Socially responsible investing (SRI) integrates personal and social values with investment decisions and recognizes the fact that providing capital to companies in effect endorses their activities. Social investors realize that while they may have limited control over the use of their tax dollars, they have much greater control of their investment dollars and what they wish to support with them.
When Pax World Fund was established in 1971, it was the first mutual fund to adopt broad socially responsible standards for its investments. Prior to Pax, socially responsible investing had been the province of "avoidance investors," mostly individuals who shunned the stocks of certain types of business. In the 1920s, this often meant the "sin stocks" of companies connected with alcohol, tobacco, or gambling. Some religious groups also avoided companies involved in weapons production or other war-related industries.
SRI broadened its scope in 1970, as shareholders at annual meetings presented resolutions aimed at changing corporate policy for ethical rather than financial reasons. The first South Africa resolution was introduced in 1971, and in the following year, a professor at Yale University and a staff member at the Ford Foundation simultaneously developed the concept of program-related investments, which sought social returns as well as (or even regardless of) financial ones.
Individual money managers began to apply social screens--for South African involvement, nuclear power, etc.--to their clients' portfolios in the early '70s, and SRI added new dimensions throughout the decade and into the 1980s: private development banks to help minority communities, selective consumerism to reward responsible companies, social venture capitalism to grow new SR companies, and a shift from divestment (avoidance investing) to proactive investment in companies with favorable social characteristics.
By 1997, over $1.1 trillion in assets were being managed using some sort of social screen, and over 144 socially responsible mutual funds had followed in Pax's footsteps. Pax itself now offers a family of funds to complement its flagship and highly ranked balanced fund. Pax World Growth Fund was introduced in June of 1997, a money market fund opened early in 1998, and more new funds are on the drawing boards.
Pax has proven that investors can do well while doing good. U.S. News and World Report listed Pax World Fund as the #4 balanced fund through June 30, 1998, as measured by its Overall Performance Index, which ranks funds using short- and long-term returns, volatility, expenses, and performance in down markets. With more than 50,000 investors and over $720 million in assets, its clear that the Fund has established itself as a convincing presence in the investment community.
All Pax Funds invest in companies that provide life-supportive goods and services such as health care, housing, food, education, pollution control, utilities, and leisure-time activities. The Funds avoid firms that make defense or weapons-related products or that derive revenue from the manufacture of tobacco, alcohol, or gambling products. Companies that fit the firm's criteria must also pass rigorous financial, environmental, and social screens. While recognizing that no company is perfect, Pax Funds invest in companies that are relatively more attractive as defined by their screens.
Pax also monitors the corporate behavior of firms in its portfolios and uses shareholder voting rights to influence business practices in a positive way, elevating its shareholders' concerns from the living room to the board room.
For more information about the Pax World Fund Family of socially
responsible mutual funds,
visit the Pax Web site at www.paxfund.com. For more
about the history and philosophy
of socially responsible investing, see The Social Investment Almanac by
Peter Kinder, Steven
Lydenberg, and Amy Domini.
Written by: Pax World Fund
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