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GreenMoney Journal - publishing since 1992
Fall 2010 issue
Socially Responsible Investing – Better Companies, Better Communities
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SRI Funds for the Global Investor
Rona Fried
2003 was a great year for global equity markets, giving global mutual fund investors solid returns
averaging in the mid-20's percentiles. Among the handful of international SRI funds, Portfolio 21,
a relative newcomer (started in 1999), achieved the highest performance for 2003 - an impressive
32.2 percent. Portfolio 21 is the only SRI global fund to receive a four-star rating from
Morningstar.
A brief description of the five global SRI funds:
Calvert World Values International Equity (CWVGX) is the oldest and largest of the SRI
international funds. Started in 1992, the Fund has $235 million in assets. Like most of its peers,
shareholders pay a hefty load of 4.75 percent on top of the usual mutual fund expenses. The Fund
invests in mid to large cap companies worldwide, with an emphasis on the UK (25%), Japan (22%),
Germany (7%) and the Netherlands (5.2%). Vodafone and France Telecom are the largest holdings. The
Fund was up 29 percent for 2003 and has a three star rating from Morningstar.
Citizens Global Equity Fund (WAGEX) is the second largest fund in the group with $120
million in assets. Started in 1994, the Fund invests in companies of any size. Over half the
investments are in US companies (51.8%), followed by the UK (13%) and Japan (8.5%). Top holdings
include: Citigroup, Vodafone, UBS AG and Microsoft. The Fund was up 21.6 percent for 2003 and has a
two star rating from Morningstar.
MMA Praxis International (MPIAX) started in 1997
and has $103 million in assets. It invests in large companies mostly in developed countries, but
may invest up to 25 percent in emerging markets. Its top holdings include Eni - Ente Nazionale
Idrocarburi, Siemens, Nissan Motor Co. and Vodafone. The Fund performed well in 2003, increasing by
27.1 percent, but Morningstar only gives it a one star rating.
Portfolio 21 (PORTX)
has doubled in size over the past year and is up to $26 million in assets. The Fund is the least
expensive of the group, with a moderate management fee and no load. It invests in companies of all
sizes, but its largest holdings are large companies in US (27%), Sweden (10.8%), and the UK
(10.2%). The largest holdings are IBM, Deutsche Bank, UBS, Nokia and Novo Nordisk. As mentioned
above, Portfolio 21 is the only SRI global fund to receive a four-star rating from Morningstar,
ranking them number 38 out of the 353 funds in their world stock category.
Enterprise
Global Socially Responsive Fund (EGSAX) started in 2000 and, although it only has $7 million in
assets, Morningstar gives it a 3 star rating. It invests in large companies in many countries.
Among its top holdings are Pfizer, WellPoint Health Networks, Citigroup, BP Amoco, Pepsico, and
Walmart. The Fund was up 26.4 percent for 2003.
Differentiating Between the
Funds
Calvert is the oldest and largest fund of the group, and like most of its peers,
focuses on investing in large companies in the developed world. Portfolio 21 and Citizens invest in
companies of any size; MMA Praxis and Enterprise also invest in emerging countries. As with
conventional global mutual funds, expenses tend to be on the high side. Citizens and Portfolio 21
are the only "no load" funds in the group, and Portfolio 21's management fees are the most moderate
of the group.
Of course, as SRI funds, they all seek to invest in companies that are
responsible corporate citizens - that make healthy products, reduce their impact on the environment
and have good labor relations.
Where the rubber meets the road, however, is with the
particular companies in which a fund invests. Here, the funds are all over the board, indicative of
their differing SRI philosophies and orientations. This is where SRI investing becomes very
personal; investors will want to choose funds most aligned with their values.
Browsing
through Portfolio 21's holdings, for example, is like reading a Who's Who of the world's top
companies known for their excellence and commitment to sustainable business practices. Fifty-eight
companies are in the portfolio because, says Carsten Henningsen, co-founder and principal, "We
can't find any other companies that meet our requirements."
Whereas the other SRI global
funds screen out bad actors and look for companies that are responsible corporate citizens,
Portfolio 21 goes much further in its selection process. Only the most visionary companies in the
world make the grade. To Portfolio 21, that means companies that are clear leaders in moving
society toward embracing environmentally sustainable practices.
After identifying the
most important ecological issues a particular industry sector faces, Portfolio 21 analysts compare
each company in that sector to its peers in areas such as the company's leadership role in
promoting sustainable practices, the lifecycle impacts of its products, and its investments in
sustainable technologies and processes. Once a company passes this rigorous analysis, it needs to
pass the usual SRI screens on the social side; a problem here would eliminate them from the
portfolio. "Unlike other SRI funds, we would never have an oil company in Portfolio 21," says
Carsten, "because a company in that business can't meet our definition of sustainability. The
company would have to decide oil isn't a viable business and would have to be moving aggressively
toward renewables to be considered."
Portfolio 21's outstanding performance may be its
reward for taking the time to identify - and having the nerve to invest in - only the world's true
leaders. After all, environmental leadership is more and more correlated with excellence in
management overall, one of the most important indicators for performance. We'd like to think that
Portfolio 21's stellar performance is a testament that making sustainability part of a company's
core business strategy positions it to be more profitable.
Article by Rona Fried, Ph.D.,
president of http://www.SustainableBusiness.com
the online community for green business with
daily sustainable business news, Green Dream Jobs and Business Connections. SustainableBusiness.com
also publishes Progressive Investor, a monthly newsletter that guides people toward sustainable
investments. Contact Rona at- rona@sustainablebusiness.com
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