Socially Responsible Investing
While on the treadmill some mornings, I flip through the cable news channels, which include a couple financial networks like CNBC. These shows are loaded with "expert" commentators hosting interviews with other "experts" in order to help us in the audience learn more about the markets and how to invest our money. Everything is about income, profits, revenue and any other term intended to bring joy to the ears of capitalists.
Rarely is any mention made of Socially Responsible Investing, integrating personal values and societal concerns with investment decisions, though there have been mutual funds following that philosophy for over twenty years. Today on CNBC I caught two "experts" disparaging the entire SRI movement. One implied SRI funds were hypocrites because they held stock in companies like Enron which were found to have cooked the books. Both men agreed, since the goal of investing is to make the most money possible, SRI investing makes no sense. As anecdotal evidence they reported on recent gains made by "vice" funds which "sinvest" [their idea of a clever pun] specifically in companies involved with sectors typically shunned by SRI funds, such as weapons, alcohol and gambling.
Let me quickly dismiss the hypocrisy charge. To invest in a company which appeared to meet socially responsible criteria, but then turned out to have cooked its books is not hypocrisy - it is victimization. Once the book cooking allegation has been made and is under investigation, the decision of when and how an SRI fund should sell the stock is made differently from other funds, which might try to dump the stock off on some unknowledgeable buyer. An SRI fund would be expected, once the decision is made to sell the stock, to only sell to a knowledgeable buyer, even if that meant realizing less money. But I doubt many SRI funds, except possibly some which held a portfolio indexed to include many large funds otherwise meeting the SRI criteria, had invested in busineses like Enron, whose business model itself raised some practical qustions about whether it was a sound investment.
As for the goal of investing, while it may be true that the financial channels operate on the premise everyone wants to make the most money possible on their investments, the problem is that the financial channels don't seem to ever talk to people from the mass of American investors. People want to make money, but they also want to avoid risk, so trade offs have to be made in deciding on investments. Real investors also have personal financial experiences and preferences that they want to take into account in making their decisions. And many investors are in fact motivated to be socially responsible in making their investments.
An investor driven solely by the desire to make the most money possible will be disappointed if investment was not made in the #1 top paying fund. Since there can only be one #1, most greed driven investors are disappointed. SRI funds typically perform well compared to their non-SRI peers, sometimes better and sometimes worse, but usually somewhere around the middle. Since greed is not the motivation, SRI investors do not have the same disappointment level as greedy investors and usually come out about the same. SRI investors, regardless of fund performance, take comfort in the fact they are not knowingly supporting companies they consider socially irresponsible. SRI funds are usually proactive also in such matters as submitting socially responsible shareholder resolutions and loaning money market funds for community development projects.
Socially Reponsible Investing is definitely something to consider if you have not already done so. For intorductory information, you can look at: http://www.socialfunds.com/.
Rarely is any mention made of Socially Responsible Investing, integrating personal values and societal concerns with investment decisions, though there have been mutual funds following that philosophy for over twenty years. Today on CNBC I caught two "experts" disparaging the entire SRI movement. One implied SRI funds were hypocrites because they held stock in companies like Enron which were found to have cooked the books. Both men agreed, since the goal of investing is to make the most money possible, SRI investing makes no sense. As anecdotal evidence they reported on recent gains made by "vice" funds which "sinvest" [their idea of a clever pun] specifically in companies involved with sectors typically shunned by SRI funds, such as weapons, alcohol and gambling.
Let me quickly dismiss the hypocrisy charge. To invest in a company which appeared to meet socially responsible criteria, but then turned out to have cooked its books is not hypocrisy - it is victimization. Once the book cooking allegation has been made and is under investigation, the decision of when and how an SRI fund should sell the stock is made differently from other funds, which might try to dump the stock off on some unknowledgeable buyer. An SRI fund would be expected, once the decision is made to sell the stock, to only sell to a knowledgeable buyer, even if that meant realizing less money. But I doubt many SRI funds, except possibly some which held a portfolio indexed to include many large funds otherwise meeting the SRI criteria, had invested in busineses like Enron, whose business model itself raised some practical qustions about whether it was a sound investment.
As for the goal of investing, while it may be true that the financial channels operate on the premise everyone wants to make the most money possible on their investments, the problem is that the financial channels don't seem to ever talk to people from the mass of American investors. People want to make money, but they also want to avoid risk, so trade offs have to be made in deciding on investments. Real investors also have personal financial experiences and preferences that they want to take into account in making their decisions. And many investors are in fact motivated to be socially responsible in making their investments.
An investor driven solely by the desire to make the most money possible will be disappointed if investment was not made in the #1 top paying fund. Since there can only be one #1, most greed driven investors are disappointed. SRI funds typically perform well compared to their non-SRI peers, sometimes better and sometimes worse, but usually somewhere around the middle. Since greed is not the motivation, SRI investors do not have the same disappointment level as greedy investors and usually come out about the same. SRI investors, regardless of fund performance, take comfort in the fact they are not knowingly supporting companies they consider socially irresponsible. SRI funds are usually proactive also in such matters as submitting socially responsible shareholder resolutions and loaning money market funds for community development projects.
Socially Reponsible Investing is definitely something to consider if you have not already done so. For intorductory information, you can look at: http://www.socialfunds.com/.
posted by Tom Blake | 3:25 PM
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