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Sustainable Investing, Integrating Your Money & Your Values by Beth Jones, RLP®

“I’m mad as hell and I’m not going to take it anymore” seems to be the sentiment of most US investors who have followed the American dream…saved their money, funded their retirement, invested in their home only to discover that their net worth has been greatly reduced by the recent global financial meltdown.

While only time will tell the final outcome, we Americans can take the opportunity to “wake up” and pay attention to where we are investing. The past few years have hammered home the importance of corporate integrity, as investors watched former Wall Street darlings collapse in the aftermath of corporate scandal and risky investment strategies.

USING YOUR MONEY TO MAKE A DIFFERENCE
Millions of Americans are looking to integrate their financial goals with their concerns about the environment, safe products, fair labor practices, and other quality-of-life issues. In its broadest sense, sustainable investing means including environmental and social factors in investment decisions. Doing so, through a variety of styles, can help investors meet their financial goals and bring about a more sustainable economy.

Sustainable investing, also known as socially responsible investing (SRI), is based on the principle of investing in well-managed companies that act responsibly toward shareholders, communities, employees, consumers, and the environment. In fact, a majority of investors now believe companies operating with higher levels of social responsibility carry less risk (55%) and deliver better returns (52%).1 And 71% of investors contend that knowing that companies are rated higher in terms of their social performance would make them more likely to invest in such companies.2

SOCIALLY RESPONSIBLE INVESTING
Although the term has a contemporary ring to it, socially responsible investing is hardly new. Many indigenous peoples have long histories of social responsibility: the Iroquois principle of considering the effects of one’s actions on seven generations to follow, being one example. SRI was first formally practiced by religious investors who, nearly 100 years ago, avoided companies involved in tobacco, alcohol, and gambling. During the 1980s, there was a resurgence of interest in SRI as investors shunned companies operating in apartheid South Africa.

Now many investors are concerned about a broader range of issues, including environmental protection, workers’ rights, product safety, and business ethics. In fact, SRI represents nearly one out of every 10 dollars under professional management (or $2.29 trillion), up 258% from 1995 ($639 billion).3 Many social investors direct some of their assets to promote community investment projects in the U.S. and around the world. In addition to earning competitive returns, these assets contribute to ending poverty by increasing affordable housing, community development, access to capital, and more.

HOW SRI WORKS
Of course, most investment managers look for companies with strong balance sheets, sound management, and viable products. However, socially responsible investments add another layer of analysis on top of traditional financial analysis that seeks to identify companies that meet specific social and environmental criteria. Many investors believe that this social research process can identify companies with lower risk and better quality management, thus helping to contribute to better long-term financial performance.

SHAREHOLDER ADVOCACY
Many socially responsible investors also actively use their position as owners to push companies to improve. And, some SRI mutual funds often work with companies to encourage them to address issues of social and environmental concern. Shareholder resolutions are formal requests that can come to a vote in front of all shareholders asking companies to take specific actions, such as working to diversify their boards, enhancing their corporate governance practices, and improving their environmental policies. Everyday shareholders can have an impact by simply voting in support of such social resolutions.

INVESTING FOR THE GREATER GOOD
Sustainable investing offers investors the opportunity to build sound portfolios for their financial futures, while helping to build a better future for the world. Some sustainable investment opportunities are in exciting young industries such as organic food and alternative energy; others transform “old economy” industries including autos and oil. Either way, we believe that strong environmental and social performance can boost financial returns.

Imagine an economy that meets the needs of the current generation without compromising the ability of future generations to meet their needs, using less of what we are running out of—resources and living systems—while creating dignified, living wage jobs for the one resource we have an abundance of—human beings.

But investment in mutual funds involves risk, including possible loss of principal. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The prospectus contains this and other information. Read it carefully before you invest.


  1. “Attitudes Toward Socially Responsible Investing,” Yankelovich Study conducted for Calvert Funds, January 2006.
  2. Ibid.
  3. 2005 Report on Socially Responsible Investing Trends in the U.S. The Social Investment Forum, 2005, p. IV.

Beth Jones, RLP® is a Registered Life Planner and Financial Consultant with Third Eye Associates, Ltd, a Registered Investment Adviser located at 38 Spring Lake Road in Red Hook, NY. She can be reached at 845-752-2216 or www.thirdeyeassociates.com. Securities offered through Commonwealth Financial Network, Member FINRA/SIPC.



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