It's a lousy time to be in the financial services, but the Wall Street Journal reports (subscription required) that the Neuberger Berman Socially Responsive Fund is seeing investor inflows -- a claim that very few mutual funds can make.

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.

The Social Investment Forum has issued a new report showing that assets under management at firms employing socially responsible investment (SRI) screens grew by 18% to $2.71 trillion [subscription required] in the two-year period ended in December of 2006.

That compares to growth of just 3% for total assets under professional management. Public outcry over environmental issues and the crisis in Darfur have led many firms to adopt at least some elements of socially responsible investing.

The Wall Street Journal reports that there were 154 SRI funds in the U.S., managing $159.2 billion in assets as of the end of 2006 vs. 151 funds and $148 billion in assets two years earlier.

SRI sometimes gets a bad rap: some pundits, including Jim Cramer, have argued that it would be better to make money investing in evil companies and then donate some of the proceeds to charity. However, in his book The SRI Advantage, Peter Camejo shows that socially responsible investing has actually historically outperformed traditional investments. Perhaps you really can do well by doing good.

What intrigues me about SRI is that it's gotten several of my socially conscious friends saving/investing for their future when, without the allure of saving the world, they might not have.

To learn more about SRI and research funds, visit SocialFunds.com.

An article in The Wall Street Journal looks at the changing face of socially responsible investing.

Socially responsible investment funds generally use screens to avoid stocks that they perceive as being objectionable: alcohol and tobacco companies, along with weapons manufacturers are generally excluded from these funds.

But as the funds gather assets and gain a mainstream following -- as investors everywhere become increasingly concerned about issues like global warming -- these funds are finding themselves with more leverage than ever before. They can get meetings with CEOs and use shareholder meetings to voice concerns about issues and drum up support among other shareholders.

As pension funds jump into the mix, issues involving labor and health care also gain prominence.

I'm a big supporter of socially responsible investing but, taken to an extreme, there can be a downside. As these funds gain increased leverage, they can push companies into adopting policies that are reflective of pet causes rather than the broader interests of minority shareholders.

As Milton Friedman wrote, "There is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

While I would argue that that may be extreme, many investors adopt that ideology wholeheartedly and will object to the growing influence of SRI funds.

If you've read Muhammad Yunas' amazing book Banker to the Poor, you know what a profound impact microlending can have on third world countries. Tiny loans (as little as $10 in some cases) have allowed poor families to invest in the rudiments of a business, in some cases breaking the cycle of poverty.

Now MicroPlace.com, with the backing of eBay Inc. (NASDAQ: EBAY), wants to make it easier for those of us in the Western world to finance these endeavors -- and earn a return too, as high as 4%.

While the site may not be profitable and certainly isn't a material contribution to a company the size of eBay, it could help the company where it needs help these days: its reputation.

The minimum investment is only $100, and subsequent contributions can be as little as $50. It's definitely something worth looking into, and the fact that you can earn interest makes this an ideal way to "do well by doing good."

If you're a parent, I would suggest opening up an account for you children this holiday season. It's a way to give them the gift of giving back, along with that Nintendo Wii or pair of Heelys.

The traditional definition of sin stocks has been simple: booze, cigs, scantily-clad women, and gamblin'.

But now some traditionally socially responsible companies are backtracking. According to The Wall Street Journal, KLD Research & Analytics, a socially conscious indexing firm, has launched a new Global Sustainability Index (subscription required) that uses a point system of sorts to include or exclude companies based on environmental impact, corporate governance, and the nature of their products. Some companies that sell liquor or operate casinos have made the list. Even Pax World recently dropped its zero-tolerance policy for alcohol and tobacco stocks.

The shift is a result in the shift in the definitions of morality and social responsibility. Originally, many of these funds targeted social conservatives who found gambling and pornography distasteful. The target market now seems to be the environmentally and socially conscious.

