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Putting Your Money Where Your Heart Is

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Conscious investing not only pays better than unconscious greed, it also makes greedy companies pay attention. Here an activist trader shows how you can sleep well at night while taking part (and profits) in a revolution that may save the world.

This article appeared in the Winter 2001 issue of Spirituality & Health.


“This is Mr. Brill, rep number 638. I have an order to sell 4,000 shares of Exxon at market.” I completed the trade for my client and stepped out of my office with a satisfied smile. I had just helped a conscientious investor divest herself of holdings in a company whose environmental misbehavior deeply offended her. And look at my own environment! The Wall Street clerk taking my order probably pictured me in a stuffy brokerage suite with electronic ticker tapes flashing. But in 1992 I had taken refuge in a relic travel trailer parked on a friend’s high desert acreage outside Santa Fe, New Mexico. Along the south side I had added an arching sunroom with straw-bale walls. A 500-foot extension cord and phone line snaked through the pinyon and juniper trees, linking me and my laptop to the world. I wore Guatemalan shorts, not a pinstriped suit.

For me the most important thing about working with people and their money is the way it touches our core issues. Where investing once was primarily the province of the wealthy elite, a majority of Americans are now in the market — we’ve become a nation of investors. This challenges us to become informed and take actions that are aligned with our life’s purpose.

Dumping my client’s Exxon stock was a tiny act in the context of the global economy, yet it was indicative of one of the most hopeful directions of our times. A large and growing segment of the public — both individual and institutional investors — are engaged in the revolutionary act of investing consciously. They are demanding that their investments produce more than profit; they want companies in which they own stock to behave responsibly. US News & World Report recently called socially conscious investing one of the “hot new trends.” Although it is not really new (colonial Quakers were screening out slavery-related investments centuries ago) it certainly is hot. A 1999 study by the Social Investment Forum reveals surprising findings: assets involved in what is commonly called socially responsible investing, or SRI, now total $2.2 trillion. This represents one out of eight dollars under professional management in the U.S. today. In just two years, from 1997 to 1999, SRI assets soared by 82%.

This is a hefty chunk of cash, and it’s growing fast. Heavy hitters like Salomon Smith Barney, Neuberger Berman, Dreyfus, and TIAA-CREF now offer socially screened investment services. Vanguard, the $500-billion mutual fund behemoth, just announced a partnership with the Calvert Group (who will do the social screening) to launch a social index fund. Vanguard’s 14 million investors will soon be hearing about SRI, many for the first time. Meanwhile, stalwart SRI companies like Calvert, Citizens, Domini, Pax, and many others, are on a rapid growth curve.

Why are so many investors charting a new, ethical course with their money? In researching our book Investing with Your Values: Making Money and Making a Difference (by Hal Brill, Jack A. Brill, and Cliff Feigenbaum; Bloomberg Press, 1999), we found that people from all walks of life strongly desire to make a difference and to leave the world a better place for future generations. They also want to walk their talk by aligning their actions with their values. We coined the term “natural investing” because it is in fact natural for people to include their deeply felt values when making financial decisions. Separating one’s values from one’s financial decisions — as free market fundamentalists teach us — is actually a recent and rather unnatural anomaly. Natural investors may prioritize different issues, but they all strive to balance their need for financial return with their yearning to make life a little better for others and the Earth.

Investing with Passion

Natural investing is not a one-size-fits-all solution. And it does not promise purity in a world full of contradictions. What it offers is a map of the territory, guiding each of us to make decisions that balance all of our goals, financial and personal. It has taken me a long time to embrace this path. To me, first as a student in Berkeley, then working as an environmental educator and sustainability advocate, Wall Street’s profit-hungry tentacles were pillaging the Earth and impoverishing the masses.

I came across socially responsible investing in the mid-eighties, and regarded it with a mixture of enthusiasm and skepticism. The concept was great: directing capital away from destructive activities and toward the creation of life-enhancing enterprises. Community based investing was especially juicy for me. I dove in with a grassroots coalition that created a community loan fund in New Mexico. But I was suspicious of SRI’s involvement in the nefarious empire of stocks and bonds. How could a few “green investors” make a difference in that world? SRI was a mere sprout compared to the industry it is today. The press either ignored or attacked it, and much of alternative culture (like me) was still rebelling against the whole idea of making money.

Then in the early nineties, two events coincided that turned my career upside down. First, the nonprofit that I cofounded for the purpose of creating a model intentional community went broke. Second was a surprising turn in my relationship with my father, Jack. He had recently made a big shift himself, leaving a career as a quality-control engineer with the U.S. Navy to become an investment advisor. I had casually sent Jack some information on SRI, and to my amazement he totally embraced the idea. Jack started writing a column for the food co-op in San Diego, and in a short time the press turned him into a spokesman for SRI. In 1991 he hired me to do research for his first book, Investing from the Heart.

As I gained expertise in the field, Jack suggested that I get licensed to become a broker. This seemed ludicrous at first. I didn’t see the potential of SRI to become a major player in the global economy, nor did I realize that the movement was poised for exponential growth. It took some time, but eventually I grasped what was going on: conscientious people were beginning to get their hands on the financial levers that run our society. It was a very exciting realization. If the movement grew, we would have a strong voice in the corporate world and have the tools to create a more just and sustainable economy. Instead of standing outside the mainstream, I could actually help to move it!

