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SRI Growth Outpaces Rest of Industry


If investing in socially responsible investment (SRI) mutual funds continues at the rate of the past 30 years, assets in those vehicles will reach $278.1 billion in 10 years and $751 billion by 2026, according to a report released last week by Pax World Funds.

SRI funds, which use social and environmental criteria to choose investments, grew about five times faster than all other mutual funds since their inception in the early 1970s, according to the report, which is based partly on data provided by Wiesenberger, a unit of Thomson Financial (publisher of MFMN).

The growth drove assets invested in such funds past the $100 billion mark for the first time this summer. And the number of socially responsible funds has increased by 9,500% in 30 years, to 192, compared to a 4,074% increase for all other funds.

The report was released last week to mark the 30-year anniversary of the Pax World Fund (now known as the Pax World Balanced Fund), which the company says was the first U.S. socially responsible mutual fund.

Pax executives say the idea that SRI means lower performance is on its way out as investors realize that they can invest with their conscience and still see healthy returns. In addition, the report cites a panel of "futurists"--including a lobbyist, sustainability expert and science journalist--who say that increased emphasis on sustainability in community planning, recycling, information technology and health issues will bolster SRI philosophies and continue the sector's growth for years to come.

Typical SRI funds are invested in companies that have sound policies regarding those issues, Pax executives said. And companies will find it increasingly difficult to ignore those issues because of continued pressure from individual investors and the attention that SRI brings to these issues through the media and activist groups.

Still, some of the largest players in the mutual fund industry have not yet delved into the SRI market, regardless of the gold mine Pax says SRI has become. But they will, predicted Pax President Thomas Grant during a press conference last week in New York's financial district. Neuberger Berman and Vanguard have already developed SRI vehicles, he said, responding to a question from MFMN, adding that more industry giants are sure to follow.

"We think they'll recognize the growth down the road and consolidate with other SRI players," Grant said.