Adding more fuel to the debate on whether investors can make money by being ethical, a review of 160 socially responsible US mutual funds showed that 65 per cent of them delivered stronger returns during last year.

The survey was carried by among 22 members of the Social Investment Forum, based in the US. These SRI funds topped benchmarks across nearly all asset classes, including balanced, large cap, small cap and global funds, as well as bonds. The performance data that was analysed by the Social Investment Forum covered all of 2009 and was provided by Thomson Reuters, the news and data group.

Particular standouts on SRI mutual fund performance were the 73 large cap funds, the largest single category of SIF member funds, where nearly three out of four (72.6 per cent) outperformed the S&P 500. On average, large cap SRI funds bested the S&P 500 by more than 6 percentage points. A majority of the large cap funds offered by SIF members also outperformed the S&P 500 over three years and over 10 years. 

“This analysis underscores the reality that socially responsible investments offer what are genuinely competitive returns,” said Cheryl Smith, chairman of the board at SIF and president at Boston-based Trillium Asset Management Corporation. 

Debate continues on whether SRI investment delivers market-beating returns over the long term. Advocates of SRI say the investment approach ensures that well-managed, and hence profitable, businesses are more likely to enter a portfolio; sceptics argue that SRI funds will necessarily pick stocks from a smaller universe than would otherwise be the case, increasing concentration risk in a portfolio.

The 22 fund families represented in the SIF analysis are: Access Capital Strategies; AHA; Appleseed; Ariel; Azzad; Calvert; Community Capital Management; Domini; Gabelli; Green Century; Integrity; Legg Mason; Meeder Asset Management; MMA Praxis; Neuberger Berman; New Alternatives; Parnassus; Pax World; Portfolio 21; Sentinel; Walden; and Winslow.