Most socially responsible mutual funds struggle to meet market benchmarks. Some wonder if investors should look for other positive outcomes.
For some conscientious investors who deploy capital in part to tackle thorny social and environmental problems, the time may have come to adopt a new goal: lowering expectations for financial returns.
That idea represents heresy at mutual fund companies committed to socially responsible investing (SRI). For decades, they have insisted that investors can "do well by doing good" – that is, address moral issues and still grow wealth at competitive rates.
But now some observers, including a pioneer of SRI, are convinced that Americans need to rethink – for the sake of Earth and humanity – whether investors must always strive to keep pace with such standard market benchmarks as the S&P 500 Index.
Among those making the case for a new investor mind-set is Wayne Silby, who in the mid-1970s founded Calvert, which is now the nation's largest family of SRI mutual funds. At a November meeting of private equity investors in Boston, he argued that socially motivated businesses too often struggle without sufficient capital because would-be investors think too narrowly about risk-adjusted returns.
"Our society more and more needs to … be OK about saying, 'We're not going to get the same rate of return as we used to under the "do well, do good" kind of thing,' " Mr. Silby said at the Investors Circle conference at the Boston Harbor Hotel. "We want to create a cultural meme that says, 'Gee, you're still into getting double-digit returns when all these things are more interesting [and] could be done on the planet? Are you so poor a person that you need that kind of money?' "
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