Table of Contents
This book is dedicated to my wife Cyndy who continues to inspire me with her confidence.
Contents at a Glance
Part 1: What Is Socially Responsible Investing? 1
1 Socially Responsible Investing Defined 3 What is socially responsible investing and how does it contrast with traditional investing?
2 What About SRI Performance? 17 Do you sacrifice performance to practice socially responsible investing? SRI investing offers many investment opportunities that werent available not that long ago.
3 Shareholder vs. Shareowner vs. Stakeholder 31 Investors who believe companies should be responsible citizens are challenging the traditional role of corporations in society.
Part 2: Important Issues to SRI Investors 45
4 Environmental Issues 47 Environmental issues have been a cornerstone of the modern socially responsible movement and continue to play a dominant role in shareholder actions.
5 Societal Issues 61 What responsibility does a corporation have in safeguarding human and work rights? Socially responsible investors advocate that companies must work harder in these areas to improve the lives of worker here and abroad.
6 Corporate Governance 75 Socially responsible investors are strong proponents of shareholder rights and work hard to make corporations more accountable to their owners. In addition to transparency of board of directors actions, they work to halt the inequity of CEO compensation and other governance issues.
7 Economic Issues 89 Economic issues that trouble socially responsible investors include advocating corporations pay a living wage and provide access to health care insurance. Globalization has had many negative effects of United States and foreign workers, while political contributions at home and bribes abroad bring undue influence to corporations.
8 Community Investment Issues 103 Community investment and community development are very popular issues for many socially responsible investors. This is a way SRI investors can see their money at work in their community through special financial institutions that serve low-income neighborhoods.
Part 3: SRI Strategies 115
9 Screening Investments 117 Screens are tools used by traditional and SRI investors to narrow their searches for investment opportunities. For SRI investors the screens may be positive or negativeeither letting companies with certain characteristics through or negative, which reverses the process and excludes companies based on certain criteria.
10 Positive Screening 131 Positive screening is used to identify companies that have certain characteristics. For a socially responsible screen, this may include certain environment policies in place, labor relations policies, and other marks that set the company apart as being socially responsible.
11 Your Shareholder Rights 145 As the owner of common stock, you are an owner of a company and have certain rights, including voting rights in elections of officers and on other important matters before the company.
12 Mutual Fund Proxy Voting Victory 159 Since most SRI investors own stock through a mutual fund, their involvement is limited. Many funds participate in the proxy votes and share that information with the funds shareholders.
Part 4: SRI Investment Opportunities 173
13 Overview of Mutual Funds 175 Mutual funds are the most popular vehicle for investing because they offer professional management, diversification in most cases, and ease of investing and divesting your shares.
14 SRI Mutual Funds 193 Mutual funds are the most popular tool for investing in the socially responsible investments. You have a wide variety of funds to choose from, although not everyone will find you to their liking.
15 SRI Index Mutual Funds 207 Socially responsible investing index mutual funds are the workhorses of SRI investing. Like their traditional counter parts, the funds track an index of SRI stocks and are an efficient way to invest.
16 More About SRI Mutual Funds 221 Socially responsible investing mutual funds must also be analyzed as a financial product. What are the risks and rewards? What is the financial focus of the fund?
17 Investing in SRI Stocks and Bonds 235 Some investors will find it more beneficial to own individual stocks and bonds, rather than invest in mutual funds. How does this strategy compare to using mutual funds?
Part 5: How to Do SRI 249
18 Investor Tools 251 Where to find information on SRI mutual funds and individual stocks. Sources of information on community development and shareholder advocacy.
19 Using a SRI Financial Advisor 263 Some investors find they need professional help to cut through the tons of information and make sense of their finances. There are financial professionals who are familiar with SRI principles and can help you reach those goals as well as your financial goals.
20 Critics of Socially Responsible Investing 279 Socially responsible investing has had many critics. Some reacted without fully understanding the process, however, others saw flaws in the system and a need for some reforms.
21 The Financial/Personal Commitment 293 What does it take to be successful at socially responsible investing? What type of SRI investor are you?
Appendixes
A Resources 305
B Glossary 313
Index 321
Introduction
Un-American.
Thats how socially responsible investing was summarized by a well-known stock market icon a number of year ago. The idea that a company had any responsibility other than to make as much profit for its owners as possible was totally alien to this Wall Street tycoon. His sentiments were not alone. But another group of peopleinvestorsdidnt feel that way. They had strong personal feelings about certain issues and wished for a way to express those feeling through their investments. The Quakers had found a way during the 1800s to oppose slavery by not doing business with companies that profited from slave labor. Modern (Twentieth Century) investors carried that torch forward. Their opposition gelled around two major issues: Apartheid in South Africa and the war in Vietnam. Their vocal opposition to companies doing business in South Africa helped end that repressive government. Their efforts of pulling investments from defense contractors drew attention to the movement and raised it to a legitimate investment form.
Socially responsible investing today is still on a small segment of the total investment pie, yet the dollars involved are over $1.5 trillion invested. Most of the money, as in the traditional investment market, comes from institutional investors such as charitable organizations, religious groups, pension funds, insurance companies, and so on. These investment heavy weights have billions of dollars to invest.
The issue that has dogged socially responsible investing (SRI) for years is the idea that you will sacrifice performance if you choose this form of investing. The truth is that SRI mutual funds have their hot and cold streaks just the same as traditional mutual funds. Under some market conditions, the large cap growth SRI funds will flourish, while in different scenarios they may not. More SRI funds were added each year and with the new funds come new options and opportunities. One negative has been the fewer choices of SRI funds compared to traditional funds, but thats changing.