Social investing has been as good for investors as it has for the environment and social causes, judging by the five-year performance of stocks in the Domini 400 Social Index.
The DSI's five-year total annualized return for the five years ended Dec. 31 was 18.34%, compared with 16.59% for the Standard & Poor's 500 and 17.18% for the Russell 1000.
The one-year annualized returns for the social index, created and maintained by Kinder, Lydenberg, Domini & Co., Cambridge, Mass., also beat the S&P 500 by 69 basis points in calendar 1995, with a 38.2% one-year total return. The Russell 1000 returned 37.77% for the same period.
The Domini 400 slightly underperformed the S&P 500 for the three-year period ended Dec. 31, with a 14.53% return, compared with 15.3% for the S&P 500 and 15.06% for the Russell 1000.
According to research from Mellon Equity Associates, Pittsburgh, the industry factors that most hurt the performance of the DSI last year, relative to the S&P 500, were the index's underexposure to oil and electrical utility companies. An overexposure to telephone companies helped the index's return, compared with the S&P 500, as did investments in Federal National Mortgage Association, BellSouth Corp. and Merck & Co.
The Domini 400 was constructed by applying screens to the S&P 500 to exclude companies involved in the alcohol, tobacco, gambling, weapons contracting and nuclear power industries.
KLD then further screened the remaining companies by applying weighted screens in the areas of community involvement, diversity, the environment, employee relations and product quality, to determine the final components of the screen.