Investors bring PC-thinking to financial plans.

They're putting their money where their philosophies are

Suzanna Moninger, a member of the Green Party, has long been an active supporter of environmental and women's issues.

Until recently, however, the San Diego psychotherapist said she hasn't been willing to put her investment dollars behind her beliefs.

"In the past I thought I had to lose money (to do that)," she said. "I don't think it's that way at all anymore."

In the last few months, she and her investment adviser, Joan Cudhea, have begun re-allocating her investment portfolio to include such stocks as Nature's Sunshine, a maker of herbal and natural food products.

Moninger is pleased that the stock, purchased at $10 a share, has jumped 10 percent in the short time since she purchased it. She's also looking at investing in alternative energy and food companies, and those sensitive to women's issues.

Moninger is part of a growing number of "socially conscious investors" who believe that they can do well by doing good.

Such investors screen stocks and mutual funds using positive or negative criteria that are in line with their personal philosophies.

While the criteria varies widely, companies involved in the production of alcohol, tobacco, nuclear power or weapons are often excluded. Environmental or alternative-energy companies are often favored.

Investors also look at the internal practices of a company; its record on hiring or promoting women or minorities or its environmental record.

$700 Billion Invested

According to the New York City-based Council on Economic Priorities, more than $700 billion in the United States is now held in "socially screened" investments. That's up from just $50 billion in 1985.

There are now more than 20 mutual funds that cater to socially conscious investors, with at least 10 created in 1992 alone.

Just last month, a group in San Francisco started the Women's Equity Mutual Fund. Representatives for the fund said it is the first of its kind to exclusively screen companies on 10 specific women's issues, such as the number of women in upper-management positions and companies' day care and family leave policies.

Not Always Liberals

While many of the funds traditionally have a politically liberal bent, that is not always the case.

Islamic investors, who wanted to increase their income but do so in accordance with Islamic law, started the Amana Mutual Funds Trust Income in Washington state in 1986, said the fund's manager, Nicholas Kaiser.

Along with gambling and tobacco stocks, it excludes investments in banks or bonds because charging interest is prohibited under Islamic law. The number of shareholders has continued to grow and has increased from 750 to 1,100 in just the past year, Kaiser said.

In the last five years, the fund has had a return of 13.5 percent, which Kaiser said is "right in the middle" for that type of fund.

Another fund, the Catholic Investment Trust, was set up several years ago in Denver to invest in bonds supporting churches, hospitals and other entities of the Roman Catholic Church. The fund was disbanded, however, when investors failed to support it, said John Dickerson of Summit Asset Management in La Jolla.

Catching On In San Diego

The socially responsible investment movement is catching on even in San Diego, a city not noted for liberalism.

Jack Brill, a local financial adviser and co-author of "Investing From the Heart," a guide for socially responsible investors, said his client base has grown to 250 since he opened his business in 1985.

Almost 85 percent of those came to him because of their interest in socially responsible investing, he said.

Brill is part of the First Affirmative Financial Network, an organization of about 60 finance, tax and insurance professionals in 20 states who serve clients with concerns about social responsibility.

Investors feel "a great personal satisfaction" in knowing that their money is being invested in "harmony with their thinking," he said.

Still, the number of such investors represents just a small segment of the investment world.

Molly Miller, a San Diego broker for A.G. Edwards & Sons, said that out of her 300 clients, not a one holds investments in any of the socially responsible mutual funds.

The idea of socially responsible investing is something that "in my office is not popular at all," said Tim Cronin, branch manager for the firm, which has 100,000 clients here.

"I would say that's true throughout the entire industry.

"If investors thought about it, they might think it was a good idea. But first and foremost they're looking at a good value and return, not what is politically responsible."

Tobacco Firm Performs Well

Phillip Morris, a tobacco company, although weak this year, "has been one of the best performing stocks for years and years. It's a great company, but not necessarily the most socially responsible," Cronin said.

But supporters of socially responsible investing say it's a myth that investors pay a price for caring about how their money is invested.

The Domini Social Index 400, an index of 400 socially-screened stocks, has "outperformed the Standard & Poor's 500 since its inception in 1990," financial adviser Cudhea said.

Returns on Parnassus, a growth-oriented mutual fund with a portfolio that includes Magma Power of San Diego, have averaged 27.4 percent over the last three years, said the fund's manager, Jerome Dodson.

By comparison, the average return for all growth mutual funds is just over 17 percent for the same period, he said.

But Paula Mathieu, a researcher for Morningstar Inc., a mutual fund rating firm in Chicago, said the "jury is still out on whether socially-screened investments can consistently offer market-level or better performance."

Short Track Record

That's because many of the funds were created in the last two or three years, and don't have the track record of 10 years or more that traditional funds do.

But "it is clear that social restrictions do not necessarily prohibit these funds from earning competitive returns," she said.

One rap against socially responsible investing is that investors are hurt by limiting the "universe" of stocks from which they choose.

That's just not true, said Brill, pointing to the 400 companies listed on the Domini Social Index. Even with the "screens" used by investors, most of them actually have a broad criteria for investment, he said.

An investor "would run out of money long before (he or she) ran out of companies," he said.

The mainstream Price Co., which recently merged with Costco, for example, was long a stock recommended by Brill.

Along with being a solid financial performer, the company had an excellent record of opportunity for minority employees, and for recycling cardboard and other materials.

Price Co. wasn't trying to practice "social activism," he said. Its actions just made sense economically, he said.

Screens A Plus

Brill contends that socially responsible screens are actually a plus for investors. Excluding companies that might face fines for polluting or labor trouble takes some of the risk out of investing, he said.

Still, money managers say they have to be careful that a company that meets the social criteria also makes sense financially.

For example, the newly formed Women's Equity Mutual Fund recently announced a list of 10 firms, including Advanced Tissue Sciences Inc. of La Jolla, that met its criteria for investment. But Tom Vickers, a manager of the fund, said Advanced Tissues is not now part of the fund's portfolio. While it's a good company, its stock price doesn't make it a good investment right now, he said.

"We're (not) going to cheat our investors" to make a social statement, he said.

According to Vickers, "There's been a somewhat justifiable rap against socially responsible investing. A lot of the funds haven't done well."

Along with making money, another goal of socially responsible investors is to make a difference in the issues they care about.

The example most often cited is South Africa. Investors and activists pressured companies and government agencies to divest themselves of their South Africa interests, which in turn put pressure on that nation to end apartheid, a policy of racial separatism.

Linda Pei, co-founder of the Women's Equity Fund, said the fund hopes to develop the clout to push for changes in the workplace.

The fund won't invest in companies with practices it opposes, but hopes that giving credit to some companies will spur others to change, she said.

"We looked at what happened in South Africa and said 'Why can't we use the same strategy?'"

On the whole, socially responsible investors haven't brought "revolutionary change" to corporate America, said Morningstar researcher Mathieu.

But over time, she said, a "strong demand for social investments (should) help foster a market climate that nurtures socially aware companies."