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Investing with Integrity

By Cameron Woodworth

When it comes to investments, people increasingly are deciding to put their money where their values are. Socially responsible investing (SRI), in which people invest their money in causes they believe in, has become a huge growth industry.

Today, SRI accounts for approximately 12-13%percent (over 2 trillion dollars) of all investments in the United States. In 1984, by contrast, only $40 billion was invested in socially responsible ways. People are jumping at the opportunity to invest in companies that develop and sell Earth-friendly products, promote women's equality, support human rights, and in other ways improve the world. They're also doing away with their investments in companies with poor records in these areas.

At the same time, investors are discovering that SRI makes financial sense. Social investors can make as much, or even more, money by investing in companies that match their principles, despite Wall Street claims to the contrary.

Proof of the financial incentive to invest responsibly comes in comparing the results of the Domini Social Index, a stock index of 400 socially responsible companies, to the S&P 500. Between 1992 and 1997, the DSI 400 outpaced the S&P 500 "in terms of annualized return by a margin of 16.9 percent versus 15.5 percent," Furthermore, despite the tragic events of September 11 that sent the financial markets reeling, socially and environmentally responsible mutual funds continued to earn top marks through the third quarter of 2001.

There are three major categories of SRI: Screening, shareholder activism and community investing. Of these, screening is the biggest. In SRI, you can screen potential investments for positive and negative qualities. In other words, you (or a professional financial planner) scrutinize a company's record on environmental and social issues. Socially concerned investors typically look to invest in companies with outstanding employee relations, excellent environmental policies, respect for human rights around the world, and safe products. Simultaneously, they avoid companies that don't have these features.
Another popular method to promote social and environmental change among corporations is shareholder activism. This technique gives socially responsible investors the direct ability to influence company practices. An investor purchases a small amount of stock in a corporation in order to gain the right to issue a shareholder resolution. The resolution, or a threat of one, can be used to influence a company to make decisions that promote the environment, the well-being of employees or the safety of their products.

Community investing is the area where SRI dollars can bring about the most bang for the buck. It includes investments in community development banks and credit unions, and concentrates on improving disadvantaged communities.

Many World Wide Web sites contain valuable information (http://www.coopamerica.com and http://www.socialinvest.org are two good starting points). Other people prefer to let experts do the investing for them, and there are several certified financial planners in the Puget Sound region who specialize in SRI.
Cameron Woodworth, a freelance copywriter, is author of "Green Cuisine: A Guide to Vegetarian Dining around Seattle and Puget Sound." Contact him at camw@seanet.com or 206-706-3301.