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Making Socially Responsible Investments

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A lot of us have become very aware about what we eat, what we buy and what kind of a footprint we leave. Then, when we invest our money, we often don’t consider that the companies we are buying in our mutual funds might be the very businesses we would avoid in the marketplace.


Perhaps it’s time to take a look at taking your investments down a path that suits your concerns about the world around and the world your children will inherit.


Narrowly Focused Investments
Most investors are narrowly focused. They want to make money. But some investors want to make money without destroying the environment, without violating their personal values and possibly even helping others in the process.


While these types of investments have been around for decades, the cost of doing this sort of investment was not always cheap. The sorts of investments first came across my radar when my daughter, a free spirit who was interested in investing asked me, “Are there any mutual funds that are ethical?”


What she was really asking was whether the companies that the mutual funds invested in were screened for more than just performance. While we would like to believe that all mutual funds are ethical; what about the companies they invest in?


What Describes Ethical?
While most companies say they act ethically and govern their shareholder’s investment with care, far too many fall short of the broadest description of what is ethical. There is the issue of how they treat their workers, the quality of the products they produce, which can lead to yet more concerns about the environmental and how what they do impacts the community around them.


Now, a great many businesses have made strides in all of these issues but progress is slow and sometimes scattershot. More difficulties arise when these companies deal with people and workers living overseas. Not only is the politics of the country in which these employees might work an issue but also so is how the indigenous people are being treated.


This must make it awfully difficult for the mutual fund manager. And the investor as well. Being socially responsible costs money. Not as much as it once did. And numerous businesses are making improvements at trying to be greener. The question is can they be profitable doing so?


What a Socially Responsible Mutual Fund Manager Looks For
A socially responsible investor might shy away from a company that produces guns, alcohol or tobacco products for example. But since it was first re-introduced back in the eighties—a Methodist minister gave the first socially responsible investment speech back in 1708 about how his parishioners should use, or should say not use, their money, it has become quite a bit more. But the basis of what socially responsible is still, all these years removed, don’t invest in sinful companies.


Throughout the years, what is sinful has turned into what is harmful to not only their customers, but to the environment and society in general. Socially responsible investments over the years has been active in working for equality for women, civil rights, labor-management issues, nuclear power, and just about every other negative byproduct of a company’s pursuit of a profit.


But it has changed over the years to include shareholder advocacy—these investors were at the forefront of calling Wall Street out for those huge bonuses—to community investments.


Investors Want Businesses to See the Big Picture
Progress is picking up pace but is still far from adequate. Currently, almost one out of every nine dollars invested goes to investments of this sort. This is due to the fact that there are still not enough companies doing the right thing, or should I say, trying to do the right thing in every facet of the business. The mutual fund manager, like all fund managers, needs to create a place for investors that is not only efficient but low-cost as well.


These qualifiers leave the choices dramatically whittled down. Some funds take the list even further, culling out those companies that don’t share a certain moral or religious belief. But socially responsible investors are on the right track and through their efforts over the years, many disclosures about how proxy votes (those done by your fund manager with your permission) are cast. Also evidence of this movement has forced many major corporations to begin to “clean-up their acts”. This is a true flight to quality and value and these investments have begun to show some serious gains in overall returns.


Community Investments: The New Socially Responsible.
This is a more direct form of investing that allows you to put money in a community where it can do the most good. A large part of the problem with growing communities is access to financial help. Large traditional institutions simply do not want to take the risk. But investors now have the opportunity to invest directly into communities that in turn invest directly through lending for housing, small business creation, and education or personal development not only in the US but in developing countries as well.


This goes well beyond charity. You are making an investment in a community and in return, you not only can feel better about who you are but what your money is doing to help others. A good deal of that money goes to microenterprises that are often begun by women and minorities. What you two ladies are doing here on this show is a form of community investment.

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