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New avenues open up for investors sensitive to social, ethical issues

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Ethical investing, a small corner in the money-managing world, is suddenly alive with activity. Since this time last year, three new ''ethical'' funds have sprung up, and one from Shearson/American Express is on the way. Three books covering the subject will be published in the next six months. And a number of newsletters have been started in the last year, too.

''There's a tremendous amount of interest on the part of the general public, . . . and a real growth in interest on the part of money managers and brokers,'' says Joan Bavaria, president of Franklin Research & Development, a Boston firm that specializes in ethical investing.

In the past few years, ethical investing has taken on a broader definition, and hence it may appeal to more people. It has moved beyond its criteria of don'ts - don't invest in liquor, tobacco, or gambling stocks - to a guideline of do's - do invest in companies that make a social contribution to the world.

While most of the ethical mutual funds still hold to their original taboos, either as a statement in the prospectus or as an internal, unwritten policy, they are now searching for companies that make a positive social impact. They want to invest in companies that have good environmental records; that have no equal-employment-opportunity violations; that promote participative management throughout the company, that make safe, quality products; or that do a good job with occupational-safety and health requirements. One new fund, the New Alternatives Fund in Great Neck, N.Y., invests only in solar and other alternative-energy technologies.

Amy Domini says the '60s generation may have something to do with the renewed interest in ethical investing. ''They are now earning and making pretty good money, and I don't think they're 100 percent comfortable with falling into the capitalist (mode),'' says this money manager at Moseley, Hallgarten, Estabrook & Weeden, in Cambridge, Mass. Ms. Domini is the author of ''Ethical Investing,'' which is scheduled to be published this spring.

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