Eco-nomics

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 market-places 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 of Nazi Germany shared a terrible secret they never spoke of, so do we today. Just as the children and grandchildren of Germany look to 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 represent 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 disciplines 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.

INVESTING AND BUSINESS PUBLICATIONS

BOOKS:

The Socially Responsible Guide to Smart Investing, Samuel Case

Financial Peace: Restoring Hope to You and Your Family, Dave Ramsey

The Morningstar Approach to Investing: Mutual Funds, Andrew Lackey

The Kabbalah of Money: Livelihood & Economic Behavior, Nelton Bonder

Get a Financial Life: Personal Finance in your 20s & 30s, Beth Kobliner

How Good Guys Grow Rich: Proven Strategies, Adriane Berg & Milton Gralla

Aiming Higher: Sound Management & Social Vision, David Bollier for the BET

Beyond Growth: The Economics of Sustainable Development, Herman Daly

Building a Win-Win World: Beyond Global Economic Warfare, H. Henderson

America Needs a Raise: Economic Security & Social Justice, John Sweeney

Financing Change: Sustainable Development, Stephen Schmidheiny

Invested in the Common Good, Susan Meeker-Lowry

Whole Life Economics: Revaluing Daily Life, Barbara Brandt

75 Best Business Practices for Socially Responsible Companies, Alan Reder

How to Get Out of Debt, Stay Out & Live Prosperously, Jerrold Mundis

Cracking the Corporate Closet, Daniel Baker, Sean Strub & Bill Henning

The Socially Responsive Portfolio, James Melton & Matthew Keehan

The Tao of Money: Principles for Financial Independence, Ivan Hoffman

Investing for Good, Peter Kinder, Steve Lydenberg & Amy Domini

Good Money: Profitable Social Investing in the 90's, Ritchie Lowry

Money and the Meaning of Life, Jacob Needleman

Jews, Money & Social Responsibility, Lawrence Bush

Investing from the Heart: The Guide to SRI, Jack Brill & Alan Reder

The Social Investment Almanac, Peter Kinder, Steve Lydenberg & Amy Domini

Your Money or Your Life, Joe Dominguez & Vicki Robin

NEWSLETTERS/MAGAZINES:

Business Ethics Report, (800) 601-9010

Clean Yield: Principles & Profits Working Together, (802) 533-7178

Co-op America / Social Investment Forum: Connections, (202) 872-5307

Council on Economic Priorities: Research Reports, (800) 729-4237

Cruelty-Free Investment News, (703) 401-5445

Green: Personal Finance for the Unashamed, (800) 477-2968

ICCR's Corporate Examiner, (212) 870-2295

IRRC's Corporate Social Issues Reporter, (202) 833-0700

Dollars & Sense: What's Left in Economics, (617) 628-8411

Franklin Research's Insight: Investing for a Better World, (617) 423-6655

The GreenMoney Journal, (509) 328-1741

More Than Money: Progressive People with Wealth, (541) 343-2420

Morningstar Investor and No-Load Mutual Funds, (800) 735-0700

Natural Business: Financial News on Health Food Industry, (303) 442-8983

Women's World Banking: What's New and MicroLender, (212) 768-8513



GUIDES (NEW 1996/97 VERSIONS):

Co-op America's Responsible Investors Handbook, orders (800) 58-GREEN

Guide to SRI Mutual Funds and Investment Services, orders (212) 870-2295

Social Investment Forum Member Directory, orders (202) 872-5319

Taking Charge of Our Money, Our Values, Our Lives, orders (541) 343-2420

Women Choosing & Managing Financial Professionals, orders (415) 561-6520

Who is my Neighbor? Economics as if Values Matter, orders (800) 714-7474

(Reprint, GreenMoney Journal, Spring, 1997 Issue)

Copyright © 1996. The Light Party.

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