Which Funds are Socially Responsible and What are Mutual Funds Rating?
In May 1990, Kinder, Lydenberg, Domini & Company (KLD) introduced a system of rating and index for screening and ranking the mutual fund companies modeled on the S&P 500 index. DSI or Domini Social Index as it is called is a capitalization-weighted index and consists of approximately 400 stocks. All four hundred companies are industry representatives screened and hand picked for their particularly socially strong character. The screening of companies for the purpose of inclusion and rating is two tiered viz. exclusionary and qualitative.
A highly concerned approach adopted by exclusionary screening eliminates companies receiving revenue from alcohol and tobacco manufacturing or sales, products and services of gaming and companies whose revenues exceed 2 % by selling military weaponry.
As opposed to this, the qualitative screening measures safety management at operational and products' level, employee relations, diversity of a company and environmental concerns and similar parameters.
It is important to understand that quite a few companies were eliminated from the DSI for failing to qualify the screening long after their inclusion too. DSI mutual funds' rating has come of age and to become the bench mark for socially responsible mutual funds.