Of course, there are different funds for people with different ideologies. There's even a special fund for Democrats! For my profiles of a few off-beat funds investing based on SRI criteria, check out Invest with Your Politics.

The Haas School of Business at the University of California, Berkeley is starting an innovative new fund. Combining education with environmental consciousness, the school is launching a $250,000 student-managed investment fund with an emphasis on social responsibility.

The Wall Street Journal interviewed (subscription required) Kellie McElhaney, the head of the university's Center For Responsible Business about the fund, which will be managed by M.B.A. students.

According to McElhaney, "There will be about five M.B.A.s initially as portfolio analysts and managers, and we hope eventually 10. They'll be responsible for researching companies; making investment recommendations with the help and oversight of Haas faculty, a committee of investment professionals and Haas alumni; and then monitoring the investments. We think each M.B.A. should be responsible for recommending two investment positions, one long for companies with a good social-responsibility record and one short for those with a poor record."

That sounds awesome! Long-term the benefits from the program could be two-fold. On the one hand, MBA-students will gain exposure to ideas about corporate and social responsibility -- McElhaney hopes that the program will encourage more students to take ethics/social responsibility classes.

But I would also like to see if the Haas program, or one like it, can attract students who don't have a financial background but a strong social-consciousness -- and get them interested in learning about investing, something that might not appeal to them without the SRI component.

In the past, I've had a certain ambivalence about socially responsible investing. If it caught on, it could have the power to change the way that companies are run. But in its current manifestation, or so I thought, investors could very well sacrifice returns at the altar of the conscience. But I was mistaken and, after reading The SRI Advantage, I've jumped on the SRI bandwagon -- and now institutional investors are too.

According to Thomas Kostigen at Marketwatch, "Nearly 200 institutional investors representing some $9 trillion in assets say they are conducting at least some type of social shareholder engagement in their investment policies. This group of investors belongs to the Principles for Responsible Investment, part of a United Nations' program to institute ethical conduct among global corporations, and the findings of how they invest are being released for the first time in a new study."

It gets better: "For example, just over half of these institutional investors are using their significant clout to require the companies in their portfolio to use standardized environmental, social and governance reporting."

Some firms are pressuring companies to make more full disclosures about their environmental and social impact in their SEC filings. It seems that Wall Street may be getting ready to exercise its enormous power to push for corporations to be better citizens.

If you're interested in shifting a portion of your portfolio toward SRI principles, check out SocialFunds.com.

I like the idea of socially responsible investing (SRI). Many socially responsible funds have amassed terrific track records, and the values-based philosophy will appeal to many investors who otherwise might not be as interested in the market. But with the popularity of SRI on the rise, it's no surprise that some funds will use the SRI moniker to generate interest, although they really aren't providing a a good product for investors.

A case in point would appear to be Integrity Mutual Funds, discussed in a column by Lawrence Carrel over at TheStreet. The fund is tiny, with just $46 million in assets, and I am impressed with the manager's commitment to social justice. He even speaks with PETA to learn about how companies treat animals!

Here's the problem with the fund, summed up by Carrel: "The fund charges a steep front-end load of 5.75%, which tops Lipper's average maximum load of 5.28%. Its expense ratio is 1.56%, topping Lipper's median expense ratio of 1.21%."

Socially Responsible Investing (SRI) has skyrocketed over the past ten years. 10% of all investments, approximately $229 trillion, qualify as SRI. There are currently 221 SRI mutual funds available for individual investors. So what, more specifically, is SRI -- other than an attempt to combine money and morals, not always an easy mix? All SRI options agree upon three broad requirements.

1. There must be some sort of screening process that examines a company's business practices to see if it meets with the social agenda of investors. Social research is just as important as fundamental financial research in SRI. One of the more common screens is to examine companies in terms of their environmental records, as well as their human rights records. Companies marketing themselves as SRI companies generally have a positive gender equity policy, and are heavily involved in social welfare programs in the communities in which they operate. There are no agreed-upon criteria for SRI other than those imposed by potential investors.