Morally Responsible Investing vs. Socially Responsible Investing

Although generally misunderstood or considered indistinguishable from Socially Responsible Investing (SRI), Morally Responsible Investing (MR) is a distinct investment discipline that appeals to a growing number of investors. These investors seek integrity in their financial affairs and good stewardship. They require their investments to reflect deeply held moral convictions, and wish to avoid tainted profits derived from immoral and corrupt corporate products or activities.

Rather than emphasizing social concerns such as the environment, tobacco, firearms, employment conditions, or military hardware; MRI emphasizes moral concerns such as abortion, pornography, gambling, and promotion of gay and lesbian lifestyles. Similar to SRI, the MRI discipline identifies offending companies and screens their securities to prevent purchase or to eliminate existing holdings from portfolios.

To illustrate the confusion between MRI and SRI, consider the $1.3 billion asset Domini Social Equity Fund. This socially screened, large-cap equity fund is often mistaken for the MRI fund. Perhaps the name "Domini" contributes to the confusion. The exclusion screens for the Domini Social Equity Fund include tobacco, alcohol, and companies that own or operate nuclear power plants. It also excludes major military contractors and firearm manufacturers. However, with the exception of gambling, the moral screens typically associated with MRI are missing. Furthermore, the Fund has a positive screen for the stocks of companies the"implement notably progressive policies and practices in support of gays and lesbians in the workplace."

We reviewed the top 25 stock holdings (representing 46% of assets) of the Domini Social Equity Fund to see how well it measured up from an MRI perspective. Exclusive of providing healthcare benefits to employees' same-sex domestic partners, almost one-third of the top 25 holdings failed ProVita Advisors' screens.The results areas follows: six of the 25 holdings were Planned Parenthood contributors, one company made abortifacient contraceptives, one company used fetal tissue from elective abortions, and one company was a major pornography distributor. Not surprisingly, 80% of the top 25 holdings provided healthcare benefits to their employees' same-sex domestic partners!

When it comes to mutual funds, we encourage morally responsible investors to ask pointed questions and proceed with caution. There are many SRI Funds but only a handful of MRI funds or alternatives.

Compliments of Kalos Investment Insights, Inc. - www.kalosinsights.com