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Maybe SRI investors should settle for lower returns – and more satisfaction

Most socially responsible mutual funds struggle to meet market benchmarks. Some wonder if investors should look for other positive outcomes.

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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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