Obliterating the Performance Myth

It is becoming increasingly difficult for Wall Street pundits to tell people they should be socially oblivious when they invest. Corporations wield vast power in the world; the ways we spend and invest our money is often our most potent vote. Recent demonstrations in Seattle at the World Trade Organization meeting show that a large constituency understands that environmental and social issues are interwoven with global economics. Even billionaire financier George Soros has written that the “untrammeled intensification of laissez-faire capitalism is the main enemy of the open society.” There is a clear imperative for including nonfinancial values in all economic decisions.

But try to do this when you invest and you’ll run smack into a wall of misperception scrawled on which is “You can’t make money that way!” This is the great performance myth repeated ad nauseam by advocates of unfettered capitalism. They reason that if you limit your investments you will limit your return. It may sound logical, but let’s look at the facts: the oldest and most widely quoted benchmark for SRI, the Domini Social 400 Index, has outperformed the S&P 500, gaining 575% since its inception in May 1990 through the end of 1999 compared to 463% for the S&P 500.

Hot performance has also characterized many of the socially screened mutual funds. In 1999 eleven of these funds returned over 30%. For the past six years, Jack Brill has participated in The New York Times’s study of mutual funds. His socially screened portfolio continues to show highly competitive results as compared to four other prominent advisors (who can choose from the thousands of non screened funds). As of December 31, 1999 Jack’s socially screened portfolio has a cumulative return of 188%. Returns from the other portfolios range from a high of 212% to a low of 126%. Investors can indeed achieve excellent real-world returns by utilizing socially responsible mutual funds.

Many studies show that responsible corporate behavior brings measurable benefits to the bottom line. Simply put, companies that take care of their employees, their communities, and the environment tend to be better managed and more profitable in the long run.

Making a Difference with Our Money

Now comes the toughest test for SRI. What about the social returns, whereby conscious investors attempt to influence the policies of large corporations? If investing is difficult, why add the complexity of social considerations? Can our small portfolios dent the gigantic global economy?

These are complex questions. Rarely is there a single cause for changes in corporate policy. The process of infusing consciousness into capitalism is a bit like eroding rock with drops of water. Yet, like the result of a river’s influence upon rock, it is collective action over time that ultimately wears away resistance. Witness the remarkable turnaround of Home Depot in 1999. Forest activists had spent fruitless years pressuring Home Depot (the largest seller of lumber in the world) to cease selling old-growth forest products. Then, at the company’s annual meeting, shareholder activists were treated roughly by security. This became a public-relations nightmare. Several weeks later, the company announced a new policy (claiming it had nothing to do with the protests) to eliminate purchase of certain old-growth lumber and increase purchases of lumber certified to be sustainably harvested.

Such victories are sweet, but SRI is still in its infancy. It must grow in order to gain the clout necessary to address critical social and environmental issues. Our desire to help achieve this is what prompted Jack and me to team up with Cliff Feigenbaum, founder of the GreenMoney Journal (www.greenmoney.com). We spent two years researching and writing Investing with Your Values, knowing that prospective investors needed a comprehensive guidebook. We thought this would be a small self-publishing venture appealing mainly to the alternative marketplace. Imagine our shock when we were contacted by Bloomberg, the Wall Street information dynamo! Their support is yet another sign that values-based investing is planting itself firmly in the economic landscape.

The Dalai Lama said that “as people see their predicament clearly — that our fates are inextricably tied together, that life is a mutually interdependent web of relations — then universal responsibility becomes the only sane choice for thinking people.” Ultimately, this change in consciousness is our best hope for the future. As we learn that the inner and the outer are connected, our actions — including our financial choices — will naturally align with values that move us toward a sustainable future.

Strategies for Natural Investing

In our book we identify four strategies that investors can use to achieve their financial and social goals. Each is a spoke in the Wheel of Natural Investing:

1. Avoidance Screening. When my client was unloading her Exxon stock, she was practicing avoidance screening. Simply put, she wished to avoid companies that had poor environmental records. A wide range of issues are being screened for today including tobacco, discrimination, sweatshops, animal welfare, weapons, nuclear power, repressive regimes, alcohol, gambling, and many more. New issues like genetically modified organisms are always being considered.

2. Affirmative Screening. Some investors seek investment in companies and activities that reflect their vision of a positive future. A fine example of this is the recent interest in solar energy and fuel cell companies, whose stock prices have soared this year as investors realize that clean energy alternatives could become highly profitable. Natural food stocks have also attracted interest since this industry is growing at a fast clip.

3. Community Investing. People-to-people investing ranges from microenterprise projects to community banks, credit unions, and loan funds operating throughout the U.S. All of them focus on empowering people who would not otherwise have access to credit. Importantly, they also train borrowers to make sure they are truly credit-worthy. This is one of the most important tools for addressing economic inequality, offering a hand-up rather than charity. Every investor should consider allocating at least a small portion of his or her portfolio to community investments. The Calvert Foundation offers a CD-like product that enables investors to name their own rate of return, from 0 to 4%. The social returns are extremely high.

4. Shareholder Activism. This strategy has been used with great success by religious institutions, labor unions, and SRI mutual funds, which engage in direct dialogue with corporate management. When dialogue doesn't achieve the desired results, shareholders can go to the next level and introduce shareholder resolutions. In 1999 shareholders filed 220 resolutions concerning social and environmental policies with more than 150 major U.S. companies. The most popular resolutions were those concerning the environment, equal employment opportunity, global corporate accountability, international health and tobacco, and executive compensation.

The Natural Investing wheel follows an inclusive path. It is possible for anyone to use these strategies to bring values to the money table. And you don't need a lot of money to get started: there are socially screened mutual funds that will let you start with as little as $50.


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