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Socially Responsible Investing: Our Money and Our Values, A Powerful Combination

Socially responsible investing can promote wealth, and a healthier world. Most of us think of investing as putting our hard-earned money to work in stocks or mutual funds. We hope (and pray) that we've made good choices so that our money will yield a decent return. We hope that we've invested in the "right thing."

What does it mean to invest in the "right thing?" Obviously, an investment that makes us money is right in one sense. What about an investment that affirms our values and reflects our desire to do something positive for society and our planet?

How many of you recycle? Conserve water and electricity? Own a hybrid car, or are thinking about getting one? We do these things because we all have a sense that we need to take care of our planet for future generations.

To paraphrase from the book "Natural Capitalism: Creating the Next Industrial Revolution," (by Paul Hawken, Amory Lovins and L. Hunter Lovins): as we get better at producing stuff and increasing our standard of living, our impact on the environment becomes increasingly negative. Blindly pursuing a higher standard of living does have a downside.

But it doesn't have to be this way. The "green movement" is gaining momentum as awareness grows regarding the need to preserve and protect our environment. Underlying this movement is the concept of sustainability. Sustainability refers to development that meets the needs of the present without compromising the ability of future generations to meet their needs. From the preservation of drinking water, to organic farming, smart forestry and renewable energy, sustainability will help slow depletion of critical resources.

How does all this relate to Socially Responsible Investing, or SRI? SRI is sometimes called "sustainable and responsible investing." It is an investment strategy that combines the intentions to maximize financial return and social good.

SRI picked up momentum in the 1980's when CalPERS (California Public Employees Retirement System) and several large endowment funds decided to protest apartheid by withdrawing investments from companies doing business in South Africa. The idea spread to mutual funds that chose not to invest in companies participating in activities at odds with social or environmental values. Over time, this trend evolved. Instead of simply screening out bad companies, investors began putting their dollars to work in companies that made a positive difference in the world.

If you or I wished to pursue this strategy of investing, we would do so through mutual funds. Recall that the definition of a mutual fund is just "a basket of securities" like stocks or bonds. With these funds, we can affirm our values while pursuing our financial goals. These values might include a desire to support companies whose policies and practices promote the wellbeing of people, animals and the environment. Some funds focus specifically on companies involved in sustainable business activities such as renewable energy and recycled products. Some invest in companies that offer equal opportunities for women and minorities. And of course, you can avoid stocks in companies that profit from tobacco, alcohol, gambling, military weapons and nuclear power.

This powerful model of investing will continue to have broadening impact as it gains in popularity. Companies are beginning to recognize that investors want them to be good corporate citizens and to act in ways that promote sustainability. Companies will gain investor support as they combine profitability with responsible action on social, environmental and governance issues. Investor support means a stronger stock price.

We may gain a greater sense of satisfaction as individual investors, knowing that we are using our financial resources to make a positive impact on society. I'll wrap up with a quote I like from George Gay, CEO, First Affirmative Financial Network (FAFN), a company that offers sustainable investing. "I believe that the way people save, spend, and invest can dramatically influence both the fabric and consciousness of society. I believe that in addition to the benefits of ownership, investors bear responsibility for the impact their money has in the world. I believe that integrating money with values can be both prudent and rewarding."

Jeffrey Stoffer CFA, CFP, Principal of Stoffer Wealth Advisors. We are an investment management and financial planning firm serving individuals, families, and business owners in the San Francisco Bay Area. Visit our website at http://www.stofferwealthadvisors.com

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