Excerpted with permission from the June/July 1999 issue of The Inner Edge. This article was originally adapted from "Investing With Your Values: Making Money and Making a Difference" (Bloomberg Press, 1999).
Given the central, powerful role of money and business--both in society and our personal lives--it is astonishing that so little attention is given to the social, ethical, and spiritual dimensions of money.
How can people include their spiritual, social, environmental, and ethical values when making important financial decisions? Why do so many conscientious, good-hearted people make investments that conflict with their own deeply held beliefs?
There are, of course, no easy answers. We have found that the status quo--where money and values are separated by an impenetrable wall--is rooted in an outdated mechanical worldview that sees everything as parts of a giant machine. When we shift toward a natural worldview (of interrelated living systems), a new sort of investing emerges: Natural Investing
Natural Investors are shunning conventional wisdom, which says we must abandon ethics when making financial decisions. People of all income levels from across the political spectrum are using Natural Investing to find profitable investments. The Social Investment Forum, a national nonprofit organization that promotes the concept, practice, and growth of socially and environmentally responsible investing, says that well over $1 trillion is invested today based on some sort of ethical criteria. That is almost one-tenth of all investment dollars.
|Investments based on social, environmental, or ethical criteria perform as well as, or better than, those based on financial criteria alone.|
Nearly every mainstream investment option now has a values-based equivalent. And you don't need a lot of money--several screened mutual funds and community banking options welcome small investors who can start with as little as $50. All that's needed is the willingness to identify and consider your personal values when making decisions about your money.
Answering the Skeptics
It takes courage to honestly examine the ethical component of one's investments and become aware of any inconsistencies. Many people try to avoid the issue by leaning on one or both of the following myths:
Limiting one's investment choices by using social, environmental, or ethical criteria results in lower financial returns.
Natural Investors do
voluntarily limit their choices, but this has not led to any systematic underperformance in the stocks they choose. In fact, solid statistical evidence shows that investments based on social, environmental, or ethical criteria perform as well as, or better than, those based on financial criteria alone.
In 1990, the Domini 400 Social Index was launched; it includes socially screened companies in a similar range of sizes and industries as the unscreened Standard and Poor's 500. From inception through December 1998, the Domini 400 has outpaced the S&P 500 with a total return 442% compared with the S&P's 366%. This is a truly remarkable feat, but it is only one of many studies that show a positive correlation between corporate responsibility and corporate profitability. So much for the myth that "good guys finish last."
Natural Investing is only for tree-hugging radicals and aging hippies.
Natural Investing in the United States traces its origins to Quakers and other Christians who could not live with inconsistencies between their beliefs and their investments. Today a diverse range of strategies is available to support investors with wide-ranging values, from conservative Christians to farm-belt traditionalists to environmental visionaries. Most screened mutual funds aim at a broad cross section of common interests. Natural Investors are not anti-business; nor are they only interested in fringe companies. For example, the Domini 400 includes many household names: The Home Depot, Xerox, Johnson & Johnson, Coca-Cola, and Bank of America. Although none of these companies is free of controversy, each has certain strengths that justify its inclusion in the index.