors that practice only shareholder advocacy, or engagement with companies to promote social or environmental responsibility, shrank from $305 billion in 2001 to $7 billion in 2003. Inaction by the Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF), which manages about $290 billion in assets, helps explain this radical decline.

“In the last couple of years, TIAA-CREF just hasn’t filed any shareholder resolutions or co-signed onto any either, so we don’t count their assets at this time,” said Mr. Larsen. “So TIAA-CREF accounts for pretty much the entire decline.” The report does count approximately $4.5 billion of TIAA-CREF’s in the screened assets category, according to Mr. Larsen.

The California Public Employees Retirement System (CalPERS), which manages approximately $150 billion in pension fund assets, also failed to file any social or environmental shareholder resolutions over the past two years. CalPERS almost single-handedly accounted for the drop in the category tracking investors that practice both screening and shareholder advocacy from $592 billion in 2001 to $441 billion in 2003. However, the 2003 Trends Report did count CalPERS’ assets in the screening-only category, so the pension funds’ lack of shareholder advocacy did not reduce the overall SRI assets statistic.

It does not require as much digging to identify the factors behind the increases. The rise in screened assets results from growth in both SRI mutual funds and in separately managed accounts for high net-worth individuals and institutions. Screened assets in separately managed accounts grew seven percent between 2001 and 2003, from $1.87 trillion to $1.99 trillion, while screened mutual fund assets grew nineteen percent, from $136 billion to $162 billion, according to the report.

Just over half (51 percent) of the growth in screened mutual fund assets resulted from newly identified or newly created funds, while just under half (49) represents growth in existing assets, both from inflows and from returns. The report pointed out that SRI mutual funds cumulatively experienced net inflows of $1.5 billion during 2002, according to Lipper, while US diversified equity funds (the closest comparison Lipper can track) experienced outflows of nearly $10.5 billion. The number of screened funds also grew from 181 in 2001 to 200 in 2003, according to the report.

Last but certainly not least, the study reported an 84 percent increase in community investment. Assets held and invested locally by community development financial institutions (CDFIs) rose from $7.6 billion in 2001 to $14 billion in 2003.


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