Net Shame for Tobacco Stocks

WASHINGTON -- A mutual fund company specializing in "socially responsible'' investing wants shareholders to shun tobacco stocks just as they once avoided companies active in South Africa. So, this week it launched a service on the Internet that identifies the tobacco holdings of 8,000 mutual funds.


The Calvert Group of Bethesda, Maryland, which controls 36 mutual funds with $5.1 billion in assets, also released a Yankelovich Partners survey of 800 mutual fund shareholders showing that 66 percent did not know whether their funds own tobacco stocks.


Fifty-nine percent said they would be at least somewhat more likely to invest in a fund they knew was tobacco-free, the survey found, and 35 percent said they might switch out of funds with tobacco investments. Clifton Sorrell Jr., Calvert's president, said the group's new online "Know What You Own'' service is intended to help investors make informed decisions about the social consequences of their investments "rather than inadvertently supporting an industry that has been linked to so much death, disease and suffering."


Calvert also is working with about two dozen health organizations -- including the American Medical Association, the American Lung Association and the American Heart Association -- to persuade companies to include tobacco-free mutual funds in their 401(k) retirement programs.


The coalition is distributing "action kits" around the country that include sample letters employees can send to their corporate benefits administrators, urging them to offer "socially responsible" funds that avoid tobacco stocks in 401(k) plans, and exclude mutual funds with tobacco holdings.


The strategy could benefit Calvert, of course, because the firm is one of only about 10 fund families that refuse to invest in businesses they deem reprehensible -- such as tobacco, military contracting and industries that pollute.


Some tobacco industry analysts said that while the social responsibility movement could make a dent in tobacco companies in the long run, it is unlikely to have much effect soon. The reason, they say, is the tobacco companies' rising earnings and stock prices.


"I myself abhor smoking," said Marvin Roffman, president of Roffman Miller Associates, a Philadelphia-based money management firm that owns large blocks of Philip Morris. "But Philip Morris is an extremely well-managed company that generates more free cash flow than any U.S. company ... and nobody's going to dictate to me what I can own. What's next? Selling Hershey's because it sells junk food?"


Tapping into the Calvert site on the World Wide Web (http://www.Calvertgroup.com), investors can type in the names of mutual funds and determine the size of their tobacco stakes.


The service reveals, for example, that 1 percent of the holdings of the nation's biggest mutual fund, Fidelity Magellan, are invested in Philip Morris. Of the nation's 8,000 mutual funds, about 1,400 hold tobacco company shares.