Portfolio performance and characteristics vary depending on the manager and sector. Some funds have outperformed their peers net of fees and other have not.

For example, Neuberger Berman’s Socially Responsive Fund is outperforming, net of fees, the comprable Guardian Fund this year. These funds are actively managed large-cap growth funds and charge expense ratios of 0.90% and 0.87% respectively – which are higher than those of traditional index funds. They hold the same number of positions and their betas are similar to one another. Calvert’s actively managed Large Cap Growth Fund charges a higher expense ratio and a 4.75% load fee. This fund’s performance, net of all fees, is outperforming the Neuberger funds this year despite the hefty load. It has slightly lagged the Neuberger funds over three and five-year periods.

There are a few SRI index funds that charge low fees. Vanguard offers the FTSE Social Index Fund which has a large-cap growth tilt. The fund charges 0.24% compared to the Vanguard Growth Index Fund’s 0.22% expense ratio. The funds have a similar number of holdings and beta. But this year the Social Index fund’s performance is hurting.

I created a simple chart comparing these funds. Click here to see it.

The Social Investor’s Forum provides a comparison chart of many of the SRI funds out there. However, comparing these funds to traditional mutual funds takes some grunt work. I’d suggest starting with Morningstar’s Fund Compare tool.

Wading through the SRI fund world is tricky. We need to make sure a fund actually follows our social criteria, fits into our asset allocation scheme, and has the ability to perform net of fees. Plus, the universe of SRI funds is still small – so there are not a ton of options out there.

As for your second question – some analysts argue that companies that are smart about their environmental and social policies now (and think about how these policies might influence their bottom line) will gain an advantage over companies that ignore these areas. In turn, funds that invest in these companies might benefit from doing so. This is not to say that alternative energy sources are more reliable than coal or nuclear energy. Rather the argument is that forward social thinking might pay off in the future. The Wall Street Journal ran a good article on this topic earlier this month.

Last question: Please explain the argument that eco friendly policies are more sustainable than coal and nuclear power. While they are awful for the environment they have proven to be much more reliable sources of energy compared to lets say wind mills.

It’s worth noting that their fees are often higher than those of traditional mutual funds. And the menu of SRI funds available is a bit more limited – though growing.

Here is a link to Yahoo!’s directory of Socially Responsible Funds.

Here is a recent article from Morningstar about how to build a whole SRI portfolio.