Ethical Shopping - Stock Investing that's Green and Viable
Investing in stocks or mutual funds is an important part of many Americans' plans for retirement or additional spending income. While many people look at the stocks performance metrics with a single goal of solid returns in mind, another criteria examines what the corporation's business is and how it conducts that business in relation to larger local, national and global concerns. This philosophy of investing is called Socially Responsible Investing or SRI. One of the more profound expressions of the ethical and social conscious emerging in our society is that of investments in corporate stocks that reflect environmental and socially responsible commerce or services. If the thought of your investments going into tobacco companies or paper companies that log old-growth forests really alarms you, then socially responsible investing is the most appropriate and viable alternative. As of 2005 $36 billion was seeded into SRI's (out of $5.6 trillion total in investment funds)—with the number of funds mushrooming from ten in the early 90's to fifty to choose from today.
Amy Domini, founder and CEO of Domini Social Investment observes, "People want to believe that some of what they invest is working toward a world of universal human dignity and environmental sustainability."
Funds not to go into and funds to go into
Essentially, in SRI, your money is being handled two ways. First, it is being steered away from corporations that are in some fashion harming the environment (directly or indirectly through policies) or engaging in business, labor or trade practices detrimental to the human standards of living and dignity expected in today's world society. In some cases religious filters are applied. Some religiously conscious funds, for instance, do not invest in the so-called sin funds of alcohol and gambling. One Catholic fund does not invest in hospitals that perform abortions.
With SRI you are confident your investment dollars aren't going into child labor on African plantations or to a company involved in weapons research.
Second, your investment is being directed into companies exhibiting good environmental policies and fair labor/social policies, or the religious/spiritual criteria that may be in place.
Green investment is growing, but is it competitive
While SRI's are great for ease of mind and an ethical expression of wealth generation, they still need to perform at a growing return rate for the fund owners. It is this concern that has been recently examined in newspaper articles and investor reports—with often conflicting conclusions.
An article in the Christian Science Monitor stated socially conscious funds and traditional funds were about even in performance, but the Domini Social 400, a well known SRI index, was lower than its traditional counterpart—the S&P—at the time of the article's publication. Some observers say this is because the Domini fund is not in tobacco and is lean on energy stocks. A Daily News article reported that 2/3rds of the largest SRI funds were behind their counterparts and some were losing money outright. Overall, since 2000, the SRI funds have lost 1.8 percent. SRI spokespeople point out that the corporate due diligence for their filtered funds is much more extensive and expensive than conventional funds. SRI managers of very successful funds also say they need to be compared to funds with similar investment styles.
On the other hand, Chicago-based fund tracker Morningstar says that SRI's assets have increased eight-fold, nearly three times that of traditional funds.
Studies have also shown that 75 percent of investors do perceive that the more ethical a corporation is in its policies and practices—including environmental, fiscal and social—the better it is as a long term investment.
Choosing green investments
Undoubtedly, the SRI's present a very ethical and responsible alternative to conventional investment funds. Yet, it is necessary to study the fund you want to invest with and ask the hard questions of the fund's people and track record. There are over fifty funds to choose from, and you need to look at both the short term and long term potentials.