Save the Earth Sacrifice Your Returns?

Even the most passionate advocates concede that evidence of success is mostly anecdotal, involving cases like Wal-Mart's decision last year to extend benefits to unmarried partners of employees.

Socially responsible investing will never become popular enough to have a serious impact because most people recognize its flaws, said Entine, arguing that social screens tend to be too arbitrary and simplistic.

A company can get high grades for its charitable work and low grades for some of its products, making the social screen worthless, he said. He noted that socially responsible investors once embraced Enron and other companies that were later embroiled in that scandal. More recently, he said, oil producer BP got high grades for an innovative environmental approach -- until admitting last year that it had failed to adequately maintain its Alaska pipelines.

The debate over whether social investing is appropriate and effective flared anew early this year on reports that the Bill & Melinda Gates Foundation, the world's largest charity, had invested in companies that were causing some of the problems the foundation tries to solve, such as pollution in Africa and predatory lending in the United States.

The foundation takes the view, shared by many others, that its endowment should be invested to produce the most funding for the foundation's causes.

But KLD's Kinder says more foundations and other institutional investors are starting to look for ways to make their investment practices more consistent with their social goals, particularly by using their voting power as shareholders to pressure companies to change.

This spring, companies face 1,114 shareholder resolutions, up from 893 in 1997, according to ISS. While most concern corporate governance, the total includes 45 measures on global warming, up from 36 a year ago -- and none just a few years earlier, Tulay said.

The killings in Darfur also have contributed to institutional investors' growing interest in socially responsible investing, Tulay said. Nine state governments have adopted legislation addressing Darfur. Some, for example, require that state employee pension funds avoid ownership of companies doing substantial business in Sudan.

In a typical case, activist shareholders this spring urged Berkshire Hathaway to sell its $3.3 billion stake in PetroChina, an oil firm whose parent company, controlled by the Chinese government, has extensive operations in Sudan.

But in an example of the uphill battle activists face, that resolution was defeated May 5 by an overwhelming margin. Berkshire Chairman Warren E. Buffett -- who is a Washington Post Co. director -- said there was no evidence that PetroChina itself operated in Sudan or that it had any influence over its parent company.

Because the activist-shareholder approach requires holding shares in the targeted company rather than banning them, it need not entail any sacrifice in investment return, Kinder said.

But even if it does, it may be worth it, he argues. Many investors, whether individuals or institutions, set the issue of effectiveness aside for a simpler goal -- to avoid profiting on businesses they disapprove of, he said.

"If you're a hospital, you really don't want to look yourself in the mirror and say, 'We own a lot of Altria,' " he said, referring to the tobacco company. "It's about what the institution wants to project to the world."