Investors who previously ignored socially conscious investments are eyeing them now, an official with the Calvert Social Investment Foundation said last week.
"We're getting mainline pensions," Art Stevens, relationship manager with the group, said at a conference in Washington of the Arlington, Va.-based Coalition of Community Development Financial Institutions. "It's becoming a much more broadly accepted standard."
Socially conscious investments typically have been a "carve-out," Mr. Stevens told an audience of more than 200 attendees. "I've got my real investments, and then I've got this," he said, describing the way many mainstream investors have dealt with socially conscious investments.
"We are working very hard to try to change that philosophy," Mr. Stevens said.
However, he said, "this is a very careful time for us. We will have exposure to people that have never been exposed to us before by virtue of this crisis."
Mr. Stevens also said, "We will have investors looking at the socially responsible space, looking at you, who haven't looked at you before, which is fabulous. And if we don't do our job right, we will lose them in 12 to 24 months."
The Calvert Foundation is a non-profit group that funds community development work. It was started by Calvert Group Ltd., a Bethesda, Md.-based mutual fund company that specializes in socially conscious funds.
Last year, the foundation sold $55 million worth of notes, making it a record year for the organization, which was started in 1995, Mr. Stevens said. The Calvert Foundation has $170 million in total assets under management, and it has never had a down year, he said.
Community Capital Management Inc., which has $5 million invested in a community development financial institution, has found it a beneficial investment in this market. "In these uncertain times, we feel it's very important to limit your credit exposure," said Todd Cohen, chief investment officer of the Weston, Fla.-based registered investment advisory firm, which manages $970 million.
Investments in CDFIs are safer than stocks because they are insured by the Federal Deposit Insurance Corp., he said. Such in-vestments also help low-income communities, Mr. Cohen added.
"Over the past year, we've seen a serious drop in lending origination within the mainstream community, which has caused demand for [community development funds] to skyrocket," said Donna Gambrell, director of the Department of the Treasury's CDFI Fund. She was the keynote speaker at the conference.
"Policymakers and business professionals will be looking to the CDFI industry for insight on how to revitalize an investment community most in need," Ms. Gambrell said.
'TURNING POINT'
The Domini 400 Social Index, which has tracked performance for socially conscious investment funds since 1990, reported average annualized total returns of 8.4% for the funds through last year, compared with 7.8% for the Standard & Poor's 500 stock index, according to Meg Voorhes, deputy director of the Social Investment Forum in Washington.
"We are at a turning point," Mr. Stevens said. The socially conscious investment industry now needs to make their investments "as normalized as possible for the average investor."
To that end, Mr. Stevens suggests that socially conscious investment managers cultivate relationships with financial advisers who are advising wealthy clients. "You have to build the relationships with the advisers to go after the larger money, because the larger social investors have it," he said.
The industry also is being queried more about "green" investments, Mr. Stevens said.
"I'm getting demands from investors asking, 'What kind of projects build these green jobs?' We can argue about what that means. Is the plumber who installs solar panels green work? I would say so," Mr. Stevens said.
He also counsels socially conscious investment managers to look for brokers who have left large brokerage firms to form their own shops.
"In your neighborhood, there's one of them. There's a registered investment adviser who has a hell of a lot easier time doing business with you than the brokers at the mainstream shops that have to go through compliance" and who have to worry about how they get paid, Mr. Stevens said.
E-mail Sara Hansard at [email protected].
