Who says you can't mix money and morality?
, Anita Clemons, vice president of investments of the New Covenant Funds, explains why socially responsible investing is growing in popularity. "Investors can have great performance without sacrificing moral values."
New Covenant is one of the largest faith-based fund families with over $2 billion in assets. Unlike most other mutual funds, New Covenant funds give investors the option to reinvest their dividends or to donate dividends and capital gains to a New Covenant Fund account held by a local church, General Assembly, or to the Presbyterian Foundation.
The firm starts its investing process by screening out so-called sin stocks such as alcohol, tobacco and firearms producers. But the money manager's strategy consists of more than just avoiding undesirable companies. It also uses shareholder activism to get the boards of companies it does invest in "to do the right thing."
An example is
. Clemons said New Covenant has been putting pressure on the bank to make capital accessible to everyone, including minorities, and to make sure it isn't engaged in predatory lending. "They put in safeguards recently, which we're very proud of," she said.
The firm's $957 million
New Covenant Growth Fund is up 10.35% year-to-date. The fund carries a moderate 1.07% expense ratio and lists its top holdings as
Bank of America
"We believe we can bring competitive returns to shareholders, but do it in the right way," says Clemons. "And it's the companies that do things the right way with their employees and customers that thrive in the long run. And those are the companies that what we are interested in."
Clemons admits there is often a gray area when picking stocks for a socially responsible or faith-based portfolio. For example, the fund can own retailers that sell beer, but not brewers.
"It's tough, but we have to draw the line in the sand somewhere," says Clemons. "So if more than half of a company's revenue comes from one of those restricted products we will divest it."