Cause investing: Do-it-yourself giving

A look at some choices
Is an SRI for you? There are a variety of ways to cause-invest. Here’s a quick overview of some of those choices:

COMMUNITY INVESTING: Want to help economically disadvantaged entrepreneurs locally and abroad who are underserved by traditional financial institutions? This strategy is for you. These types of investments supply capital to small businesses and affordable housing projects, most notably. Community investing may be part of a mutual fund portfolio or can be achieved through community loans funds, development bonds, or the like. Assets in community investing institutions are on the rise, from $19.6 billion in 2005 to $25.8 billion last year—a 32% increase.

SHAREHOLDER/STAKEHOLDER ADVOCACY: Want to organize everyone who holds stock in your favorite company to make it more socially responsible? Shareholder/stakeholder support for social and environmental issues is at record highs. According to the Washington, D.C.-based Social Investment Forum’s 2007 Report on Socially Responsible Investing Trends in the United States, the average level of corporate shareholder support for such issues has increased by 57% in the past three years — from 9.8% in 2005 to 15.4% in 2007. Socially responsible investment clubs, for example, can be quite active. The Investor Environmental Health Network — a Falls Church, Va.-based investor club that wants to rid consumer products of chemical toxins — filed or re-filed 46 resolutions urging safer chemical policies at 28 companies for consideration at corporate annual meetings between 2006 and 2008. Meanwhile, in April, more than 60 people representing various U.S. colleges and universities from across the country attended a first-of-its-kind conference at Columbia University — co-sponsored by the school’s Advisory Committee on Socially Responsible Investing — to urge universities and nonprofits to invest their hefty endowments in companies that act in socially responsible ways and to challenge corporate behavior where appropriate.

SOCIAL SCREENING: Simply put, investors using this strategy choose their securities based on a list of criteria called “screens.” Positive screens search for companies with values similar to those of many socially responsible investors, such as firms with human rights or pro-environment policies, or companies that invest in communities. Negative screens, conversely, weed out companies from the portfolio if they, say, produce tobacco products, engage in animal-testing, or pollute the environment. Socially and environmentally screened assets have increased by nearly 28 percent from the $1.5 trillion identified in 2005.

Getting results on the ground
Besides reaping good returns, SRI investors also tend to get results on the ground. In 2003, Calvert Mutual Funds led a coalition of socially responsible investors in a campaign to improve the environmental performance of computer manufacturers. The result? Dell signed on to establish a materials tracking program that measures the company’s impact on the environment and tells shareholders and the public what it is.

In 2005, a dialogue between Domini and Proctor & Gamble over its coffee harvesting practices convinced the consumer products firm to launch its Fair Trade coffee brand, which guarantees farmers a standard price per pound for coffee and offers better pay to democratically managed cooperatives that use environmentally sound farming techniques.

In October 2007, Pax World Management Corp., the investment advisor to Pax World Funds — which launched the nation’s first SRI in 1971 — decided to toss out all holdings in Weatherford International Ltd., a $7.8 billion Houston-based corporation that discovers and develops oil and gas reserves in more than 100 countries worldwide. The reason: “problematic ties” to the government of Sudan, which is widely viewed as responsible for the genocide in Darfur. “We adopted a Sudan Investment Policy to try to be responsive to the ongoing violence and human rights abuses in Darfur,” Pax President and CEO Joe Keefe explained in an October 16 statement. “Our policy includes both engagement and, where appropriate, divestment. We determined the latter was the proper course in the case of Weatherford International as it remains unclear what the company intends to do about its continued operations in Sudan.”

Shareholders making a difference
Still not convinced that SRIs can make a difference? Earlier this month, CVS/Caremark announced a new Cosmetic Safety Policy, the direct result of a shareholder resolution filed in 2006 by Boston Common Asset Management, LLC, urging the company to stop selling products that contain toxic and potentially toxic chemicals. Separately, on May 1, Avon Products shareholders expressed support for a shareholder resolution filed by Calvert Asset Management Company asking Avon to disclose its policies on so-called nanomaterials — a rapidly growing class of very small engineered substances whose safety and environmental hazards have not been well-studied.

And before that, in late 2005, Sierra Club Mutual Funds joined with other funds to ask Whole Foods stores to remove plastic baby bottles that contained Bisphenol- A, a chemical compound that some alleged could leach into beverages and foods when exposed to heat or acidic materials and elevate hormones in children, potentially leading to cancer and other health problems. In January 2006, Whole Foods removed baby bottles and child drinking cups made from polycarbonate plastic or other plastics with added phthalates.

Not a bad return for any investment.

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