Mary Beth Storjohann, founder of San Diego-based financial planning firm Workable Wealth, isn't a do-gooding investor. "I don't personally include socially responsible investments in my portfolio," said Storjohann, who is 29. But many of the financial planner's clients—she focuses on people like herself, in their 20s and 30s—come to Storjohann with questions about making good with, rather than simply making good on, their investments.
Storjohann said one downside of some socially responsible investing (SRI) funds is that they can carry higher fees, as a result of the work of screening the investments—detracting from the overall returns. She prefers to express her values through charitable giving and personal decisions like not eating meat. But Storjohann has her work cut out for her convincing her clients to take the same approach.
It's true that socially responsible funds typically have higher fees than the least expensive index funds—for example, Dimensional Fund Advisors' socially responsible index funds have fees between 30 and 40 basis points, the Calvert Group's domestic equity SRI fund has a management fee of 40 basis points, and this is versus the lowest equity index fund fees in the industry at 10 basis points.
Yet these SRI fund management fee levels are still well below most actively managed equity funds. And recent research shows that young investors desire to do good within their portfolios. Among wealthy U.S. adults ages 18 to 32, 69 percent believe investment decisions are a way to express social, environmental and political values, according to a recent study from private bank U.S. Trust. That compares with 45 percent of all respondents.
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Sixty-one percent of younger investors said they'd be willing to accept a lower return from companies that make a positive impact on society and the environment—compared with 46 percent of all investors surveyed. And 72 percent of the young adults said they'd be willing to accept a higher risk for investments that have a positive impact on society or the environment—versus 44 percent of the total pool of respondents.