Socially Responsible Investing: Putting Your Money Where Your Heart Is

Socially Responsible Investing: Putting Your Money Where Your Heart Is Socially responsible investing (SRI) has been around in some form for more than 200 years, but it has become more prominent in the investing scene in the last 40. It's a way for individuals, corporations and institutions to merge their investing with their values. It empowers investors to 'vote' with their pocketbooks as a way to influence governments or corporations, hopefully, improving the quality of life throughout society.

SRI in the United States was first practiced in the late 1700's, when members of the Methodist Church refused to invest in companies that were involved in alcohol, gambling and tobacco. As the Quakers settled in North America, they refused to invest in slavery or weapons. The modern roots of SRI began with the politically-charged 1960's. Social responsibility gained more attention as thousands demonstrated for civil rights for women and minorities, protection of the environment, labor issues and anti-nuclear issues. Then in the 70's, all eyes turned to apartheid in South Africa. It is generally acknowledged that apartheid finally ended because of the eventual worldwide boycott.

SRI is Big Business
So, how big is socially responsible investing in the U.S.? As William Shatner so ably used to say: 'Big'.really big.' According to Tim Smith, Board President of the Social Investment Forum www.socialinvest.org, ''more companies [are] embracing their role as responsible corporate citizens by?acting as leaders of corporate social responsibility.'

Assets in socially responsible mutual funds have grown dramatically in the last fifteen years. In 1984, there were 4 such funds representing about $40 billion. Today, there are about 200 such funds with total assets over $151 billion. If you include all SRI portfolios, the total invested is $2 trillion.

Shareholder Advocacy
When you buy individual stocks or stock mutual funds, you become a part owner in that company (or companies in the fund). As such, you are entitled to attend shareholder meetings and express your concern about the policies and practices of the company(s). According to the Securities and Exchange Commission (SEC) any shareholder who owns at least $2,000 of stock in a given company for one year may file shareholder resolutions asking management to consider changes in practices and policies.

Increasingly, shareholders are voting to support lesbians and gays. Consider the following:
  • In 2004, Northstar Asset Management introduced a resolution at Fifth Third Bancorp's annual meeting to add sexual orientation to the company's anti-discrimination policy. Sixty-three per cent voted in the affirmative.
  • Also last year, the First Parish Unitarian Universalist Church in Cambridge, MA used the influence of its endowment fund to convince Stryker Corporation not to discriminate against gays & lesbians when hiring employees.
  • Also in 2004, after years of discussion between concerned shareholders and members of the Board, Coca-Cola created a report on the economic impact worldwide of HIV/AIDS, malaria and tuberculosis. The resolution urging that report was supported by 98 per cent of Coca-Cola's shareholders.
  • Five years ago, McDonalds Corporation added a sexual orientation non-discrimination policy after the Pride Foundation and Trillium Asset Management brought a motion to shareholders.
More than 50% of the companies in the S&P 500 have policies supportive of their lesbian and gay employees, according to the Social Investment Forum. Moreover, the Human Rights Campaign (www.hrc.org) reports 379 of them have established non-discrimination policies that include sexual orientation. These corporations are in such Red States as Arkansas, Virginia, Georgia, Texas, Idaho, Missouri, Ohio, Kentucky, Tennessee and North Carolina. While that is progress, clearly, there is much more to do.

Screening is a way to either exclude or include publicly-traded securities in investment portfolios or mutual funds based on a particular criteria. The firms may have good employer-employee relations, produce products that are useful and safe for the environment or be supportive of lesbian and gay employees by offering (or continuing) domestic partner benefits.

On the flip side of the coin, there are many companies that are avoided through screening because they're involved in the 'sin stocks' of alcohol, gambling, tobacco, weapons manufacturing or harming the environment. A 2003 Social Investment Forum report on SRI trends in the U.S. indicated an 11% increase in screened mutual fund assets between 2001 and 2003.

Socially responsible investing is definitely here to stay. The Baby Boomers are putting their money where their collective mouths are. Look for continued progress going forward.