Social Investing: Trend or True Investment Philosophy, Investors speak out.
Sunday, September 12, 2010
Social Investing: Trend or True Investment Philosophy, Investors speak out.
Before beginning the research for this essay, I was among the disingenuous crowd that would believe that the movement toward socially responsible investment was, indeed, only a trend. Now I know I could not have possibly been more wrong; wanting to put one’s hard-earned money into funds that parallel moral and ethical concerns (Dictionary.com, 2008) is not a fad; the phenomena is an extension of a modern civilized and global culture event.
The owner of a San Antonio wet cleaner’s called Clothesline Cleaners, Derba Mills, promotes itself as a ‘green cleaner’. I asked her why she chose to build a dry cleaning business around a technology that was more expensive to operate than the rest of the industry she competes with. Her answer surprised me. Ms. Mills said that she wanted to correct an imbalance. You see, dry cleaners traditionally use very toxic and dangerous chemistry to effectively clean textiles and she wants to correct past mistakes. She knows other small business owners that have told her that they would set up a store anywhere but next to a dry cleaner: because it was so smelly. So, when Derba started her business, there was no way that she was going to offend people by watching them gasp for air when they entered her plant (D. Mills, personal interview, August 10, 2008).
I did not have to go far for my second interview. My wife is Diana Ackerman, the Threadbender; a successful vintage wedding gown seamstress. Her work with vintage textiles was an easy choice for her as her she happens to be a third generation tailor. When I asked Diana why ‘being green’ is such an important aspect of her work, she replied that when she does an alteration or modification to a family heirloom, she feels compelled to use the same textiles from the era the gown was first made to transform a wedding gown, veil, or garter to fit a modern bride’s vision but using only the techniques and materials of the era when first made. So, in that way, she does not further harm the planet by using new components with plastic combs, or made-in-China lace (D. L. Ackerman-Herschel, personal interview, August 8, 2008).
The first concessions to ethical behavior, as relates to this thesis, came from two interviews of small business owners speaking to a moral understanding of their place in society first and their juxtaposition in the world second. Could this possibly be a trend; one that would go away eventually, like the hula-hoop? I don’t think so.
And I am not the only one either. In 1980, a stockbroker named Amy Domini noticed that some of her clients were not pleased to invest in companies in industries with which they disagreed: like defense contractors and tobacco companies. She heard those investors question if it were possible to follow their investment objectives without contravening their conscience. In the 1980’s, this was a difficult thing to do. But it made sense to Amy to see a new way of ethically investing was emerging. Moral personalities with a social conscience were beginning to demand the investment trades work the way they wished and not the way they had always done business. In 1984 she authored the book Ethical Investing in an effort to understand how this type of socially cognitive strategy could complement each other. It was finally in 1989 that she partnered with Peter Kinder and Steve Lydenburg to compose the Domini 400 Social Index; an index of 400 primarily large-cap U.S. corporations that are selected on a basis of a wide range of social and environmental standards. A year later they introduced the Domini Social Equity Fund to trace the index fund. Domini believes now that social investors use three fundamental tools to achieve their financial objective: application of social and environmental standards, shareholder advocacy, and community investing (Domini Social Investments, 1997-2007). This is not a trend, it’s a movement.
And the movement has tentacles that reach to public broadcasting giant Fox News and the Bill O’Reilly news program The O’Reilly Factor. According to Human Events essayist W. Thomas Smith Jr., published in an article titled Doing Business with the Devil, he explains perfectly Bill’s position on the matter. According to O’Reilly, “GE has about $50 million on the table in business dealings with Iran. Doing the math, that means $250 million could have been derived since Iran began killing Americans in Iraq about five years ago. (Smith Jr., 2008).” Mr. Smith reports on a statement by GE’s director of financial communications saying that GE is down to two contracts with global oil and gas companies only and that those contracts would be expired at the end of June 2008.
The U.S. Securities and Exchange Commission queried GE in the summer of 2006 and the company duly disclosed that it not only doing business with private firms in Iran but directly with the Iranian government (Smith Jr., 2008). Fast forward to June 12, 2008: in an article published in the Wall Street Journal and reported on by Messrs. Benoit Faucon and Roshanak Taghavi titled Oil Majors Say US Restrictions Delay Iran Project, that the impact of delayed GE equipment – due to American restrictions on selling technology or equipment – are forcing natural gas companies Anglo-Dutch oil giant Royal Dutch Shell PLC and Spanish-Argentine Repsol YPF to not sign an agreement worth $10 billion dollars with Iran because of the delay in implementing a later phase of the project. Quoting directly Shell Chief Executive Jeroen van der Veer at a May 20 shareholders meeting, “Due to American sanctions, we can’t apply American technology or equipment (and) will need longer for the preparation of the project.” The ramifications of the delayed investment are said to be significant (Faucon & Taghavi, 2008). GE is not the only company to face socially responsive, moral, and ethical concerns. Responding to trepidation in investments from a New York fireman pension fund, the U.S. firm of Halliburton disclosed $50 million dollars of Iran revenue for 2003. We, as the general public, would have never known if not for the conscience of a group of fireman in New York. So, did all the fuss Bill O’Reilly made for GE have an impact on the corporate mettle of an industry giant? We shall likely never know for certain, but I, for one, would certainly like to think so.
Should there be any doubt in one’s mind that the reasoning behind and the actuation of well-conceived socially responsible investing is here to stay as a new tool for the global community to snip at the hindquarters of the CEO’s in the ivory towers of commerce, allow me to offer one more piece of information gleaned from the Social Investment Forum of the Advocacy and Public Policy forum of Washington, D.C. This groups’ sole stated purpose is to make communication between its associates easier, provide a stage to coordinate public policy decisions, make research funds available, and allow for “members and colleagues to share information and collaborate on shareholder proposals, social investing and corporate social responsibility issues (Social Investment Forum, 2007).” Among the group’s accomplishments is a 2003 litigation victory that requires registered mutual funds and registered investment advisors to disclose their proxy voting guidelines and the votes actually cast on behalf of their clients. This group conducts seminars, public education campaigns, and seeks to create occasions for socially responsible investing (Social Investment Forum, 2007).
These are stories and testimonies that have touched me immeasurably. Remarkable and aggressive activists are in the world now and are determined to make a difference in the future we leave our children. These are the type of forward-looking campaigners I can place hope for change into. This leaves me with only one question; where’s a bold stand of oak when I need one? I need to hug one.
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August 10, 2008, from Domini Social Investments:
Ebert, R. L., & Griffin, R. W. (2007). Business Essentials, Sixth Edition.
Upper Saddle River, New Jersey: Prentice Hall.
Faucon, B., & Taghavi, R. (2008, June 12). Oil Majors Say US
Restrictions Delay Iran Projects. Retrieved from
Yale Global Online:
Smith Jr., W. T. (2008, June 2). Doing Business with the Devil. Retrieved
August 10, 2008, from Human Events:
Social Investment Forum. (2007). Advocacy and Public Policy.
Retrieved August 10, 2008, from Social Investment Forum: