Friday, January 31, 2003
Green Corner Investing: for your conscience and wallet
With the recent wave of corporate scandals sweeping over the country, knowing which companies to invest in can be daunting. One solution is to invest in companies that, in addition to having good track records, are socially and environmentally conscientious. Companies that treat their employees, the community, and the environment with respect and integrity might have similarly responsible business practices in other areas, such as accounting, so their stockholders may benefit. Companies with bad labor relations, poor environmental records, and lawsuits are the ones to avoid because eventually they will have higher costs of doing business.
Socially responsible investing (SRI) can be done by buying shares of mutual funds that own a collection of stocks and/or bonds selected by using specific screening criteria, slightly different for each fund. Important social concerns among funds are tobacco, gambling, alcohol, the environment, human rights, labor and animal rights. For example, in response to the recent coffee crisis, SRI funds have been investing in companies that sell fair-trade coffee, in an effort to raise the standard of living of coffee farmers and save the rainforests (see the 11/01/02 Green Corner). Funds with large holdings in a company can influence that company's direction through shareowner proposals and direct contact with management.
SRI mutual funds used to have a reputation for mediocre performance. However, recent studies indicate that SRI funds do better than the average fund. In the five-year period from 1997 through 2001, 29 of the 45 SRI funds rated by Lipper Analytical Services performed better than the average non-SRI fund.
In the 1970s, socially responsible investing got off the ground when investors avoided companies that invested in South Africa to protest apartheid. Now there are almost 200 socially responsible funds worldwide to choose from. Well-known fund groups with SRI funds include (alphabetically): the Calvert Group, Citizens Fund, Domini, Dreyfus, Green Century, Parnassus Investments, Pax World, TIAA/CREF and Vanguard. See www.SocialFunds.com or the Morningstar mutual fund guide in the town library for performance information. To invest in individual stocks, start by looking at companies that are in a socially responsible mutual fund's portfolio.
© 2003 The Carlisle Mosquito