Like most SRI funds, the Neuberger Berman Fund screens out all companies involved in tobacco, alcohol, gambling, nuclear energy and defense. After that, the fund seeks out companies with strong balance sheets and good growth prospects and then screens based on more proactive criteria like workplace diversity, environmental impact, etc.
Given all the angst about corporate America right now, socially responsible funds should continue to gain market share. Whether they'll be able to outperform the market in terms of performance remains to be seen. The fact that SRI funds are less likely to be invested in oil companies has saved them some considerable heartbreak in recent months, and one Islamic-oriented mutual fund avoided the whole financial rout because Muslim law prohibits the lending of money with interest, and the fund consequently shies away from the financial services industry. On the other hand, the fund will likely underperform if the banks lead an economic turnaround over the next few years.
Looking at all the data though, it is pretty clear that socially responsible investing does not, on average, lead investors to underperform the market. If you're interested in exploring socially responsible investing, check out Pax World, the market leader in the field.
Neuberger Berman was owned by Lehman Bros. until it was sold to a pair of private equity firms in the wake of the company's bankruptcy filing: One wonders if socially responsible investing would have allowed the fund to invest in a company that was as socially irresponsible as its parent.
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