Socially Responsible Investing

This information is sponsored by The Social Investment Forum, the non-profit trade association for SRI professionals.

The purpose of this area on SCN is to share ideas and tools that can be used to understand and begin to practice a more sensible, and fun, investment approach. Investing and spending our money has become so complex and abstract that many people no longer feel a personal connection to what their money is actually doing in society.

Socially responsible investing (SRI) is the allocation of financial resources, after the consideration of both economic and social criteria, with the goals of maximizing the potential financial and social returns to both the investor and society at large.

The Four Key Parts of Socially Responsible Investing

  1. Avoidance screening and analysis. Examples: You want to screen out tobacco, gambling, and nuclear power or weapons.
    Long practiced by religious organizations, this is simply avoiding certain industries or practices in your portfolio.
    Avoidance screening is usually coordinated through your SRI mutual fund or separate account manager.

  2. Qualitative screening and analysis. Examples: Domestic and international labor practices, environmental practices, and full public disclosure.
    To have a diversified portfolio, sometimes we have to invest in a company that is not perfect but has better qualities than others in their industry.
    Qualitative screening is usually coordinated through your SRI mutual fund or separate account manager.

  3. Shareholder dialog and activism. Examples: Asking a major company to report their EEO data or global labor standards to the public, asking a large media company to not support a porn network, or getting a large chain to phase out selling unsustainably harvested old-growth and tropical lumber.
    We are seeing increasing use of this tactic lately by the SRI community to try to get the companies that made it past "2" above to change their ways.
    Some big-name companies are taking heed. Recently, shareholder campaigns for tighter supplier oversight have resulted in steps being taken by Nike Inc., Wal-Mart Stores Inc. and Walt Disney Co. Disney, where one shareholder proposal won 43% support, is making sweeping changes to the way it monitors, audits and reports on contractors. Gap Inc. has also started releasing more information on overseas contractors' compliance. Get the latest scoop on what's going on from the Advocacy & Public Policy Program of SIF web site.
    Shareholder activism is usually coordinated through your SRI mutual fund or separate account manager.

  4. Community investing. Example: A young couple was a long-term welfare recipient. They turned to his long time hobby, woodworking for help. And, with the help of a small loan from a community loan fund, they were able to turn his woodworking into a business that now supports the whole family off welfare. Get the latest scoop on what's going on from the Community Investing web site.
    Investors can now easily make job creation, child care, and affordable housing a portion of their portfolio by investing in professionally-managed community investment notes.
    Check out the 1% for community campaign at the above web site.

The Social Investment Forum encourages its members and their clients to fully participate in SRI those four ways.

Most people think that social investing only has to do with avoidance or negative screening. Now you know better. If your money is not participating in each of those four key parts above, you're not really doing all that is possible with social investing.

This page is maintained by the following individual:
Contact: Eric A. Smith, CFP
Web: Goodfunds includes more information and resources on SRI including books, periodicals, news, and more.

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