(Dow Jones) A number of 529 college savings plans are adding more socially responsible investment options to their line-ups.

At least one-the District of Columbia College Savings Plan-provides enough funds to create a diverse SRI portfolio.

The D.C. plan was designed that way because "we thought it would give D.C. a niche," says Laurent Ross, college savings plan manager for Calvert Investments, which manages the plan. "Almost all of our out-of-state clients use us because of the SRI."

SRI funds typically screen out investments in companies that pollute or are involved in such products as alcohol and tobacco. Demand has grown significantly in recent years, especially for so-called green funds, although some industry experts say demand is still limited among investors in 529 plans.

"I haven't seen a huge groundswell," says Joe Hurley, founder of Savingforcollege.com LLC, a company owned by Bankrate Inc. that provides information about 529 savings plans on its Web site.

Still, advisors who specialize in SRI say they are finding more families who want the option for college savings.

"A lot of people do not know that there is a good SRI 529 plan available," says Eric Packer, a senior investment advisor at Progressive Asset Management in Wellesley Hills, Mass. He says his clients prefer using the D.C. college savings plan despite potentially higher fees than say a direct-sold plan. Assets in the D.C. plan are still relatively small at more than $131 million, up 43% in 2009.

Among the states with SRI fund options are Illinois, Pennsylvania and California, which was the first 529 plan in the nation to offer a socially responsible investing option. Oregon will provide one this year when TIAA-CREF takes over management of its plan. The Virginia College Savings Plan last fall started offering an SRI option, the Parnassus Equity Income Fund, because of consumer demand and the desire to provide more choices, says Mary G. Morris, chief executive of the Virginia College Savings Plan.

Jon Ellenbogen, a financial advisor with Wells Fargo in Washington, D.C., who specializes in SRI, recommends that clients begin by looking at the 529 savings plan in their home states because many states offer tax and other benefits in addition to the federal tax benefits. He often uses the District of Columbia plan-especially for in-state clients-but says investors also need to consider performance and fees.


Copyright (c) 2010, Dow Jones. For more information about Dow Jones' services for advisors, please click here.