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.