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The methodology used to compile the Rating addresses the three main strategies of Corporate SRI - Avoidance and Affirmative Screening, and Shareholder Activism - along with Community Investing. The mutual fund's application of each element is weighted and scored, and then the funds are ranked. Those in the lowest percentile group (0-20%) are awarded  , those in the highest percentile group (81-100%) . Each fund is reviewed annually to determine its rating, and it is not uncommon for funds to rate differently from year to year given changes in their social responsibility policies.
Avoidance and Affirmative Screening. NI has always maintained that Avoidance Screening, while important, should not be valued the same as Affirmative Screening. Avoidance of alcohol, tobacco and firearm companies within a fund is relatively easy to apply, but mutual funds that seek and support alternative energy or invest in companies that have progressive employment policies receive special recognition for investing in industry leaders which embrace responsible corporate behaviors. This effort contributes to the changes valued by socially responsible investors, and therefore NI weights Affirmative Screening practices more heavily in its Rating.
The social screens are distinguished by issue groups: "vices" (alcohol, firearms, gambling and tobacco), environmental, employment, corporate governance, product quality and safety, military contractors, animal rights, health issues, and community relations and international human rights. Investing with Your Values features a matrix of the social screens applied by each SRI fund circa 2000, while the chart below is current.
Shareholder Activism. The use of shareholder dialogue and action is one of the most direct and powerful tools for bringing about changes in corporate behavior and policy with regards to the environment, employment practices and corporate governance. When compiling the NI Social Rating SM we evaluate each fund's participation in dialoguing with companies, drafting and supporting shareholder resolutions, and divesting as warranted.
Community Investing. The Social Investment Forum has for many years advocated a "1% For Community" campaign in which funds and advisors strive to allocate at least 1% of a portfolio's assets to certified community development financial institutions. As such, performance in this arena is included in the Rating. Extra weighting is given to funds that dedicate a portion of its total assets to non-insured targeted investments such as microcredit institutions in emerging markets worldwide. Finally, some mutual funds give a portion of their profits back to the local and world community, perhaps via humanitarian aid, and this is also recognized in the Rating system. |
The Heart Rating 
