What makes a fund or a company socially responsible? How can you tell which money managers are really walking the walk and screening the companies in their portfolio for their Environmental, Social, Governance, and which ones are in fact greenwashing? Just because a fund says their socially responsible, does it mean that they are?
The short answer is no.
I had come across my desk this article from Yahoo Finance. It lists three funds that it has determined are top performers. The second one they indicate is the VALIC Company II Socially Responsible Fund (VCSRX). They write that this fund has low fees and great performance. This obviously piqued my interest as a Socially Responsible Investments Advisor that is consistently looking for good funds for my clients. So, Gayle and I did some digging. It says it’s socially responsible, but we know that does not mean that it is socially responsible.
One of the resources that we use to determine how SRI a fund is, is www.fossilfreefunds.org. This website brought to us by the organization As You Sow provides scores on several different components of SRI. So, how did VCSRX perform? I’ll cut to the chase; not very well.
On their fossil fuel exposure, they got a C, with over $50 million in fossil fuel investments. If you scroll down, you can see how they performed on some other critical metrics of SRI. They received an F for both deforestation and military weapons and only scored a B in Tobacco.
To really do SRI, you cannot take a fund or a company at face value. As we’ve seen, there is more to it than meets the eye. As a comparison, look at how Green Century’s Balanced Fund scored. They are entirely Fossil Fuel Free and have almost all A’s on their SRI scores. They even received a badge for their work in shareholder advocacy on deforestation, working to further improve the companies that are in their portfolios. Traditional money managers that have “socially responsible” funds do not engage in shareholder advocacy and historically have instead voted right along with the board.
Each client of ours has a unique set of values, and our research goes deep into these funds to make sure that the funds we invest our clients in are in line with what is important to them, to the best of our ability. You won’t find any greenwashing here.