Socially Responsible Investing

The Investment DilemmaThree ApproachesClean InvestingThe Morality of InvestingSRI: Is There a PenaltyIs SRI for You?

The Investment Dilemma

People invest in order to put their dollars to work to make them produce income or to grow in value. The purpose of investment is to provide security and opportunity in the future. If you invest in your own business, it is to provide current income and to build value in the business.

As you build your business, you will be continually challenged to make ethical decisions about the quality of the goods you buy or sell, about the way you treat employees, customers and suppliers, about the nature of your products and services, about the impact of your business on the lives of others and upon the environment, about innumerable other questions. These decisions will challenge the moral code you have learned and chosen to live by. Likewise, investors are faced with similar choices.

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Three Approaches

Every investor has three options they may employ when choosing to purchase a particular stock; investors may decide to use one, two or three of these options (view SRI terminology):

  • Deciding to buy or not buy the investment. Even the act of buying—or not—buying a particular stock or other investment product represents a conscious act with financial and ethical consequences. As an investor, one literally "buys into" a company's products and services, including their impacts on people, community and the environment. Deciding which investments to purchase based on ethical considerations as well as economic ones is call "screening." We offer several resources to help you learn more about screening:
    • Our Selection Criteria section illustrates the types of parameters investors often apply when screening;
    • You can learn more about available SRI investments at Indexes and Mutual Funds;
    • Find out how the way you life and what you buy—Your Footprint—impacts other people and places; and
    • Learn about these issues in depth with our Books & Resources.
  • Getting involved in the investments. Stockholders have the right to get involved in company business through several means: drafting initiatives, soliciting support from fellow shareholders, introducing resolutions, voting on issues and speaking on the floor at annual meetings. This approach—known as "shareholder advocacy"—is often employed by secular and religious organizations and individuals who are focused on corporate change within companies they belief have the potential to improve financially, ethically, or both. Though these resolutions often garner only a small percentage of "yes" votes, they frequently serve as "wake up calls" to company executive, initiating dialogues and moving company policy and practice. View sample Company Reports for illustrations of typical shareholder advocacy issues.
  • Invest in your community. Investing in community development financial institutions allows investors to add a broad range of investment vehicles to their portfolio while knowing that their investment dollars are being used for specific purposes either locally, nationally or abroad. To learn more, visit our Community Investing section.

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Clean Investing

If you were to create a company with all of the attributes you desire, what would it be? Assume that it is a company that is reasonably profitable and that accommodates your personal skills and interests. What more would you want? Perhaps these criteria would be desirable:

  • Fosters awareness of a commitment to human goals such as creativity, productivity, self-respect and responsibility, within the organization and around the world.
  • Delivers safe products and services in ways that sustain our natural environment.
  • Is managed with employee participation throughout the organization in defining and achieving objectives.
  • Maintains good health and safety standards.
  • Negotiates fairly with its workers, does not discriminate unfairly, and provides opportunities for the disadvantaged.
  • Seeks to work in ways that achieve excellence in both financial return and environmental soundness.

Several screening organizations work to identify companies that strive to meet just such criteria. Finding and evaluating the providers of these screening services is one of our specialties. If the social values of the companies where you invest your money are important to you, we can help.

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The Morality of Investing

Sunia Technology has been surreptitiously contaminating a nearby creek with hazardous chemicals. Querta Wearever has been contracting with weavers in India who  employ child labor. WestCentral, a nuclear power generator, has vigorously lobbied against public support of solar power research. P. R. Treymar, Inc. aggressively promotes its cigarettes to children throughout developing countries. Megatransit Industries actively opposes efforts of employees to organize. And, Pinefield Oil is the mainstay of an African dictator.

These hypothetical examples represent the reality of today's market place that many investors wish not to support with their dollars. At the same time, it is not easy to find a company totally free of some vices, however minor. Companies have a primary drive to succeed financial and it is common for them to do whatever is required to reduce costs and maximize income to stay ahead of the competition. Shareholders are pleased with profits and unhappy with losses. Company executives usually stay within the letter of the law—but the boundaries of moral issues are often less clear and more aggressively tested. Ultimately, moral issues revolve around what is harmful to others, what is just and fair, what is equitable and contributes to the betterment of society.

The individual who chooses to make his investment practices consistent with his moral commitments is faced with a formidable task. But there are opportunities and tools that permit taking a stance based on ethical considerations.

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Socially Responsible Investing: Is There a Penalty?

The financial marketplace in general and some media sources have posited that investment screening on the basis of ethical considerations must—by virtue of eliminating certain investment opportunities—result in a penalty on returns. However, many investors, financial professionals and researchers contend that companies that ignore safety and fairness, pollute the air and water, discriminate, exploit workers and pay low wages, support dictatorial regimes and ravage the land are taking large financial risks and incurring liabilities that are harmful to their profits. The argument is that such companies make for risky, if not bad, investments. For in-depth information on the many academic studies that support this conclusion, visit the Social Investment Forum.

Even if the complex issue of profit advantage can be determined, profits may be only on a par with—or even subordinate to—corporate moral behavior for the ethically motivated investor. If there is some price to be paid for not investing in a company because of its unsatisfactory moral behavior, the investor who prioritizes moral behavior accepts such a compromise. That investor wants to support responsible enterprises that provide needed products and services, are viable and profitable and make a positive contribution to society and the world environment. He or she hopes to make good businesses perform better—while making a reasonable return—and is willing to compromise some return in order to make that happen.

Can you be more successful or profitable by cutting legal and ethical corners? Certainly, there are those who have amassed financial fortunes—particularly in the short term—by doing so. There are also those who have failed. For the ethical investor, there is no alternative to investment based on the principles of humanity and integrity as well as prudent financial planning—all of which call for a careful consideration of the consequences of one's actions.

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Could SRI be for You?

We can assist you in examining what SRI might mean for you, your portfolio and your financial health. You may want to get started by completing our Social & Environmental Sensitivity Questionnaire on our Financial Planning Forms page. For further information concerning any of these issues, please contact us and we will send the information requested. We look forward to your call and will do our best to be helpful. Please indicate how you wish to be contacted (U.S. mail, e-mail or fax) and provide the following information:

Name • Address • Phone Number • Fax Number • E-mail address 


John Shellenberger

Securities through McDermott Investment Services FINRA/SIPC

© 2018 Estate Conservation Associates
14541 Kelly Canyon Road, Bozeman, MT 59715 • Phone: 406-585-5384 • e-mail: jshellenberger@mcdermottadvisors.com.

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