Socially Responsible Investing

[Craig Grella]

Socially responsible investing is not a new idea, but one that has become increasingly more popular in recent years, and particularly as new funds become aware of the reality that investing in companies that promote christian values is not only good for the soul, but very good for business.

What Does it Mean to be Socially Responsible?
Each denomination has their own definition of what it means to be socially responsible, but in many respects being socially responsible lies not in what a company does, but more in what it does not do. For instance, one church discipline encourages socially responsible investing by investing in companies that avoid morally questionable business practices like:

• Making or promoting alcohol, tobacco, or firearms
• Creating or trading in pornography
• Manufacturing or selling products or services that promote or profit from war or the unethical treatment of citizens on a global scale
• Contributing to the damage of the environment

As you can see, some of the guidelines are specific, whereas others are more ambiguous. We all know the companies that make cigarettes, beer, and liquor, and can easily avoid investment in such firms. But what about the companies that profit from war? It’s somewhat harder to pin down the companies involved in those practices, and since these companies tend to be among the largest companies in the world, they may be involved in both “good” and “bad” practices. An argument can be made about some large electric and energy companies, for example. On one hand, these companies are helping to pioneer clean, efficient energy; which has the potential to reverse years of environmental damage. On the other hand, some of them make engines for jets capable of dropping bombs and engaging in warfare. One may argue these products fulfill an important part of our national security and are necessary for the safety of our citizens, while others denounce the manufacture of such weaponry for its potential to harm even just one human being. How far you go with delineating the boundary between a “normal” company and a “socially responsible” company is up to you.

Where to Put Your Money
The main tenet of most investing is to grow your money. Socially responsible investing takes that one step further and seeks to encourage investment in companies which promote the greater good, like affordable housing, community development for underserved communities, micro-financing and other types of positive social purpose investments, not only here in the states, but abroad too. Such investment does not have to be at the detriment to financial growth.

One of the common myths about socially responsible investing is that you’ll earn a lower return on your money than had you invested in other funds. You might hear that socially responsible indexes under-perform the market, even in good times. This is simply not true, and is a good example of over-generalization and ignorance on the part of the money manager. There are many companies providing products and services that comply with socially responsible themes that outperform the market and feature higher than average returns.

There are various ways to adhere to socially responsible investing principles, even for those who wish to place their money in non-church affiliated organizations; such as “ethical” banks, socially responsible investments funds, and even indices of companies which fit the investment criteria established in several church finance disciplines. There following list of companies are established funds that practice socially responsible investing, with services available to any denomination.

Calvert Investments - This is an index of the larger companies that practice sustainable and responsible investing. Calvert places your money with firms that have a strong commitment to protecting not only social values, but also the environment. Several of the companies with which they place money are involved in clean energy, environmental research, and conservation.

Domini Social Investments - Provides a company screen for socially responsible investing, and also promotes access to funds for struggling or developing communities.

Dow Jones Sustainable Index - An index of global companies that compete with sustainable practices. Most relate to environmental issues, but others include more ethical practices which are rooted in core christian values. To be included in the index, the Dow considers things like corporate citizenship, local and global philanthropy, and its corporate compliance as well as conduct of the board, historically.

The Investors Circle - Helps you invest in new and emerging companies that are involved with socially responsible and sustainable business practices.

Using a fund manager which practices socially responsible investing has a few advantages. These funds actively review shareholder resolutions to keep abreast of the business direction taken by the companies in which it invests. They also report issues and concerns to boards of directors through letter writing and advocacy, and in some cases even lobbying efforts can help push policy that makes socially responsible investing efforts more transparent.

Getting Your Organization Started with Socially Responsible Investing
If your organization would like to find out more about socially responsible investing I recommend the following course of action:

• Check your by laws or church discipline, as it probably dictates exactly what you should and shouldn’t do with the money you plan to invest.
• Check your local conference or diocese for investing resources or a list of recommended funds that may be related to your particular faith. The church accounting and finance office can probably point you in the right direction.
• Check with local money management firms which specialize in church and non-profits. Groups like the United Methodist Foundation invest money for churches exclusively.
• Contact other churches in the area, or their finance officers, and find out where they invest.

Before writing a check to anyone, make sure to thoroughly investigate their references. There are literally thousands of horror stories of churches which gave (and lost) money to ponzi schemes, fake funds, unscrupulous investment managers, and fraudulent mortgage companies. Do not be shy about asking to speak with existing or former clients. While the fund manager can’t speak about specific investments they can probably put you on the phone with a client or two to discuss their interaction with the firm. If you suspect that you might be dealing with an individual or firm that is committing fraud notify the authorities immediately, including the state attorney general and the local church board. Do not let that activity go unnoticed and unreported, even if it is embarrassing to your church. To view a list of currently reported mortgage scams view the credit library at Direct Lending Solutions which has tracked dozens of user submitted scams over the past few years. It’s a great resource.

When I was treasurer of a church in Seattle, there were very few local investment managers with experience in non-profit socially responsible investing. We had to rely on the advice of other churches. That had a few unexpected results. We eventually developed relationships with those other churches, pooled resources, co-sponsored events, and strengthened our ties to the local community. All things which have enhanced the mission of the church and its finances.

[DerrikCFP]

Individuals and ministries interested in socially responsible or biblically responsible investing can also get good information and advice from a frequent blogger on Christian PF and Certified Financial Planner, Jay Peroni.

www.jayperoni.com


Derrik Hubbard, CFP
www.thestewardshipsolution.com

[Sal LoPiccolo]

Craig Grella wrote a fantastic article on Socially Responsible Investing. I was on the website today and became a memember of the site and I came across this article. I was very interested. It has been known that some people are easily taken advantage of when it comes to money and finance. You need to work with someone you trust, read and gather information from articles like Craig's for awarness and resources. I can always appreciate some good topics and good writing. Blessings to all in the name of the father. May positive thinking and strong faith make your dreams come true!! I Thank God for all he does in my life I am greatful always!!