Poll: Are You a Socially Responsible Investor?

[kyounge1956]

I choose 1, but I do my part to be socially responsible (recycling, limiting waste, volunteering, etc.). Option 2 sounded too much like a guilt trip and I don't feel guilty if the companies I invest in are not considered socially responsive.

Rats! I tried so hard to avoid including any kind of guilt trip on any of the options, but I guess I wasn't successful there. I certainly have no right to lay one on anybody who makes offsetting charitable donations, because I haven't gotten that far myself. For the moment, I'm in the "thought about it but haven't actually done anything yet" category. There are a few things I'd like to eliminate completely from my sources of income. Not that I'll ever be able to do so, because the pension fund from which I expect to derive a large chunk of my retirement income has, AFAIK, no plans to include screens for those particular issues in its investment decisions. Right now my emphasis is on reaching my asset allocation target. Because of the limited choices in my tax-deferred plan at work, which is where the majority of my savings are, I'd have to use the self-directed option, with its extra fees and other restrictions, to include a screened fund and still hit the target allocation. I'm not even sure there's anything available that would screen for the things I'm concerned about. So for me, being a more socially responsible investor is on the back burner until I roll that money into an IRA and am able to pick and choose to a much greater extent than I can now, without incurring a bunch of extra expenses.

I included option 2 because of a remark that ziggy made on the thread where the topic of SRI arose:,

Let's say I support cause X. Building a diversified portfolio with mutual funds or ETFs is nearly impossible without holding some companies which are anti-X or whose policies undermine X. Hopefully if I'm in support of X, the direct donations I make in support of X will more than offset the profits I've made from the anti-X portion of my portfolio. The net result, hopefully, is that my money is working on the side of X.

Not perfect, but IMO most practical.

Ziggy isn't the only one I've heard who takes this view, and not only on this thread. There are a few issues on which I want to take even stronger action than that, but for a lot of my concerns, I think I'd be satisfied with having a net positive influence.

 

[kyounge1956]

Since some of my best performing individual stocks are Altria, Diageo, Apple, and In-Bev, I guess I'll say...no. (Option B actually)

What did Apple do that's so terrible? Please, please don't tell me I will have to get rid of my Macs and switch to PCs due to Apple's despicable corporate misdeeds!

 

[kyounge1956]

Sorry Gumby, that's a poor excuse. I'm actually very surprised at some of the comments on this thread.

I am surprised at how lopsided the poll results are, with over 80% of the voting on the first two options.

 

[Gumby]

Sorry Gumby, that's a poor excuse. I'm actually very surprised at some of the comments on this thread.

I'm not sure what you think I would need to be "excusing". I'm just telling you that I doubt the fundamental premise of those who advocate socially responsible investing. You have no idea where I actually invest my money.

If it makes you happy to avoid investing in certain companies, then by all means you should do that. I just don't think it will have an effect on anything but your own conscience.

Just so we're clear, I view socially responsible consumption in an entirely different light.

 

[ERD50]

Sorry Gumby, that's a poor excuse. I'm actually very surprised at some of the comments on this thread.

It didn't strike me as an excuse, it was a reasoned, practical explanation.

To the OP - here is one possibility that I don't think was mentioned, and no, I would not do it myself. If you can determine the weighting of stocks in your portfolio holdings in areas you don't want to be invested in, short each of those companies by that weighting. You would have effectively canceled them out. You will likely need to do this is a separate account, I doubt any pension fund allows for shorting.

Just be sure to have that account well funded. And an added 'bonus' for you, (just pulling your leg a bit here), is that as the value goes down, you can feel good about yourself! Won't that be fun!

BTW - I'm a number 2. There are more effective ways to 'do good', and probably more effective use of your time towards this end. So in some ways, the time you invest trying to divest yourself of these is time that becomes counter-productive, as it could have more effect applied elsewhere. Probably.

-ERD50

 

[73ss454]

Having a conscience is good, no?

 

[rescueme]

I was looking at choice #2 with 22 votes. Does this mean that you'd invest in a tobacco company and give to the Cancer Society?

Why not?

With the investment, I probably would get a good return.

With the contribution, I get a tax deduction.

