Planting trees

Put Your Money Where Your Values Are

You want to make the planet a healthier, more sustainable place to live, but you also want to maximize your investments to achieve financial security. Can you do both? Yes.

Trillions of dollars — more than 10 per cent of those under professional management in the United States — reside in investments that have been screened using social or environmental criteria. It is a movement that has become an industry for global change.

“It is crucial and rewarding to align your financial decisions with your personal values — whatever they are,” advises Jack Brill, a licensed financial adviser with Natural Investment Services in San Diego. He, along with his son Hal Brill and Cliff Feigenbaum, co-authored the book Investing with Your Values (Bloomberg Press).

Jack Brill says the “natural” investors “actively seek to balance their need for financial return with their yearning to make life a little better for others and the earth.”

Green Up and Clean Up

Does socially responsible investing mean you have to sacrifice portfolio performance? Clearly, the answer is no.

Take a look at the performance of the MSCI KLD 400 Social Index. From its inception in May 1990 til today, this leading index of socially responsible companies has outperformed the S&P 500.

Brill himself maintains a model growth portfolio on his company’s web site. “Social investing does not harm returns, and may help them,” observes Brill.

Hal Brill says socially responsible companies succeed in part because of their values. Because socially and environmentally responsible companies “take care of their employees, take care of their communities and look after the environment,” he says, “they are avoiding lawsuits” and “actually turning out to be more profitable.”

How to Get Started

The Social Investment Forum, a non-profit organization that promotes socially responsible investing, suggests three ways to make a difference in the way you invest.

1. Remove “misaligned” companies from your portfolio

Identify companies whose values you don’t share and eliminate them from your portfolio. Among the companies shunned by many socially responsible investors are those who sell tobacco, use nuclear power or make weapons. Other investors avoid companies with poor environmental records or troubled relationships with their employees.

2. Invest in communities

Invest in local banks, credit unions and other institutions that lend money to small businesses, low-income housing projects or provide micro enterprise loans to citizens of developing nations to improve their livelihoods.

3. Engage in shareholder advocacy

Tell the managers of companies in your portfolio that you want them to operate ethically and to establish and adhere to policies that are important to you. Two years ago, shareholder pressure forced Wal-Mart to stop selling rain-forest wood in its stores. Wal-Mart, in turn, then encouraged the entire industry to adopt the same policy.

A good place to start your search for responsible companies is among the two major indices: the MSCI KLD 400 Social Index.

The MSCI KLD 400 index is composed of 250 of the S&P 500’s best corporate citizens, along with the next largest companies that meet Domini’s rigorous screening criteria and a smattering of smaller companies.

If you prefer to invest through a mutual fund, you can chose from among hundreds of socially responsible funds. Information on the performance and composition of each fund is readily available on the web. To help you get started, the Social Investing Forum has information to help you compare socially screened funds.

5 Tips for Natural Investors

Jack Brill, a registered investment adviser with Natural Investment Services Inc and co-author of Investing with Your Values (Bloomberg Press), suggests the following steps for becoming a savvy and socially responsible investor.

1. Gather your account information together — bank and investment accounts, insurance, annuities, retirement accounts, etc — and make a list of all the companies you invest money in today.

2. Make a list of your personal values — religious, social, etc — and the causes you wish to support. Then, separately, add the products and issues you wish to avoid, such as tobacco, gambling or oil, for example.

3. Examine your first list against the second to see how well your current portfolio balances with your values.

4. Investors seeking professional guidance should sit down with a financial adviser who specializes in socially responsible investing. This person can help you evaluate your financial goals and select appropriate investments. A good list of SRI advisers can be found at Co-op America’s Green Pages.

5. Self-directed investors (all investors for that matter) should seek a well-diversified portfolio of 10 to 12 companies. Investors who can’t afford to take a sufficient position in that many equities should consider one of the many socially screened mutual funds now available.