Riding the Ethical Bull

The World of Socially Responsible Investment

“More analysts are riding the bull,” read the headline in the Chicago Tribune recently.

Despite bad news from other sectors of the economy, the stock market seems to be on the rebound. With tech stocks including EBay, Yahoo, and Amazon hitting 52-week highs last month, the first evidence is in that the burst bubbles of the century’s turn might be behind us. The Down Jones Industrial Average, New York Stock Exchange, and even the wayward NASDAQ are all up for the year.

But before you bolster your mutual fund, or fork over more money for your 401(k), you might want to ask yourself, “What’s my money doing anyway?”

In the beginning…
In the late 1960’s, a group of very creative people who asked themselves that question didn’t like the answer they discovered.

They began to realize that, although their value system privileged civil rights, the equality of the sexes, environmental conservation, international peace, and worker justice, their investments supported the corporate old boy’s club, pollution, weapons’ production, and a “profit at any human cost” mentality.

Pax/Peace Dollars
So they invented a new way to invest: socially responsibly. In 1971, the Pax World Fund was launched with $101,000 in assets. Like other mutual funds, it was broadly diversified. But fund managers were directed to select stocks with an eye toward the social impact of the companies in question, not only the potential for the fund’s financial gain.

Today, the Pax World boasts over $1 billion in their Balanced Fund alone. Their vision gave birth to a movement for justice which now commands $2 trillion in professionally managed assets. According to the Social Investment Forum, there are now over 175 socially responsible funds available to conscientious investors.

Three’s company
Funds exercise social responsibility in three ways. First, they refuse to invest in morally objectionable behavior. For example, managers might screen their portfolios to keep out companies that produce tobacco, alcohol, weapons, and nuclear power. Some new funds founded by more traditional Catholics
screen out companies involved in abortion, including most pharmaceutical companies and many insurance firms.

Second, socially responsible investors actively pursue companies which support community development. ShoreBank of Chicago, for example, offers Development

Deposit accounts: checking accounts, time deposits, money markets, and retirement (IRA) and savings accounts “directed—single-mindedly—toward urban development.”
ShoreBank finances entrepreneurs who recapture

solid but neglected rental buildings and start and expand small businesses. They also provide financial training and banking services to low income working people and help people fix up their homes and property.

Third, investors engage in shareholder activism , intentionally purchasing stock in certain companies in order to propose shareholder resolutions which address social ills. The latest campaigns of the Shareholder Action Network include the introduction of resolutions at ExxonMobil requiring the company to adopt emissions reduction goals, and at Wal-Mart to require third party monitoring of working conditions in the company’s overseas factories.

Making good AND making money
The socially responsible firms
over the last 30 years have also posted competitive returns for their investors. The Domini 400 Social Index keeps pace with the S & P 500 . Experience shows that you need not check your conscience at the Wall Street door. An ever-growing segment of the population knows what their money is doing…to the environment, for human rights, and in their pocketbooks. Its working for the common good, and getting a great return.

For more information on this subject, check out the Social Investment Forum.