The Oregonian reports that Oregon might add a socially responsible investment (SRI) option to its menu of 529 tuition savings products.

So-called “529 plans,” named after the relevant section of the federal tax code, differ significantly from funds held directly by states on behalf of their own employees. 529 savings plans are administered by state governments, but they are in fact private accounts held by individuals. Any American can invest in and receive tax benefits for participating in any state’s plan, although there may be additional tax advantages for investing in one’s home state.

As The Oregonian’s Bill Graves explains, the broad reach of state government – investing in companies that it regulates, protecting citizens while seeking returns with their money – can lead to contradictions. Some objected to Oregon’s simultaneously fighting Big Tobacco while investing in a cigarette company:

“…[Oregon investors Rob Huff and Katie Corson] also questioned how the state can invest money through one of its college savings mutual funds in Altria Group Inc., until recently the parent company of Philip Morris USA Inc. The tobacco company contributed to a campaign last year to defeat Measure 50, a proposal by the Legislature to use a cigarette tax to buy health coverage for Oregon’s 116,000 uninsured children. ‘It is so hypocritical,’ Corson said….”

While only a few states consider ESG criteria in their investments, the engagement of individual investors might change that. Oregon would join Pennsylvania, Washington, D.C. and California in providing an ESG-screened 529 option, according to Graves. California’s 529 product is based on the KLD Broad Market Social Index and has attracted $59 million from investors.

For more information, see “College savings plans: The hunt for social responsibility in Oregon” and “Board looks at college savings plans.”

Click here to learn more about the KLD Broad Market Social Index.