As "socially responsible investing" gains in popularity, critics are increasingly more prone to point fingers at foundations and charitable groups that accept money from corporations whose business objectives advances the very problems these nonprofit organizations are trying to correct, the San Jose (Calif.) Mercury News reports.

The problem can be confusing, because while many groups wouldn't take money from a tobacco firm, a petrochemical giant or a brewer, they might accept donations from a third party that, unknown to the nonprofit, has ties to one of the corporations, the newspaper reports.

For instance, the American Lung Association’s policy prohibits taking money from tobacco companies, yet it received a small grant from Community Foundation Silicon Valley, which invests some endowment funds in Philip Morris stock.

In 1999, the $1.6 billion James Irvine Foundation granted $267,000 to an organization that battles substance abuse, while at the same time investing $7 million in such companies as Anheuser Busch and Asahi Brewery. And the William and Flora Hewlett Foundation, which supports the Sierra Club, invests in such firms as Exxon and Dow Chemical, the Mercury News reports.

Foundation boards of directors tend to blame such oversights on financial advisors more concerned with increasing the charity's assets than with socially responsible investing. A 1997 study by the Council on Foundations finds 85.5 percent of 647 grantmakers do not use any type of investment screen related to their organization’s mission, the newspaper reports.

Many foundations don't perform such screening because it can be a costly and time-consuming process, and they often don’t have specific reasons to review their investment policies. Grant recipients, on the other hand, filter out donations that may have come from a company whose objectives aren't aligned with their priorities, the newspaper reports.

Michele Perrault, a Sierra Club board member, said the organization does not accept grants from corporations whose business activities seem to conflict with her group’s philosophies> However, she also indicated that money from other nonprofits -- which may have come from some of these corporations -- is not screened, the newspaper reports.

"It is certainly an issue to be wrestled with," she said.

Most of the money organizations receive through such channels comes in small amounts. And many of these foundations may be investing in companies whose business practices were not perceived as objectionable as recently as five years ago.

The issue nonprofit groups are now wrestling with is whether accepting funds from such corporations is doing more harm than using the money to further social causes, the newspaper reports.

"We think that in the long run, we will do better and more good by not trying to bridge a gap between our investment policy and our programs," Bill Nichols, treasurer of the William and Flora Hewlett Foundation, told the Mercury News.

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