Conscious Choice: Socially Responsible Investing

January 2003

Socially Responsible Investing

How to do the "green thing"

by Sheri Wallace

Socially responsible investing (sri) is the process of matching your money and your value system. Socially responsible investors consider companies’ policies, values, and products before they invest, asking, "Do I believe in this company? Can I take pride in supporting this enterprise?"

There are thousands of ways to invest responsibly. The more you learn about the topic, the more you’ll want to learn. Moreover, even if you’re not an investor, you’ll learn how to choose companies that empower your values whenever you do business.

Screening Your Portfolio

One of the terms you’ll hear frequently in SRI circles is screening. This is one of the most dynamic aspects of social investing. It’s also where you, as an individual investor, wield the most power. After all, you decide what goes into your portfolio, right?

There are two types of screening, avoidance and affirmative.

Avoidance screening is probably the most common. Someone who opposes tobacco use, for example, might use avoidance screening to eliminate investment candidates that support the tobacco industry. Such an individual wouldn’t want to invest any of his or her hard-earned money in a company that is tied to tobacco.

Affirmative screening takes the opposite approach. Imagine this same investor has a young child at home. She or he could use affirmative screening to select companies that are manufacturing organic foods for children.

So where do you go to find out if a company has ties to the tobacco industry, if they secretly (or not so secretly) sell pornography, or if they engage in other business practices you’d prefer not to support? And how do you find companies that are doing great and wonderful things for the world?

A few good magazines (listed below in the resources section) are among my favorite places to find information. They always have the latest news, including commentary on issues I never would have thought of on my own. The profiles of new and exciting companies can give you ideas for new investments, as well as inspiration after a rough day!

You can also start by viewing the Web site of a company you’re considering or searching your favorite investment site, looking for press releases and other information that might hint at issues you want to research further.

If you don’t have time to do the legwork yourself, there are socially responsible mutual funds that employ professional screeners. They spend their time watching companies for corporate responsibility, so check out some of their Web sites to see if your prospective company is listed. This will help you determine whether you’re on the right track or have been "greenwashed." Greenwashing is a tactic by which companies put a certain spin on their public relations to make the outside world believe they are socially responsible, when, in fact, they aren’t.

Investing in Your Community

Another piece of the socially responsible investing pie is community investing. Community investing is simply that — investing money in a community, where it cultivates the resources necessary to directly help the people who need it most. The recipients of community investing are underprivileged people who don’t qualify for traditional loans. This capital helps them start their own businesses, buy homes, and develop their community with childcare and jobs. According to the Social Investment Forum, community investing is the fastest-growing area of social investing in the United States, with a growth rate of 41 percent between 1999 and 2001.

Information on community investing can be more difficult to find, especially if you want to invest right in your own backyard. Without a doubt, the best place to begin your search on any community investment topic is at www.communityinvest.org. You’ll find plenty of resources and articles, as well as suggestions for bringing community investment to your own neighborhood.

Since investing in a bank that does community investing is no different from banking with any other bank (FDIC insurance, etc.), you simply need to shop around for the bank that offers the best account for your needs. However, if you decide to invest in a community development loan fund, you’ll notice a wide range of products and returns. Other sources of information include www.cdfi.org and the National Community Capital Association.

Shareholder Activism

Shareholder activism has been receiving a lot of news in the past couple of years and will probably continue to grow exponentially as the American public works to change the face of big business. Any shareholder who has owned a minimum of $2,000 in stock for at least a year and adheres to the other regulations set forth by the Securities Exchange Commission (SEC) can file a shareholder resolution. Many of the shareholder resolutions filed this year focused on environmental policies, the arctic drilling issue, and fair labor standards.

As a first step, you’ll obviously want to vote on any shareholder resolutions you receive as a stockholder. You can keep up on the latest resolution news at www.shareholderaction.org. The shareholder activism section at
www.sriworld.com is also useful for research.

Where To Begin?

SRI is an exciting topic for a journalist to cover because there are no rules. Practice what you believe in, and you will find that the world just opens up. You are welcome whether you are an investor with a large portfolio or simply someone who wants to invest at the consumer level. Making intentional choices about the products you purchase, the trips you take, and the companies you help support is very empowering. You are not simply left to the whims of fate or greed. Instead, you are making the world a better place — whatever that means to you.

Sheri Wallace is a freelance writer from Tucson, Arizona, specializing in social investing issues. She will be contributing occasional articles on this subject.

Learn More About Investing Green

* The Coalition for Environmentally Responsible Economies (CERES).

* Corporate reporting on environmental performance issues. www.globalreporting.org

Interfaith Center on Corporate Responsibility (ICCR). (Coalition of religious organizations that work through shareholder resolutions.)

* Social Investment Forum (A home page of sorts for SRI).

* Green Money Journal (Print publication that discusses all aspects of social investing. Available by subscription; archived articles available online.).

* Domini Social Investments (A leader in investment products. The Domini site also has many resources for investors, including research materials and shareholder resolution information.).

* Calvert Funds (Another leader in SRI funds. The Calvert site is a great place to begin a search into any company’s suitability for your portfolio. Their "Know What You Own" service, available for free online, allows investors to research using common social keywords.).

* Utne Reader (This is a fantastic magazine for alternative living. Use their Web site to chat about current articles, subscribe, or send a gift subscription.).

* Mother Jones (Another magazine for hard issues.).

* LOHAS Journal (A great source of news and information about the Lifestyles of Health and Sustainability marketplace).

* Socially Responsible Investing: Making a Difference and Making Money by Amy L. Domini. If you’ve ever wondered if it’s possible to make money while investing responsibly, here’s the book you need to read.

* Investing With Your Values: Making Money and Making a Difference by Hal Brill, Jack A. Brill, and Cliff Feigenbaum. This book is the most exhaustive resource currently available on the subject. Includes contact information for all the players in the social arena, explanations of all the issues, and even discussions of investing and portfolio selections. A must-have for any social investor.

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