Ca$h with a con$cience
Ethical
funds are becoming investment vehicle
of choice for some Christians
By
Kevin Heinrichs
ChristianWeek staff
The battle for investors’ dollars is at its most visible on the flicker of the TV tube. Mutual fund advertisements cater to all investor types, from earnest pronouncements of conservative growth to quirky ads appealing to the already-cynical investor.
Who can’t relate to the feeling of the customer in the Bank of Montreal commercial who, after asking an investment broker about mutual funds, is told, "If you’ll kindly put your head in the vice, we’ll get started"?
While each implies the qualified promise of building money for retirement, one relatively new group of funds is asking the question: "At what cost?"
Socially responsible investment funds appeal to a growing segment of people for whom the promise of easing consciences is more important than easy cash. And a TV marketing campaign launched this fall by Ethical Funds Inc. is significantly harder-hitting than the usual fare. Images of a nuclear mushroom cloud, sweat shops and polluted waters precedes the message, "Do the right thing." The obvious inference is that other mutual funds might own shares in companies that promote nuclear energy, exploitive employment practices or overt pollution. In one scene, a cigarette is cut open and blood oozes out.
"I think it’s a little much," says Mark Weber, member relations manager at Mennonite Savings and Credit Union in Waterloo. But there is no doubt the "greening" of mutual funds is hitting a responsive chord, especially among Christians.
"Anabaptists and others in the Christian faith community are realizing that where and how they invest says a lot about what they believe to be important," says Weber.
MSCU's six branches, which serves members of Mennonite, Amish and Brethren in Christ churches, have sold $20 million in ethical mutual funds since 1993, almost half of that in the first eight months of 1998 alone. Sales are up 50% from the same period last year.
Weber explains that there are several different types of socially responsible funds, each screening out a different set of criteria. There are "sin screens" that prevent investments in companies that produce alcohol or tobacco for example. Others block out companies that have unfair labor practices, trade with countries that have poor human rights records or engage in practices harmful to the environment.
VanCity Credit Union in Vancouver introduced the first such fund in Canada in 1986. There are currently a dozen ethical and green funds in Canada. Eight are managed by Vancouver-based Ethical Funds Inc., Winnipeg-based Investors Group’s Summa Fund and the Desjardins Environment Fund. Another four are managed by Toronto-based Clean Environment Mutual Funds Ltd.
Weber is even more excited about the prospect of importing a model fund from the United States called MMA Praxis Mutual Funds, managed by Mennonite Mutual Aid in Goshen, Indiana. Fund managers there have integrated Anabaptist values into the screening process, thereby red-flagging companies that contribute to military weaponry, for example.
"In Canada, Praxis-style funds would be unique in their application of Christian values," says Weber, noting that the fund's priorities are influencing corporate behavior and encouraging community economic development.
Green money
Investing ethically doesn’t mean being kicked in the teeth when it comes to returns, either. According to Eugene Ellmen, author of The Canadian Ethical Money Guide, from 1990 to 1995 stock prices listed in the Domini 400, an index of socially responsible U.S. stocks, grew 135.5 percent. The leading U.S. stock measure, the Standard & Poor’s, increased by 120.5 percent over the same period.
One of the funds available from Ethical Funds Inc. has averaged 22 percent return over five years.
"All the research points to the fact that investing with a conscience does not have a negative impact on your returns," says Weber. "That debate is essentially dead."
But like all mutual funds, ethical funds invest in a pool of companies whose values fluctuate from week to week. There is still a degree of risk in terms of rates of return and, unlike a GIC, investments are not guaranteed and there is no deposit insurance coverage.
Nonetheless, for those who are committed to invest in mutual funds for retirement, ethical investing may ease the conscience, if not the anxiety of watching the stock market’s rise and fall.
