The magazine analyzed 43 SRI funds and concluded that more than a dozen offer a solid track record, on both social and financial terms. The data, as of March 31, 2006, also reveals that the outperformance during that 12-month period was largely due to the fact that most funds have a slight growth bias.

However, over a three-year period, exactly half the socially responsible mutual funds outperformed their peers and half underperformed, indicating that over time, SRI funds perform no better or worse than the average fund.

In a related analysis, Corporate Knights found that that most SRI funds invest in pretty much the same securities as other funds, with shareholder activism cited as the main difference.

"Investing for change is becoming increasingly more sophisticated with fund families like Ethical Funds publishing reports with names such as the Shareholder Action Program Update detailing how they are advancing human rights standards, environmental justice, and climate change mitigation," says Corporate Knights editor Toby Heaps.

Funds were awarded a score of one to five shields. Fifty per cent of the score was based on the social qualities of the fund, such as disclosure, engagement and research, and 50% was based on the financial quality of the fund, determined by its one-year and three-year percentile ranking.

Four funds achieved the top score of five shields: Inhance Balanced Fund, Ethical Canadian Dividend Fund, Desjardins Environment Fund, and Ethical Special Equity Fund.

The social scores, topped by Inhance Balanced Fund, were based on how well the fund integrated social and environmental factors into the stock selection process, presence and execution of community investment, disclosure of both voting record and policy, engagement with companies to help them better appreciate social and environmental risks and opportunities, and the extent to which the fund stayed true to its mandate when investing in derivatives, trusts, other funds, and indexes.

Ethical's Canadian Dividend Fund was the top performer, with a one-year return of 29% and a three-year return of 28%. Eleven new SRI funds were launched in the past 12 months.

That's the good news. What's surprising, says Heaps, is how few Canadians actually invest in SRI products. The main reason for that, he believes, is that Canadians don't really understand the concept and that's partly the fault of fund companies, who "tiptoe around the reality of of SRI." These funds own mostly the same same stocks as non-SRI funds, with a few exceptions such as weapons and tobacco, he says.