Efforts to use investment funds to reward socially responsible business date back to the 1980s. In the early days, however, the restrictions on where money was invested were relatively crude - limited to avoiding tobacco stocks and,perhaps, petroleum companies. Now these funds are more sophisticated, and fund managers actively seek out companies that have racially diverse workforces, or that make extra efforts to protect the environment, or that actively try to protect their overseas workers. "Investors over the long term are interested in strategic differentiation," says Brady, who spent more than a quarter century on Wall Street before he launched the Salomon Smith Barney fund in 1987. "In the new world we operate in, these are increasingly strategic business issues."

The desire to support progressive companies comes from both individuals and increasingly from the managers of the giant pension funds. "We are having literally hundreds of discussions and interactions about socially responsible investing on a scale we've never seen before," says Timothy Smith, director of socially responsive investing for Walden Asset Management, a division of United States Trust Company of Boston.

While fund managers admit that many still doubt they make good investments, most will readily assert that their products perform at least as well as the average fund. "The market has always paid for good strategic management," Brady says, "and a lot of these issues are indicative of good strategic management." -

WHAT'S A COMPANY TO DO?


It's easy to announce intentions to operate a company in more environmentally and socially sensitive ways. But, as many executives are discovering, delivering on that promise can prove to be the most confounding mission a company ever undertakes. A good place to call is Business for Social Responsibility, essentially a trade organization where executives come together to discuss how to conduct socially responsible business.