Understanding the wooly world of socially responsible investing (SRI) can be a daunting task for people who want to leverage their financial assets for the environment. But more and more enlightened investors are banding together in clubs, which allow them to divide up research and responsibilities, spreading out the risks inherent in building a stock portfolio focused on doing well by doing good.

If you're interested in forming a new or joining an existing investment club, start with the National Association of Investors Corporation (NAIC). The group teaches people how to become successful strategic long-term investors, and it aids in the creation and management of investment clubs.

NAIC can help you find the club that's best for you, including those focusing on socially responsible investments. NAIC members can participate in workshops on a wide variety of investment topics, such as annual report analysis, accounting basics, and Internet research.

Behind the Screen

Most investment clubs create some guidelines-commonly called "screens" that weed out companies that don't meet specific criteria. Clubs with an SRI focus usually consider environmental performance a top priority in choosing stocks. Well-managed companies involved in activities such as energy conservation, mass-transit systems, pollution control, recycling, and water management are obvious choices. Of course, these companies would also need to have good records in terms of human rights, animal testing, employee relations, and philanthropic giving to pass a larger social responsibility screen.

And then it needs a track record. "No proponent of socially responsible investing suggests that anyone should invest in any company without a reasonable expectation of receiving a decent return," said financial author and investment club guru Douglas Gerlach. "You still need to spend time on stock research. Just because a company gets five stars when it comes to social responsibility doesn't mean it's a good investment."

The Better Way to Make a Buck

As the stock market surged in the mid-1990s, Jacque French of Beaverton, Oregon, was just another individual investor looking to make a buck. But when she read an article stating that investors should only be concerned with the bottom line, she became alarmed. In an effort to counter this callous perspective on investing, she organized and taught an SRI workshop at her church. Several of the workshop participants expressed interest in expanding their knowledge of SRI, and French suggested they start their own club to learn about and invest in companies which were doing well by doing good.

Today, the portfolio of French's Green Futures Investment Club is starting to show an overall gain, despite rocky economic times. The club's dozen members meet monthly to discuss their 14 portfolio companies and add new ones as needed.

"We don't expect that the companies in our portfolio are 100 percent top-of-the-line in terms of socially responsible behavior," said French. "But if we feel that they are generally doing the right thing and working to remedy problems — and have good long-term financial prospects — we can still include them."

French is confident that the companies in the club's portfolio, including AFLAC, Astropower, Home Depot, Starbucks, and Washington Mutual will continue to deliver above-average performance, both economically and environmentally.

Another SRI-club founder, Marion Von Beck, had been in another investment club but became appalled by some of the choices made for inclusion in the group's portfolio. Unable to convince her fellow club members of the benefits of an SRI focus, Von Beck quit the club and started her own with seven like-minded friends.

Three years later, Von Beck's Responsible Investing Society of Knoxville (RISK) boasts a 9 percent return on its SRI portfolio, which includes Lincare, Patterson Dental, Pfizer, Chico's, Affiliated Computer Services, and Astropower.

"The members were all attracted to companies with good values, which made it easy to come together as a club," Von Beck said.

Von Beck warns that it's difficult to find companies with solid financials and socially responsible credibility.

"There are no pure socially-responsible companies," she said.

All of the corporate scandals coming to light recently have only muddied the waters for investors like Von Beck and her compatriots in RISK.

Indeed, no one ever said it would be easy to invest with one's values, and the subjective nature of screening out bad corporate actors does not make for clear choices. But by banding together with other like-minded investors, members of SRI clubs can share the work as well as the rewards, with society and Mother Earth as additional beneficiaries.