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Social Screening

Social screening is the most common way for investors to practice socially responsible investing. Social screening is the process of selecting companies to invest in based on social and/or environmental performance in addition to a company's financial performance.

There are two forms of social screening: negative or avoidance screening and positive screening. In addition to the usual investment goals, these funds restrict their investments to whatever they define as socially responsible. Such criteria can include: avoiding military, alcohol, tobacco, or gambling industries; selecting companies that demonstrate a high degree of respect for their employees; and selecting companies that have minimal negative impact on the environment.

Negative screening is the easiest and earliest form of social investing. Beginning with the Pioneer Mutual Fund in 1928. Negative screening is the conscious decision not to invest in companies that are inconsistent with the personal values of the investor. The term "socially screened" may be somewhat misleading to investors. There are various levels of screening, which range from excluding tobacco companies to funds that meet an extensive list of screens such as the exclusion of companies that do not meet diversity, workplace, and environmental standards. Currently there are more than 70 mutual funds that screen companies, the first of which was with the Pioneer Fund in 1928.

Criticism for negative screening has emerged from the concern that is not a sustainable method of impacting corporate change. Unless all investors employ the same screening criteria for their investment decisions, there will exist a large pool of people and institutions investing in companies regardless of the company's social and environmental impact.

Positive screening is the process of actively searching for companies to invest in, which reflect the values of the investor through leadership in product design, policies, environmental practices, and human rights. A common form of positive investing is choosing industry leaders to invest in despite the reputation of the industry as a whole with the hope that the standard of business will be raised to compete with the corporate social responsibility leaders within a particular industry.

It is nearly impossible to meet all social screens. All companies employ practices, which on some level may indicate negative social and environmental practices, but the standards are changing business, making the role of the investor more critical.



Top 10 Largest Socially Screened Mutual Funds


10 Largest Funds (as of 09/30/17)
Fund Name
Assets
(Millions)
Type
Style
$9,777.3
Growth
Large-Cap
$3,838.3
Growth
Large-Cap
$2,022.1
Growth
Large-Cap
$1,938.0
Value/Growth
Mid-Cap
$1,588.4
Intermediate
High Quality
$1,543.4
Value
Mid-Cap
$1,499.0
Growth
Large-Cap
$1,471.5
Large Growth
Balanced
$1,451.1
Value/Growth
Mid-Cap
$1,383.5
Value/Growth
Large-Cap





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