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What Are SRI Funds?

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You dont have to check your values at the door when investing in the market. An increasing number of investors are choosing to put their money to work in companies that not only have a profitable future, but also reflect their values, like those committed to environmental sustainability or ones that give back to the community. But this isnt charity, it is Socially or Sustainable and Responsible Investing (SRI), and investors still expect and seek a strong return on their money – just one that balances their values with their investment goals.

The Rise of the SRI Fund
The first SRI fund of its kind started in the early 1990s with very few assets. But at the end of 2010 there were over 250 SRI-focused funds for investors to choose from. Funds earmarked for SRI investments now make up around 12%, or $3 trillion, out of the $25.2 trillion invested in the market today, according to The Forum for Sustainable and Responsible Investment (US SIF), a trade group representing SRI funds. Inside the funds, which are managed by professional money managers, are a collection of companies and investments that comply with a certain SRI cause. They usually follow some sort of environmental, social or corporate governance theme, which are collectively known as ESG issues.
Several of the large money managers offer several SRI products for their clients, ranging from simple passive index funds that track large or small SRI compliant companies, to actively managed funds that invest in companies focused on one of the three main ESG themes. Investors can also put their money in one of a number of exchange traded funds (ETFs) that track SRI compliant companies.

What Does It Mean to Be SRI Compliant?
The large funds may be a bit too broad for many investors, money managers screen and add or eliminate companies that normally do not comply with the general idea of what makes up an SRI company, but peoples values arent usually that simple. In general, money managers choose to avoid adding companies that deal in things that kill (defense