Saturday, August 29, 2009

Socially Responsible Investing Part 2 of 3

Okay, I know I was supposed to post this yesterday, but I was too geeked up about helping my friend with his green building project. So today, we will highlight trends in Socially Responsible Investing.


A rapidly growing number of investors are factoring a company's environmental, safety and corporate governance (ESG) practices into their investment decisions. Some for social reasons, others fear the risks associated with violations, regulation, competition and public relations when companies don't have strong ESG performance. ESG is especially important given the growth of "emerging market" funds. These are funds of businesses operating in high growth developing countries, including China, Brazil, parts of Africa and India There is growing evidence of a positive correlation to financial performance and sensitivity to the triple bottom line over time. Currently there is a push among blocks of investors, for the Securities and Exchange Commission (SEC) to require its member companies to provide ESG reporting. The most recent data suggests that SRI dollars account for 11 percent of all dollars invested, this represents a growth of 18% from 2005 to 2007. Typical institutional investors include governments, universities, hospitals, foundations and religious organizations that want to align their mission and values with dollars invested. The Interfaith Center on Corporate Responsibility (ICCR)represents 300 faith based institutional investors and has over $100 billion in capital in the SRI market.

Financial Performance or "Show Me The Money"

Recent studies have demonstrated the superior performance of SRI funds over non-SRI funds and indexes. According to Social Investment Forum, the oldest SRI index, The Domini 400 earned 8.43% from 1990-2008, compared to the S&P 500, which returned 7.78% over the same period. I am considering investing in The Appleseed Fund, given its 35.21% year to date performance and 12.42% one year return. Another one I'm considering is the Pax World High Yield Bond Fund with year to date returns of 27.42%. There are several other indexes which have outperformed comparable non-SRI indexes in the past decade. The Dow Jones Sustainability Index World is one of these. Wow! So it sounds like you really can have your conscious cake and eat too! All investments have some inherent risks, so be sure to do your homework, understand your comfort level with assuming risk versus return, your time horizon for needing your cash, your goals and review with a certified financial advisor (they should ask you for this information -if they don't- walk away).

Act Now

If you are a member of a credit union or union, donor to or board member of a non-profit or foundation, employee of a large corporation or member of a religious entity you can now ask if your institution has included ESG or SRI requirements into its investment policy (a written internal document that outlines rules, regulations and guidelines for investments) and if not, suggest that they do. If you are an individual investor, you can purchase shares of SRI funds and indexes for as little as $500 (save up monthly until you accumulate this amount or use your tax refund, gift money, etc) or part of a company's stock through Sharebuilder for an even smaller initial investment. There are many investment firms and advisers that specialize in this type of investing, we will touch on these in my final post of this series on socially responsible investing.

For a more detailed report on this topic, click here, there is a lot of good information about guiding your organization's dollars in this direction, in addition to general information on SRI.

No comments: