Source: LOHAS Weekly Newsletter
Published: Wednesday, November 01, 2000

A good solution to this problem is the growing selection of international and global mutual funds that are socially responsible. Each fund has different goals and objectives, but all share a goal of changing conditions in the world through shareholder activism.

Calvert World Values


International Equity Fund

At $253 million (as of June 30) Calvert's World Values Fund touts an objective of “seeking to achieve a high total return consistent with reasonable risk by investing primarily in a diversified multinational portfolio of equity securities.” Invested primarily in Japan, with 27.8 percent of total investments (as of March 31), Calvert also invests heavily in the United Kingdom (19.9 percent) and France (10.6 percent). Calvert lists the risk level of this fund as aggressive.

The World Values Fund is managed by Murray Johnstone International Ltd. Andrew Preston is the portfolio manager. Alya Kayal, an international human-rights analyst, describes the process by which a company is screened and approved: “There are three legs to the stool for the model of how we decide whether a company meets the criteria of the fund. First, we utilize company screening. This involves our in-house research from a library of publications, public records, human rights publications, and even conversations with corporate management, to name a few sources.”

Calvert also utilizes shareholder activism and a proactive investment strategy, focusing on companies with a high social impact and special equities, such as start-up companies that have social responsibility incorporated into their mission.

Dianne Saenz, manager of social products and policy for Calvert, says: “The Calvert World Values International Equity Fund allows social investors to get exposure to foreign markets and be assured that the companies they invest in meet the most rigorous social criteria.” Investors can also rest assured that meeting these strict criteria won't hurt their bottom line. Average annual returns (as of June 30): 1 year, 15.2 percent; 3 years, 9.5 percent; 5 years, 12.1 percent; since inception (July 2, 1992), 10.2 percent.

Sue Mullin of Murray Johnstone explains: “News from Europe points to improving growth. The depreciation of the Euro through 1999 enhanced the competitive position of European exports, which stimulated manufacturing in the core economies as well as the periphery. So, the focus in the portfolio remains on Europe, with a strong exposure to Japan, where the market could experience a further surge if growth picks up later this year. We will retain the exposure to Latin America, where we expect markets to perform throughout the year.”

A $2,000 minimum investment is required, except for IRAs, which require a $1,000 minimum investment.

Portfolio 21 Fund

Started in September 1999, Portfolio 21 is the newest global fund. It has received some attention from the press because of the founding principle of the fund—environmental sustainability. Going beyond the usual screens employed by social funds, Portfolio 21 demands that companies practice sustainability goals. Carsten Henningsen, co-founder and chairman of the fund, says: “The premise of environmental sustainability is that our waste and pollution cannot systematically increase while international resources systematically decrease. Companies that understand that there is a crisis and use sustainability as a core part of their business strategy are able to position themselves to have a competitive advantage.”

As an example, Henningsen cites Electrolux, the Swedish manufacturer of household appliances. Electrolux, which currently manufactures the most water-efficient dishwashers and clothes washers on the market, approached the Chinese government and showed how much water could be saved by using their machines. The Chinese government then mandated that all washers purchased in China must be manufactured by Electrolux.

“The investment philosophy and trading approach are long-term, as is consistent with Portfolio 21's focus on sustainability,” Hennington says. “As a result of this approach, the fund expects relatively low turnover, making it a potentially more efficient tax vehicle than funds with high turnover rates.”

Since inception, the fund has grown to approximately $6 million dollars and the actual return since its inception on Sept. 30, 1999 through June 30 was 19.2 percent. For the first half of 2000 the return was 8.8 percent.

Portfolio 21 is invested primarily in the United States (47 percent) and Sweden (19 percent), with Canada and Switzerland both at approximately 9 percent. Japan, Denmark, France and Norway round out the allocations.
A $5,000 minimum investment is required.

Citizens Global Equity Fund

This is the largest social global fund with approximately $320 million invested, as of June 30. More than 35 percent of the fund is invested in the United States with approximately 36 percent in Europe, 16 percent in Asia—mostly (13 percent) in Japan—and 5 percent in Latin America. A large-cap growth fund, it is fairly conservative and invests only in developed countries. About 25 percent of the fund is invested in emerging markets, with the rest invested in the equivalent of international blue chips. According to its profile, Citizens Global Equity Fund endeavors to have at least 50 percent of the total money invested in international companies, with a minimum of three countries being represented.

Chris Polizzoto, vice president of marketing for Citizens, says that this fund would be excellent for the social investor who wishes to have some international exposure but doesn't want to take on a lot of risk.

The fund is managed by a team, with the lead team member, Sevgi Ipek, in charge since 1995. This
continuity may help explain the fund's exemplary performance. According to Polizzoto, it has outperformed 97 percent of global funds in the past year.

Average annual returns (as of June 30): one year, 53.3 percent; three years, 31.7 percent; five years, 25.6 percent; since inception (Feb. 8, 1994), 20.9 percent.

Future outlook is difficult to determine, but Polizzoto says that because the challenges of market correction and tech-level deflation are real, Citizens Global Equity Fund has made some changes. First, cash reserves have been raised—a defensive posture given current market conditions. This will allow the fund to respond more quickly to changing market conditions. The fund is also shifting toward investments in Europe and Canada, where the managers see better opportunities. Lastly, there is a downshift from tech and telecommunications stocks to financial and consumer stocks.

A minimum investment of $2,500 is required, except for
IRAs and automatic deposits, which require only a $1,000 initial deposit.

Sheri Wallace is a freelance writer; Cliff Feigenbaum is co-author of Investing With Your Values (New Society, 2000) and editor of The GreenMoney Journal (www.greenmoney.com). This article appeared originally in The GreenMoney Journal (Fall 2000). Click on this story at www.LohasJournal.com for additional coverage of international SRI mutual funds.