Goldman, Deutsche Back 'Do-Gooder' Funds

NEW YORK (TheStreet) -- Goldman Sachs(GS) investment strategist Abby Joseph Cohen and Deutsche Bank's(DB) Mark Fulton say socially responsible investing, once the province of do-gooders, may produce better returns.

Socially responsible investing is picking up the pace. During the past year, environmental mutual funds Gabelli SRI Green(SRIGX) returned 58%, while Winslow Green Growth(WGSLX) climbed 45%.

Socially responsible mutual funds aim to invest in good corporate citizens. Those include companies with strong records for treating employees fairly and protecting the environment.

Can green funds and other socially responsible investors outperform over the long term? Some Wall Street analysts think so, and they're pounding the table for a variety of social investment strategies.

Companies with sound environmental and social policies are likely to produce better returns, Goldman's Cohen argues. Speaking at a recent United Nations conference on climate change, she said many major institutions plan to invest in companies that are leaders in managing environmental risks. That will boost green shares over the long term.

Fulton, a climate-change strategist at Deutsche Bank's asset-management arm, is urging clients to overweight stocks that are involved in emissions reduction and clean-energy production. Government-stimulus funds will encourage green building and spending on energy-efficient technology, Fulton says.

Wall Street's enthusiasm for social investing represents a marked change from the past. When socially responsible funds appeared in the 1970s, most analysts saw them as do-gooder investments that weren't likely to outperform the benchmarks. At the time, social funds used simple screens, eliminating companies that polluted or made harmful products such as tobacco. Portfolio managers could buy any stocks that didn't trigger warning flags.

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