In the second part of his look at ethical investing, Michael Donovan discovers you don't have to
compromise your morals to make your money
Maintaining principles is a challenge, especially living in a country with such a
relatively poor record on the environment, social responsibility and individual rights.
Trying to earn a living and maintain a decent quality of life in Japan is a trade off
between short-term gain and long-term opportunity. The lack of security and instability of
earning power makes expats acutely aware of the value of cash, fluctuating exchange rates,
the drawbacks of Japanese banking and other methods to make the most of money earned. One
may occasionally brood on the morality of money but it is less commonly discussed than
get-rich-quick schemes.
Sheep and wolves, bears and bulls, however you characterize the market it's good to know
that we are not restricted to a straight choice between burying our heads and disregarding
our principles in the urge to maximize profits or having to opt out and keep our money in
a shoe box under the bed.
Some people will genuinely wonder what is all the fuss about? It's boom time; stocks are
up and interest rates down. We might be better off on paper but there is a creeping
realization that things aren't what they seem. The numbers on the ticker tape don't tell
the whole story.
An annual increase in GDP, the economist's touchstone, is an absurdly abstract way of
judging society. We are experiencing an increasingly high standard of living but low
quality of life. GDP ignores a multitude of sins. Here are a few of the more extreme:
Pollution of the environment and depletion of resources are not counted. The human cost of
sweatshop labor doesn't figure. Lives lived out in misery or ended abruptly through lack
of basic food and medicines don't count. Socially, we are in a deep recession.
It's depressing stuff. But don't despair - there is a middle road. Ethical banking and
social investment offer a viable alternative to the high street piggy banks and the casino
stock market. It's possible to practice what you preach and put your money where your
heart is! It is possible to find an ethical equivalent for virtually all the mainstream
financial vehicles - from simple savings accounts to credit cards, from bonds to life
insurance.
Investing ethically has a triple reward. Firstly, it is a sound investment that pays. Like
their conventional counterparts different financial instruments have different levels of
risk from high to zero so apprise yourself of all the relevant information before parting
with your cash. Your money will work to your benefit as well as the benefit of others.
By providing funding for sustainable development you are doing everybody a favor. Through
supporting positive stocks you are rewarding socially aware companies and encouraging (or
punishing) poorer performers into behaving more acceptably. Well-applied money muscle
works wonders. Recent examples include the largest lumber retailer in the world, Home
Depot, which recently ceased selling wood products from endangered forests because of
consumer and shareholder activism. A similar campaign in the UK championed by B&Q and
later joined by other DIY and wood consuming companies has led to around 20 million
hectares of FSC (Forest Stewardship Council) certified forest around the world. There are
innumerable other success stories.
Screening has different levels of severity depending on your values. Missiles, guns and
ammunition would probably fall into a negative category for most people. Fuel and
chemicals are more complex and open to argument. Cigarettes are debatable, for smokers
anyway. However you choose to screen companies limiting financial activity does not mean
limited returns. There is sufficient evidence to show otherwise.
In 1990, the Domini 400 Social Index was launched including socially screened companies in
a similar range of sizes and industries as the unscreened Standard and Poor's 500. From
its inception in 1990 through December 1999, the Domini 400 has outpaced the S&P 500
with a total return of 575 percent compared with the S&P's 463 percent.
This is but one example. No doubt other examples can show the reverse. It is easy to
retrospectively illustrate what one wants to prove. All the same many studies show a
positive relationship between corporate responsibility and profitability. Perhaps it's
common sense.
The Social Investment Forum (US) www.socialinvest.org
Social Investment Forum, 1612 K Street NW, Suite 650 Washington, DC 20006. Tel:
+1-202-872-5319. Fax: +1-202-822-8471.
Everything you need to know about ethical banking and social investment with lots of links
to investment opportunities.
Citizens Bank (Canada) www.citizensbank.ca
Online banking, investments and mortgages. The bank runs a donation program that benefits
charitable causes in Canada. Every transaction with the Shared Interest VISA Card deposits
10 cents into a fund that also receives a $1 contribution from the bank for every $1000 on
deposit. All moneys are shared with Canadian non-profit groups chosen by depositors and
VISA cardholders.
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