Money Does Grow on Trees; Sierra Club's Mutual Funds Making Strong Returns

Article excerpt


Investors have discovered they can make a lot of green in so-called green stocks. The Sierra Club Stock Fund, introduced in January 2003, produced a 32.02 percent return for investors last year. The fund's benchmark, the Standard & Poor's 500 Index, rose 26.38 percent in 2003.

"For them to be up that much is very good. ... You can invest in your values and not compromise your returns," said Thomas Van Dyck, a Piper Jaffray & Co. analyst who tracks philanthropic and social investing.

The Sierra Club, an environmental activist group based in San Francisco, has put its name on two mutual funds: the Sierra Club Stock Fund and the Sierra Club Balanced Fund. The organization's officials said they entered the investment world at the request of members, who wanted to put their money in companies that have strong environmental reputations.

The Sierra Club approves all investments in the funds with guidelines that are so strict that the organization's executive director, Carl Pope, estimates that only one-third of the companies in the S&P 500 Index qualify.

Mr. Pope and other Sierra Club officials will not disclose the specific guidelines but, in general, they say the funds exclude companies that have poor environmental track records, such as businesses with pollution pasts.

The Sierra Club also takes some non-environmental criteria into consideration, such as whether a company has a good labor record. For example, businesses that have International Labor Organization violations do not qualify.

The Sierra Club Stock Fund, which invests about 80 percent of its assets in stock and the rest in cash, is actually 5 years old. In January 2003, the environmental group partnered with Forward Management and "rebranded" a Forward mutual fund that began in October 1998 and began subjecting its holdings to the strict screening guidelines.

The Sierra Club chose to rebrand an existing fund because many institutional investors won't put money into a mutual fund unless it has a record of three years or more, said Garvin Jabusch, the funds' research director.

Since its inception, the stock fund has averaged an annual rate of return of 3.66 percent, compared with a 1.71 percent rate for the S&P 500 Index.

The Sierra Club Balanced Fund, introduced in January 2003, was started from scratch. It invests about 60 percent of its assets in stocks and 40 percent in fixed-income securities such as bonds. …