Sometimes, you can play both sides of the coin ....

 

[ERD50]

Having a conscience is good, no?

Sure, but if one wants to make a difference, one needs to find the ways and means to do that. I think what we are saying is there are better ways to do that than trying to avoid a few percent of stocks in an index fund.

-ERD50

 

[73ss454]

Sure, but if one wants to make a difference, one needs to find the ways and means to do that. I think what we are saying is there are better ways to do that than trying to avoid a few percent of stocks in an index fund.

-ERD50

Maybe so, but you've got to start somewhere.

 

[MichaelB]

Denying investment in a company is a passive effort at socially responsible investing. Same for an index that only invests in select enterprises. An active effort would be to organize or support a cause that promotes others to do the same. Another active effort would be to use investment gains to achieve social goals that are directed at specific companies, not causes. Another active effort would be to invest in companies that specifically promote social goals as part of their overall mission and financial measurement of success.

Using investment gains to support charitable causes is not socially responsible investing, but it is socially responsible living – and just as beneficial to society. Sort of a different way to achieve a similar goal. I’m not being critical of the thread or the options in the poll, but am wary of those that would try to discount the actions of some by applying a too rigorous or narrow definition of what qualifies as socially responsible investing.

 

[ERD50]

Maybe so, but you've got to start somewhere.

Fine, but if you are serious about it, it needs to lead down a path of serious change. And again, if there are better paths, than those should be taken - if you are serious.

This 'start somewhere' approach just reminds me too much of the "check the air in your tires and screw in a funny light bulb" to save the planet. If it is a start, with no reasonable middle or end game, then it is just window dressing. Worse, it distracts from meaningful change. Which can make it negative, overall.

I don't have an answer, but I do think the 'invest in an index and use the profits to target good things' would be much more effective. Personally, I don't think it is a big enough deal to spend much time on (just my opinion), but if you do, and you are serious, I think you should evaluate which would have a bigger effect. And I'm not saying that in a grumpy way, I mean it, in a helpful way to help you achieve your goal.

-ERD50

 

[ziggy29]

I was looking at choice #2 with 22 votes. Does this mean that you'd invest in a tobacco company and give to the Cancer Society?

If my share of the tobacco company's profits is $100 a year and I give $200 to the Cancer Society, why not? The net result is a social "positive" for your position.

It's simply not practical for most mutual fund investors to apply SRI on the "where I put my money" side of the fence.

 

[John Galt]

if you really cared about this you would short the socially irresponsible companies

 

[kyounge1956]

It didn't strike me as an excuse, it was a reasoned, practical explanation.

To the OP - here is one possibility that I don't think was mentioned, and no, I would not do it myself. If you can determine the weighting of stocks in your portfolio holdings in areas you don't want to be invested in, short each of those companies by that weighting. You would have effectively canceled them out. You will likely need to do this is a separate account, I doubt any pension fund allows for shorting.

Just be sure to have that account well funded. And an added 'bonus' for you, (just pulling your leg a bit here), is that as the value goes down, you can feel good about yourself! Won't that be fun!

It wasn't included because I don't understand short selling. I'm probably too chicken to do it anyway. If you were doing it, I guess that would have been a vote for "other". I think I might be able to eliminate at least one of the specific things I object to (tobacco) by holding a full selection of sector funds or ETFs, except the Consumer Goods sector. That would also eliminate laundry soap and deodorant but I don't feel a moral imperative to invest in those products even though their social benefits are obvious to all.

BTW - I'm a number 2. There are more effective ways to 'do good', and probably more effective use of your time towards this end. So in some ways, the time you invest trying to divest yourself of these is time that becomes counter-productive, as it could have more effect applied elsewhere. Probably.

-ERD50

I think there are two broad motivations for SRI, one of which is doing good (however that is defined by the individual investor). For that motivation, the argument that it's more effective to find a way to have a net positive effect than to try to deny funds to companies you object to, is I think a valid one. The other, which includes my desire to eliminate income from tobacco, is being repelled by the thought that one is profiting from (fill in the blank). I'm sure we can all think of things we personally would not accept money for doing, and for people with this second motivation, eliminating those things from our portfolio is just another way of not accepting money for doing them.

