Socially responsible investing

A friend of mine at work asked about our SRI (socially responsible investment) fund available from our 403b provider. I did a little digging in the prospectus' and here is what I found. The equity index fund had fees of 0.23% and the "Balanced" SRI fund costs 0.91% annually. The balanced fund is weighted 60% Stocks 40% Bonds. The Equity index fund is 100% stocks. They where a little vague in their descriptions of SRI criteria and they can redefine them at will without notice to shareholders. Here is an example of the wording.

The Portfolios seek to invest in companies that:

• Take positive steps to improve environmental management and performance, advance sustainable development, or provide innovative and effective solutions to environmental problems through their products and services.
  
• Maintain positive diversity, labor relations, and employee health and safety practices, including inclusive and robust diversity policies, programs and training, and disclosure of workforce diversity data; have strong labor codes ideally consistent with
  the International Labor Organization (“ILO”) core standards, comprehensive benefits and training opportunities, and sound employee relations, as well as strong employee health and safety policies, safety management systems and training, and positive safety performance records.
  
• Observe appropriate international human rights standards in operations in all countries.
  
• Respect Indigenous Peoples and their lands, cultures, knowledge, environment, and livelihoods.
  
• Produce or market products and services that are safe and enhance the health or quality of life of consumers.
  
• Contribute to the quality of life in the communities where they operate, such as through stakeholder engagement with local communities, corporate philanthropy and employee volunteerism.
  
• Uphold sound corporate governance and business ethics policies and practices, including independent and diverse boards, and respect for shareholder rights; align executive compensation with corporate performance, maintain sound legal and regulatory compliance records, and disclose environmental, social and governance information.
• Develop good attitudes towards puppies.*

If BeePee was offering Environmentally friendly gas for 10 cents more per gallon would it sell?

Here is my take on socially responsible investing. I prefer maximizing my investing results by keeping my costs down. This frees me to give to charities that I pick and value. This is an indirect relationship though. When wealth is created I feel more free to be more generous with my giving even though it is not coming directly from My 403b. By choosing an SRI  you put that choice in an insurance/financial companies hands. The extra 0.68% buys you a fund manager that is hopefully benevolent and probably keeps you out of tobacco and maybe oil but who knows. Seems like too much work to keep up with what your SRI is invested in. 

I ran some numbers on bankrate.com. If you invest 3k a year in your 401k/403b for 10 years the extra 0.68% costs you $1575.00 over the ten year period. $9000.00 over a twenty year period. This calculation assumes a 6% annual return. The power of compounding can work against you too!

One good thing about this fund is that you would be more balanced in your investment types but there are cheaper ways to be diversified.  

If it is a matter of morals. i.e. dirty money. I feel that all money is dirty. Root of all evil! But that is a question only you can answer for yourself.

Happy investing!

*made this up