THE FUTURE OF SOCIALLY RESPONSIBLE INVESTING
Social Investing, Economic Evolution or Revolution? by Amy L. Domini
Does the way in which investment decisions are made have the potential to change to the world? Advocates of integrating social and ethical criteria into the investment decision making process (Socially Responsible Investing or SRI) have long argued that it does. SRI advocates are not drawn to the field by a libertarian impulse to give freedom of choice, nor do we enter this discipline to provide the world with a feel-good investment choice. As SRI advocates we vehemently argue that this approach to investing is a means of returning corporations to their original purpose whereby financial markets serve economic needs.
At the heart of the argument is the simple fact that capitalism and corporations did not evolve in a vacuum. Our system of corporate rights and ownership structure evolved to provide society with much needed goods and services in a timely and effective way. The implicit social contract made states, "give us food, clothing, shelter, health care and comforts of humankind, and we will construct financial marketplaces to grease the machinery for delivery." The system has worked fairly well and neither corporations nor most individuals wish to completely dismantle it. But it is far from a perfect structure and the imperfections are fast becoming fault lines that threaten to destroy the very values society set capitalism free to protect.
The social investment industry has the potential to change the world. It has the potential to slow or reverse the common wisdom that the purpose of corporations is to provide financial return, to remind society that the purpose of Microsoft, for example, is not to return profits to investors. The purpose of Microsoft is to provide computer software. Profits are only a means to that end. Our job is to construct a framework within which corporations give us food, clothing, shelter, health care and comforts we ask for while also not causing us harm.
How do SRI professionals combat the argument that the business of corporations is financial returns? The logical extension to the argument that financial return is the purpose of the corporation, is that corporations will get out of the business of providing goods and services and stick to money lending. Clearly the end result of this argument is that five people become very wealthy and billions starve. Our purpose goes beyond providing personal choice. It goes beyond bearing witness. Our purpose is to win a desperate struggle - the struggle against the system. The struggle against an ever dwindling minority benefitting from the economic engine society put into place to feed, clothe and shelter its population.
At the Social Investment Forum meeting in Minneapolis some years ago, Daniel Quinn, author of Ishmael, spoke of his book. In it the teacher Ishmael helps his student to understand that, just as citizens in Nazi Germany shared a terrible secret they never spoke of, so do we today. Just as the children and grandchildren of Germany look to their elders and ask, "How could you have done nothing?" our children are looking to us and asking the same question. And what question is this? "How could we pretend that we did not agree to consume the planet and its resources until they were gone?"
Philip Morris makes roughly $6,600 per tobacco-related death. Each of these deaths represents hundreds-of-thousands-of-dollars in costs to society. A direct transfer has taken place to benefit the economic well-being of a few at the immense hardship of the many. The tobacco industry is not the only industry in which these numbers are so dramatic. The mining, timber, sugar, beef and oil industries all make tiny, incremental benefits to the very few by massive transfer from the majority. They only escalate the progress toward our shared secret. Can we deny Ishmael's wisdom?
Social investing is our best hope. It can return our economic structure to its purpose. Investors operate at the rub point where corporations and society meet. Social investors can define the terms of this intersection. This is our purpose. The struggle is too great, the need too immediate, the failure too costly to allow ourselves to do nothing. We investment professionals must be constantly vigilant. It is not enough to wear our Birkenstocks and Patagonia as we sip Odwalla juices. We must do more than no harm. Social investing is not just eco-fundamentalism applied to pricing stocks. It is a means of social change.
If we are to deflect the fate financial markets have catapulting down upon us,
we must achieve institutional excellence at once. We must, as an industry, set our
goals higher. Only firms committed to social change goals can continually push back.
But, if we lack the discipline to deliver consistently superior social advocacy research
and financial results, we not only let down our clients and ourselves, we doom the
yet unborn to a world created by the system now in place, the system committed to
self-indulgence by the few. A world increasingly dedicated to financial return to
the lucky elite, over economic well being for all."
Copyright © 1996. The Light Party.
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