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Socially Responsible Investing for the Long Term
The past few years have hammered home the importance of corporate integrity, as
investors watched former Wall Street darlings collapse in the aftermath of corporate
scandal. In fact, a majority of investors now believe that companies that operate with
higher levels of social responsibility carry less risk (55%) and deliver better returns
(52%).1 And 71% of investors contend that knowing that companies are rated higher in
terms of their social performance would make them more likely to invest in such
companies.2
But how do you go about investing in companies with higher levels of integrity? An
investment strategy called socially responsible investing (SRI) provides an option. SRI
is based on the principle of investing in well-managed companies that act responsibly
towards shareholders, communities, employees, consumers, and the environment.
Socially Responsible Investing
So, what exactly is SRI? SRI is an investment strategy that integrates social or
environmental criteria into financial analysis. Although the term has a contemporary
ring to it, socially responsible investing is hardly new. SRI was first formally practiced by
religious investors who, nearly 100 years ago, avoided companies involved in tobacco,
alcohol, and gambling. During the 1980s, there was a resurgence of interest in SRI as
investors shunned companies operating in apartheid South Africa. Now many investors
are concerned about a broader range of issues, including environmental protection,
workers’ rights, product safety, and business ethics. In fact, SRI represents nearly one
out of every 10 dollars under professional management (or $2.29 trillion), up 258%
from 1995 ($639 billion).3
How SRI Works
Of course, most investment managers look for companies with strong balance sheets,
sound management, and viable products. But socially responsible investments add
another layer of analysis on top of traditional financial analysis that seeks to identify
companies that meet specific social and environmental criteria. Many social investors
believe that this social research process can identify companies with lower risk and
better quality management, thus helping to contribute to better long-term financial
performance.
In addition, many socially responsible investors also actively use their position as
owners to push companies to improve. For example, Calvert, the nation's largest family
of SRI funds, often works with companies to encourage them to address issues of
social and environmental concern. In 2005, Calvert successfully resolved 21
shareholder resolutions. Shareholder resolutions are formal requests that can come to
a vote in front of all shareholders asking companies to take specific actions, such as
working to diversify their boards, enhancing their corporate governance practices, and
improving their environmental policies. Everyday shareholders can have an impact by
simply voting in support of such social resolutions, much like you might cast a political
vote.
Lastly, many social investors direct some of their assets to promote community
investment projects in the US and around the world. In addition to earning competitive
returns, these assets contribute to ending poverty by increasing affordable housing,
community development, access to capital, and more.
Millions of Americans are looking to integrate their financial goals with their concerns
about the environment, safe products, fair labor practices, and other quality-of-life
issues. SRI offers investors the opportunity to build sound portfolios for their financial
futures, while helping to build a better future for the world.
For more information on Socially Responsible Investing, visit Blue Summit Financial
Group's Web site at www.bluesummitinvest.com or call 888.698.4330 for a free
consultation. With a long standing track record of helping San Diego citizens,
businesses, community leaders, and institutions succeed with their financial future,
Blue Summit Financial Group is San Diego’s choice for socially conscious investment
and financial planning advice. They are committed to putting their client’s needs first.
When you invest through Blue Summit, your money works towards achieving two
objectives. By aligning your investments with your values, your money can work to
create a secure future for yourself and your family, while encouraging the development
of a better future for our world.
1. “Attitudes Toward Socially Responsible Investing,” Yankelovich Study, January 2006.
2. Ibid.
3. 2005 Report on Socially Responsible Investing Trends in the US. The Social
Investment Forum, 2005, p. iv.
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