Spurred by such factors as rising institutional investor interest, growing demand for climate-related renewable energy alternatives, concerns about the Sudan humanitarian crisis, and the emergence of new products, socially responsible investing (SRI) in the United States is now growing at a much faster pace than the broader universe of all investment assets under professional management, according to the new edition of the Report on Socially Responsible Investing Trends in the United States published by the nonprofit Social Investment Forum (SIF). The report found that, from 2005 to 2007, SRI assets increased more than 18 percent while all investment assets under management edged up by less than 3 percent.  

The Trends report identifies $2.71 trillion in total assets under management using one or more of the three core SRI strategies -- screening, shareholder advocacy, and community investing. In the past two years, social investing has enjoyed healthy growth from the $2.29 trillion documented in the 2005 Trends report.  Today, nearly one out of every nine dollars under professional management in the United States today is involved in socially responsible investing -- 11 percent of the $25.1 trillion in total assets under management tracked in Nelson Information's Directory of Investment Managers.

Highlights of the new Social Investment Forum Trends report include the following:

SCREENED FUNDS:  Assets in all types of socially and environmentally screened funds – including mutual funds and exchange-traded funds (ETFs) – rose to $201.8 billion in 260 funds in 2007, a 13 percent increase over the $179.0 billion in the 201 tracked in 2005.  Eight socially and environmentally screened exchange-traded funds (ETFs) with $2.25 billion in total net assets were available through the end of 2006 – the first time SRI-focused ETFs have been a factor in a Social Investment Forum Trends report.

INSTITUTIONAL INVESTORS:  At more than $1.9 trillion in assets, socially screened separate accounts managed for institutional investors and high net worth individual clients constituted the bulk of SRI assets tracked in 2007, up 28 percent from $1.5 trillion in 2005.  Institutional investors have also used the stock they hold to increasingly participate in shareholder resolutions.

SHAREHOLDER RESOLUTIONS:  The average level of shareholder support for resolutions on social and environmental issues increased 57 percent from 9.8 percent in 2005 to 15.4 percent in 2007, a record high.

COMMUNITY INVESTING:  Assets in community investing institutions rose nearly 32 percent from $19.6 billion in 2005 to $25.8 billion in 2007.

Social Investment Forum Board Chair Cheryl Smith CFA, Ph.D., executive vice president and senior portfolio manager at Trillium Asset Management Corporation, said:   "Thanks to growing institutional investor demand and a wide range of issues that are driving stronger retail investor interest, socially responsible investing is thriving today as never before.   Increasingly, money managers are incorporating social and environmental factors into their investing practices, acknowledging the demand for social investing products and services from institutional and individual investors, socially concerned high-net-worth clients, individuals seeking SRI options in their retirement and college-savings plans, and 'mission-driven' institutions including foundations, endowments, labor unions, and faith-based investors."

Social Investment Forum Board Member/Trends Committee Chair Alisa Gravitz, executive director, Co-op America, said:  "SRI mutual funds remain a significant piece of what socially responsible investing is about for individual investors and retirement plans.  The big news is that in this most recent period, we also saw unprecedented innovation in terms of products and issues.  New investment products and fund styles are driving growth in socially and environmentally screened funds, especially ETFs and alternative investment funds such as social venture capital, double- and triple-bottom-line private equity, and hedge funds.   Examples of how issues are driving SRI investments include the fast-growing numbers of institutional investors, fund families, and money managers that are incorporating criteria related to climate change and the crisis in the Sudan into portfolio management and shareholder advocacy."

Walden Asset Management Senior Vice President Tim Smith, immediate past chair of the Social Investment Forum, said:  "Shareholder resolutions on environmental, social and related corporate governance questions are now enjoying major mainstream acceptance and the vote totals that go with that.   Part of that is due to widespread investor concerns about such issues as climate change, the Sudan crisis and CEO compensation.  For example, a large and expanding number of institutional investors are actively supporting shareholder resolutions on social, environmental, and corporate governance issues and joining investor coalitions, such as the Investor Network on Climate Risk, to make their concerns known about the risks and opportunities associated with issues such as climate change."  

Social Investment Forum CEO Lisa Woll said:  "Community investing remains one of the fast-growing strategies of socially responsible investing.  The expansion of market-rate opportunities and other industry developments are making it easier for a broad range of investors to participate in the expanding field of community investing. Institutional investors are proactively allocating portions of their portfolio to community investing options in order to deepen the social impact of their investments. Investors are also increasingly embracing international microfinance opportunities to promote positive social and economic development abroad."

OTHER KEY FINDINGS

Mutual Funds: The largest share of socially and environmentally screened funds are mutual funds, with $171.7 billion in total net assets invested in 173 different funds available in 358 different share classes. Of these socially and environmentally screened mutual funds, 19 of them with $12.5 billion underlay variable annuity products.

Other Screened Funds:   Three socially and environmentally screened closed-end funds with assets of $850 million were tracked separately for the first time. Also, an estimated $5.3 billion in capital were identified under the management of 46 different socially or environmentally screened alternative investment vehicles, such as social venture capital, double- and triple-bottom-line private equity, and hedge funds, typically organized as unregistered limited partnerships or limited liability companies and available only to accredited institutional and high-net-worth investors.  Nearly 11 percent of the total assets in all socially screened funds – $21.7 billion – were invested through 30 other pooled products, typically commingled portfolios managed primarily for institutional investors and high-net-worth individuals. 

Large Investors: $1.88 trillion in assets are managed in institutional client accounts, a 27 percent increase over the $1.49 trillion identified in 2005.   Additionally, investment advisers managed $39.5 billion for individual high net worth clients, a $22.2 billion increase over the $17.3 billion identified in 2005.

Shareholder Resolutions: The total number of resolutions increased from 360 in 2005 to 367 in 2006.  Institutional investors that filed or co-filed resolutions on social or environmental issues controlled $739 billion in assets in 2007, a more than 5 percent increase over the $703 billion in assets counted in 2005.

For the full text of the executive summary of the 2007 Trends report, go to www.socialinvest.org/resources/research on the Web.

The Forum has issued periodic Trends reports on the world of SRI since 1995, most recently in 2005.