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Social conservatives rally an investor army

They have long used boycotts to sway policy, but now social conservatives are aiming to put their savings where their beliefs are.

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Until now, the AFA has overlooked investing as a tool for two primary reasons, according to AFA President Tim Wildmon. Consumer pressure is simpler to explain to a mass audience, he says, and the AFA hasn't had sufficient resources to rally an investing campaign on top of its other projects. He now sees values-based investing as an opportunity missed.

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"We just dropped the ball on that," Mr. Wildmon says. "We haven't been very smart in that regard. But now that's about to start changing."

Values-based investing likely to grow

Social conservatives have seen their options multiply over the past six years. Launched in 2001, the Ave Maria family of Catholic-friendly funds has grown to include five funds. Each screens out firms with links to abortion, contraception, pornography, and nonmarital partner benefits. Also in 2001, the Southern Baptist Convention established GuideStone Funds, which shun firms involved in pornography, abortion, and vices. Seven of the 12 GuideStone Funds now count more than $1 billion under management, making it the largest family of socially conservative mutual funds.

The $2 trillion SRI industry, which represents about 13 percent of all professionally managed funds in the United States, still dwarfs the fledgling endeavors of conservative investors. Still, observers believe values-based investing is likely to keep gaining momentum. Ron Simkins, director of the Kripke Center for the Study of Religion & Society at Creighton University in Omaha, Neb., regards the growing acceptance of ethical investing as a natural extension of conservatives' 25-year quest to reform society through public policy initiatives and consumer boycotts.

"It's just a matter of growing up" and adding more sophisticated tools, Professor Simkins says. "Now, instead of boycotting Disney, they'll be investing in Fox Family Films."

Pioneers in values-based investing, however, see other factors at work.

After a failed attempt to launch a family of socially conservative mutual funds in the late 1990s, Stephen Bolt shifted to a new model when he established Nashville-based Faith Financial Network in 2002. FFN, which pays for exclusive endorsements from AFA, relies on a network of more than 100 representatives to plug socially conservative investors into suitable investments, based on a proprietary screening system.

Among red flags are a firm's exposure to alcohol, tobacco, and gambling industries, as well as abortion, pornography, and gay issues. Companies sponsoring the gay-rights efforts of Human Rights Campaign, for instance, get poor marks.

The model works, Mr. Bolt says, because socially conservative investors usually want top-performing investments, and this system doesn't put anything off limits for social reasons. Instead, investors learn which investments are the least objectionable among a list of top performers in a particular sector. They also get a chance, he says, to resist a societal slide in morality that wasn't a concern three decades ago.

"If you look at the dramatic, phenomenal, historic change in the values of this country over the past 30 years, you'll see that social conservatives are now decidedly on the defensive," Bolt says. He cites gay initiatives in corporate America as an example. "Thirty years ago … everybody thought like us. But today, that's not the case."

As values-based investing takes off, stakeholders are hoping to broaden the scope of salient social issues. Bolt, for instance, says his analysts will begin screening for environmentally troublesome companies within the next year.

In Birmingham, Mich., Marco DeCapite says he's pleased his investments don't support abortion or pornography, but he also wishes they would do more to address other Catholic concerns, such as environmental protection and poverty-related issues.

"There are other concerns that definitely need to be considered," Mr. DeCapite says. "We're doing what we can with what we have today."