November 14, 2004
C'MON, WE DIVESTED FROM KRUPP:
Has social investing lost its way?: A host of SRI mutual-fund managers are fuming after a scathing report on their industry. (G. Jeffrey MacDonald, 11/15/04, CS Monitor)
Many ethically minded investors would think twice before funding an industry known for misleading ads, scant environmental accomplishments, and boardrooms where just about everyone is white.So what happens when such charges are directed at socially responsible investing? A host of SRI mutual-fund managers are fuming in the wake of a scathing report on their industry. At the heart of the controversy lies a concern as stinging as it is sweeping: Has the term "socially responsible" become meaningless in a fast-growing industry that invests in just about anything?
"To put it plainly, if the SRI industry were a corporation, it wouldn't qualify in a rigorously screened portfolio," says the Oct. 15 report from the Natural Capital Institute (NCI) in San Francisco. "Either the industry has to reform in toto (or rename itself), or that portion of the industry that wants to maintain credibility must break off from the pretenders and create an association with real standards, enforceability and transparency."
What's more, the report charges, pressure to beat such mainstream performance benchmarks as Standard & Poor's 500 has led SRI funds to own shares in 90 percent of firms on the Fortune 500 list. When Wal-Mart, McDonald's, Pfizer, and Microsoft are all deemed socially responsible, who's left to screen out? These criticisms are especially notable because they come from Paul Hawken, an icon of the sustainability movement and founder of the NCI.
Posted by Orrin Judd at November 14, 2004 7:18 PM
Truly "socially responsible" companies are also usually unsuccessful companies. If it irritates a liberal, then it's probably a good investment.
Posted by: Governor Breck at November 14, 2004 9:13 PMNow that Ben & Jerry's have sold out to Unilever, is there a socially responsible company to invest in?
Posted by: John at November 14, 2004 9:38 PMIt's mostly a load of balls that only got the prominence it did because ethical funds loaded up on tech stocks during the boom years hence "proving" that SRI worked.
Meanwhile Philip Morris was earning a pretty stonking dividend yield during the early Oughts.
Posted by: M Ali Choudhury at November 14, 2004 9:44 PMI encountered my first socially conscious investment adviser in 1987 or '88. Wrote a story about him, 'living lightly on the Earth.'
Checked back sometime later to find out what he'd invested in.
Wyoming gas leases.
He did very well.
Posted by: Harry Eagar at November 15, 2004 2:10 AMHarry, I've had clients with 'social investment' restrictions. When we showed them data suggesting how much potential performance they were giving up, they (the staffs) threw up their hands and said it was being done for reasons of public image. They knew it was a shakedown, and what it was likely costing their funds.
This is feel-good finance, that really only enriches those who can own the divested companies. Depending on whose list you use, you could be left with a really sub-par universe of stocks from which to select.
Posted by: Dave Sheridan at November 15, 2004 2:41 AMLet the losers lose and the winners win. As for me, I'm thinking of creating an unethical portfolio, weapons stocks, booze, gambling, porn, tobacco, fatty foods, jiggle TV and movies, mining, medical research companies that use animal testing, companies that develop and sell genetically modified crops and animals, and oil stocks.
Posted by: Bart at November 15, 2004 12:27 PMBart: There are a number of "sin stock" portfolios, although with conglomeratization it's hard to structure a pure sin play. One interesting thing: sin suppliers tend to be cash rich businesses with good dividends.
Posted by: David Cohen at November 15, 2004 2:55 PM