Profiting With Principle

Profiting With Principlefrom_our_columnists

By Megan E. Corcoran

Investing is all about making money, right? Well, to some people, investing means more than profit–not to say they don’t look for profit, but they want to invest in companies that they can feel good about while still turning a healthy profit.

“I want the way I spend my money in the world to reflect my values,” says Monique Miller, Development Director for the Center for a New American Dream, based in Tacoma Park, Maryland. She has been working in the environmental protection field for ten years, and her passion for the environment informs her investing habits.

Miller is a socially responsible investor (SRI). She does not just pick the hottest stock in the market; she takes a careful look at the company or mutual fund holdings first. Like most investors, she looks for growth and earnings strength, but she only targets those companies whose treatment of employees, the community, and the environment is in line with her own principles.

And Miller is not alone–$2.2 trillion dollars are socially responsibly invested in this country, according to the Social Investment Forum’s 1999 Report on Socially Responsible Trends in the U.S. That figure translates to one out of every eight dollars under professional management.

It seems only natural that investors would want to invest responsibly for society’s future, while still preparing for their own financial needs. And socially responsible investing also provides an opportunity to influence change in corporate America since SRI investors and fund managers often file shareholder resolutions as a way of influencing company behavior.

The SRI movement has its roots in the late 70’s when, in an effort to fight apartheid, a number of groups divested themselves of U.S. companies that were doing business in South Africa. Gradually, it occurred to investors to begin using investment funds to accomplish certain public goals, such as community development, environmental protection, or civil rights. As a result, the number of socially responsible mutual funds has grown from 55 in 1995 to 175 today.

“SRI is an important tool in building a just and environmentally sustainable economic system, by bringing issues such as environment and social justice to the forefront of business and investing,” says Amy Domini, a partner at Kinder, Lydenberg, Domini & Co. and founder of the Domini Social Index 400–which has outperformed the S&P 500 since its inception in 1990.

Her analysis of a company includes how the company affects shareholders, employees, suppliers, customers, communities, and the natural environment, as well as corporate culture and the quality of the management team. “By looking at all these points, we have a comprehensive idea of the company’s impact on society,” says Domini.

Generally, SRI mutual funds shun companies involved in alcohol, tobacco, gambling, weapons, or nuclear power and instead look to invest in companies dedicated to improving community, diversity, employee relations, environment, and product safety. Some SRI funds devote themselves to tackling a very specific issue, such as animal cruelty, gay and lesbian rights, or women’s issues.

Linda Pei, co-founder and manager of the Pro-Conscience Women’s Equity Fund, says she started her fund in 1991 because she was struck by how little the glass ceiling had risen in the twenty years since she had graduated from business school. “Women filled 5% of the management positions in 1970, and in the early 90’s that figure had not changed at all,” notes Pei.

So, Pei set out to make a positive impact on the lives of women and uses investing as a way to define a voice for women in corporations. When screening companies, she looks at the number of women on the board of directors, the percentage of females in top management positions, the company’s policy in terms of hiring and promotion, and benefits that are available for women so they don’t have to worry about other roles in life–such as child care and elder care.

“There are a lot of entry level women, but we look for the company to create ways for women to climb the corporate ladder. It is part of our commitment to make the world a little better for our children,” says Pei.

And what makes it even more appealing than the idea that your investment dollars could affect corporate policy and make the world a better place is the knowledge that investing with a conscience can pay off with healthy returns. After all, it makes sense that a cleaner company is going to be more profitable in the long term–since no toxic waste clean-up costs and fewer personal injury suits means more money for growth.

It’s a win-win situation, so why not pick your cause the next time you are picking an investment.

Five Largest SRI Mutual Funds:
Domini Social Equity Fund (DSEFX)
Dreyfus Premier Third Century (DRTHX)
Pax World Fund (PAXWX)
Calvert Social Fund (CSECX)
Citizens Index (WAIDX)
Pro-Conscience Women’s Equity Fund (SEMMX)