Green industry, corporate social responsibility, environmental impact assessments, and corporate governance are terms gaining popularity and common understanding in the global marketplace. As we continue to gain awareness about the social and environmental impacts of the corporations we rely on, demands for higher standards also rise. It is no longer just environmentalists and affected communities calling for such changes, but the everyday consumer interested in reducing his or her own ecological imprint that are also requiring improved (environmental and social) corporate practices in exchange for their consumer loyalty.
One such example is an increase in awareness about socially responsible investing and the role that each of us can play in holding corporations to higher environmental and social practices, through the power of our own pockets. However, in a recent class on socially responsible investing, only one out of about 30 students who claimed to currently hold financial investments indicated that their investments had been geared towards socially responsible companies.
As we begin to ask corporations difficult questions about their willingness to make social and environmentally responsible decisions that may affect their bottom line, we must also ask ourselves, how far are we willing to go in our own lives to ensure that we contribute to a more environmental and socially responsible world?
Below is an article in the San Diego Union-Tribune with tips for how you can better align your investments with your moral or cultural values.
BY JUDITH SEID, NOVEMBER 27, 2010
As a public service to residents, the Financial Planning Association of San Diego is answering financial questions for readers of The San Diego Union-Tribune. Today’s question — on socially responsible investing — is answered by Judith Seid, CFP, at Blue Summit Wealth Management in La Mesa.
Q: My mother, who smoked for some time, recently lost a long battle with lung cancer. A few months after, my husband pointed out to me that one of our largest mutual-fund investments own tobacco stocks. Given our family experiences, and the messages that we want to send to our children, how can we better align my investments with my values?
A: You are not alone in wanting to align your investment goals with your own moral and ethical values — a good percentage of the American population is seeking ways to do just that. In fact recent studies show that one out of every $8 are invested in some sort of socially responsible investing, or SRI strategy. There are a number of ways that you can research and invest in companies, industries or investment products that hold themselves to their own set of socially responsible standards.
Here are some ways you can get started:
Take stock of your current portfolio: Many people have no idea what securities they actually own inside their mutual funds, 401k’s, IRA accounts, etc. So the first thing you can do is find out what stocks and bonds are held inside your portfolio There are a few ways you can do this on your own:
• Go online using the ticker symbols for each fund you own and look at the list of underlying holdings.
• Contact the fund company and ask for a list of holdings in the portfolio.
• Read the annual report which will list all holdings at the time of the report, and/or visitcalvert.com to see if it includes your fund in it’s “Know What You Own” interactive tool, which runs the funds’ stocks holding through an SRI screening criteria.
Research the companies in your portfolio:
• Visit its website. Most companies now have a corporate sustainability officer, a shareholder relations department and/or a portion of their website devoted to what the company is doing regarding environmental and social responsibility and corporate governance.
• Read the annual shareholder report. Oftentimes, you can find out information on CEO compensation, community relations, environmental stewardship and company philosophy regarding a variety of financial and nonfinancial issues.
• Subscribe to new services, such ascsrwire.com, that report on corporate social responsibility, or CSR issues.
• Read publications. Keep you eyes and ears open in the newspapers and magazines for articles pertaining to the companies you own. This way you can be engaged with what your money is supporting.
Find out the criteria your fund uses: Find out if your mutual funds or money managers use any socially responsible investing criteria to screen companies on issues such as environmental impact, human rights, diversity, tobacco, weapons, etc. This will be detailed in the mutual fund prospectus. You can also call and ask.
Determine what issues are important to you: Consider what types of companies you would prefer to be invested in and what types of companies you want to make sure you are not invested in. Are there any issues in addition to tobacco that are important to you? Then you can start to tailor your portfolio to fit your individual concerns.
Consult an SRI professional: Nationwide, there are a host of advisers and investment professionals who seek out socially responsible funds and other investment vehicles for their clients. If you already work with a financial adviser, ask him/her about your current holdings and how they align with your values. If you are seeking an adviser in the SRI space, you can find one at the Social Investment Forum website, socialinvest.org, which lists advisers and planners by state, or the “Green Pages” for the nonprofit national advocacy group Green America, at greenamerica.org.