 

[Gumby]

Having a conscience is good, no?

I will acknowledge that my first post was somewhat flippant. What I hinted at, but ERD50 brought to a clearer point, was a question -- do we want to do something to salve our own conscience or because we want to achieve a positive outcome for society?

Just as an example, I would not want to buy stock in a company that manufactured its product using slave labor, because making money off of human misery would bother my conscience. But I am under no illusions that my choice to forego buying stock on the secondary market will have any effect whatsoever on that company. So I can feel better and brag to my friends that I am "socially responsible", but I'm not making a difference.

In fact, one could argue that I would be doing the most good by purchasing all the stock (or at least a voting majority) so that I could force the company to stop.

I see another problem in even coming to any common agreement regarding the identity of socially "irresponsible" stocks. For example, to my knowledge most "socially responsible" funds avoid stocks in the nuclear power industry. I think that is extremely foolish and not socially responsible at all. But I'm sure there are many who would disagree with me. Similar splits in opinion would exist with respect to alcohol distillers, cigarette companies, firearms manufacturers, etc.

For me, contributing my time, energy and money to causes I support is more important than whether or not I buy any particular stock.

 

[harley]

What did Apple do that's so terrible? Please, please don't tell me I will have to get rid of my Macs and switch to PCs due to Apple's despicable corporate misdeeds!

Truly, I don't know. I just assumed that since Steve Jobs has been such a flaming a-hole for so long he must have effected the ozone layer at some point.

 

[glippy]

I've done it with my bank.

I switched from a faceless mega-bank to a local bank in Boston that pays its employees a living wage, provides discounted loans for local home-owners trying to make their homes more energy efficient, is trying to get ALL its buildings LEED certified, and places an emphasis on local charitable causes. It cost me nothing extra in fees or lost interest.

I'd like to do it with my stock holdings. I don't even like buying petroleum products because I know my money is finding its way to religious nut-jobs in the mid-east who would have me (an infidel!) put to death if they they could. The idea of investing money into one of their enterprises sickens me. Yes, I want a good return, but one percentage point isn't worth losing my self-respect.

But, as people have said, as an index investor it's hard to say where your money is. Perhaps when I do FIRE I'll have the time to do it. I'd be willing to take a hit on my return to know I'm not giving money to maniacs who are killing innocent people. If "other people are going to do it anyway" let them, I'd rather sleep at night.

 

[kyounge1956]

Truly, I don't know. I just assumed that since Steve Jobs has been such a flaming a-hole for so long he must have effected the ozone layer at some point.

Well, that's a relief!

 

[roger r]

A long time ago I owned some Calvert funds. They significantly underperformed my traditional funds and were load funds. For that reason I've not tried again. If there were a socially responible group of funds with low management costs and good performance, I would do it again. I just have never run across much that fit the bill. Matter of fact does anyone have any recommendations?

I was thinking about investing in a commodities fund not long ago and noticed their number one holding was Monsanto. I consider Monsanto one of the least responsible companies in the US and immediately rejested the fund.

 

[kyounge1956]

A long time ago I owned some Calvert funds. They significantly underperformed my traditional funds and were load funds. For that reason I've not tried again. If there were a socially responible group of funds with low management costs and good performance, I would do it again. I just have never run across much that fit the bill. Matter of fact does anyone have any recommendations?

I was thinking about investing in a commodities fund not long ago and noticed their number one holding was Monsanto. I consider Monsanto one of the least responsible companies in the US and immediately rejested the fund.

I don't know it would be possible to reduce the expenses of an SRI fund. Unless the screening were done by volunteers, it will add to the cost/reduce the performance. For some people that's a tradeoff they are willing to make.

I'm just thinking out loud here, but maybe some kind of investment Wiki would make low-expense SRI possible. I have only a vague understanding of how a wiki works, but I think anyone could add info about any fund or individual stock, concerning a product or practice they consider praiseworthy or objectionable, and anyone can (if they wish) use that info as input to their investment decision making. In fact, an investing wiki already exists. I haven't looked around it to see if it includes info that would be relevant to SRI, but it's possible.