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Investing Your
Values
How do your investments fit your values? Are the places where your money is earning more money for you consistent with the values by which you live your life? Socially responsible investing is a growing movement that assumes our investment money can serve social needs we choose while at the same time meeting our financial goals. About one in every eight dollars invested now is invested with some social criteria. This amount has grown from about 40 billion dollars in 1984 to over 2.3 trillion dollars today. These funds include public pension funds, church pension funds and endowments, and other personal and institutional funds. The three S’s -- Screening, Shareholder activism and Socially targeted community investing -- provide three complementary approaches to social investing.
Screening Screening investments means selecting investments that meet certain social criteria and excluding those that do not. Typical screens used for exclusion include companies involved with alcohol, tobacco, gambling, and the production of war materials. Other investors seek companies that meet positive criteria like environmental responsibility or fair hiring practices. Companies in socially screened investments may not be completely consistent in representing your values, but sound research that is now widely available from numerous sources enables informed choices. Many socially responsible mutual funds with different criteria provide a wide choice for individual investors. Many screened portfolios provide equal or better financial return than unscreened portfolios. Two screened index funds, for example (Domini and Citizens), have over their life provided returns above the Standard and Poor’s Index.
Shareholder Activism Shareholders as owners of the company have the right to bring issues before other shareholders in the proxy materials provided for the annual shareholder meeting. These issues must meet criteria defined by the Securities Exchange Commission. All shareholders have the opportunity annually to vote on all issues presented in the proxy statement. Since 1971 religious investors working through the Interfaith Center on Corporate Responsibility (ICCR) have addressed many issues using the shareholder proposal and dialogue. Working cooperatively with other social investors, members of ICCR seek to influence corporate management to be more socially responsive on a variety of issues. These issues have included human rights violations like South Africa and Myanmar (Burma), destructive environmental activities like hazardous waste disposal or global warming, the production of weapons, equal employment opportunity, unhealthy and unsafe working conditions like sweatshops, and economic issues like community reinvestment or world debt. Shareholder activists recognize that companies that are responsive to the wider community of stakeholders usually have better management, support the health and welfare of communities and produce returns that are secure for the long term. For texts of all shareholder proposals sponsored by religious groups, see The Proxy Resolutions Book available from ICCR at 475 Riverside Drive, New York, NY 10027.
Socially Targeted Community Investing Community investing provides capital to groups and institutions committed to community economic development. Community banks and credit unions, community loan funds, worker owned cooperatives and other community based businesses provide ways that money can remain in communities to provide jobs, housing and local services. Social investors often set aside a portion of their capital to serve community need. While the direct financial return may not be as high as other forms of investment, the social return is higher. Some of these investments, like certificates of deposit in banks and credit unions, have little risk and returns consistent with the market. Others, like loan funds, have higher risk since they are not insured, and usually provide a lower rate of interest in order to serve community needs. Finding Your Approach
Many social investors use a combination of these three approaches, understanding that each has its own validity and viability. There is a wide variety of choices, depending on the amount of money you have to invest, the relative risk you are willing to take, and your need for regular income or your desire for capital growth. Stocks have the ability to increase capital over the long term faster than bonds and other fixed income investments. While stock prices rise and fall with the market, in the long term stocks have appreciated in value more than fixed income investments like government bonds. Stocks also have varying degrees of risk since they are not insured or backed by the government. Choosing mutual funds as a vehicle for investment allows a means of diversifying holdings and thereby lessening risk. Several socially responsible mutual funds are also index funds, which means that their returns closely track the Standard and Poor’s Index.
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