Investing and purchasing with a social conscience is the key to consumer power. Everyday, I find myself being more and more selective about which companies I support either through investment or patronage. I dumped my JP Morgan Chase accounts after years of abuse by them in the form of illegitimate overdraft fees. I recovered over $200 through the CPFB from Chase for false fees they charged me. That’s no way to run a business. As more consumers become socially aware, the more they will pick companies that support their beliefs (or at least play fair & don’t rip you off). Watch out corporate America! The ‘socially aware’ consumer is on the rise!
This is why mutual funds should be a thing of the past. Buying into them is like eating cheap hot dogs. What on earth is in there?
1
If you don’t like a company, don’t buy their stuff.
The paradigm example of a philanthropist and consummate investor,Bill Gates,provides the answer to this NYT articles idealistic rhetorical question.
Even though were aware that ONE HOUR of sunlight that falls on the earth ,when captured and stored,can provide ONE YEAR of the entire earths energy needs.........Bill Gates still has billions invested in dangerous, dirty,and NUCLEAR energy........the most inefficient and toxic way to boil water for generating electricity.........because to withdraw his money from nuclear,would LOSE SHARE VALUES for his own TERRA NUKE FIRM and related investments in the International Nuclear Associations vast web of, life destroying, radionucleide producing businesses..........These ,now toxic investment funds,can FUND research for successful and efficient SOLAR STORAGE and QUICKLY,could save the planet from global warming and provide cheap and clean unlimited energy.............but bottom line IMMEDIATE PROFIT MOTIVE and temporary share value loss ....... even .blinds green ideals and IDEALIST !
Let’s face it, capitalism is an ugly system which favors profits over all other considerations, so naturally, finding stocks without blood or tears all over them is no easy feat. Add to that the corporate crime wave, and you face a daunting task. He’ll, even Facebook is dirty.
2
I belong to and since retirement have drawn my income from the Ontario Teachers Pension Plan, long renowned as one of North America’s largest, best-funded, and best-managed.
Several years ago, a group of the plan’s members asked why our investments weren’t being moved into more socially and environmentally-responsible funds and assets.
In our next Pension Newsletter, a lengthy and exquisitely well-written and diplomatic article appeared, explaining why.
The explanation can be summarized In one sentence:
“They don’t make enough money”
1
Thank you for highlighting socially responsible investing. I think it's a potentially powerful tool for change, but the world of finance is often opaque to people not steeped in it. I'd love to read more columns about it.
4
It's hard to invest with a social conscience because the entire system lacks a social conscience. How can a system that funnels wealth to billionaires so efficiently ever have a social conscience?
2
Could there be a rating system for "green" stocks and the like? Of course, this would have to be done by an independent group with extensive criteria delineated.
1
Personally I think the issue comes down to two factors: impact investing is an over used term and the investment community isn’t investing in areas where its impact could really be felt. Impact investing is a term which is thrown around with care free when it was supposed to be saved for those times where monies were being used to benefit society. Investors are haphazardly throwing money at opportunities in my opinion with little thought for the overall consequence of their investment, it’s almost as if these investments are done much more for meeting quotas then helping a particular cause. Whatever the case these big investment machines should be spending more time developing mandates and building due diligence teams than throwing money haphazardly at causes which aren’t that impactful.
Fully customizable individual portfolios based on ethical and social screens are available starting at $25,000 minimums. They have been available for about the last 5-7 years through financial advisors utilizing firms such as Savos and Curian Clearing.
However to your reference about the profitability only Savos still offers the portfolios as Curian Clearing stopped offering the platform several years ago because of an inability to do it profitably.
How about if people with money to invest and want to do it in a socially conscientious way, first invest some of their disposable income into things like solar panels and insulation for their home?
I live in Colorado - with 300 days of sunshine a year. There is a lot of money here too. And yet there might be one solar array of panels per 40 houses. That's crazy. I also recently moved into a Denver house built in the early 1960s. There was no insulation in the walls and very little in the attic. For almost 60 years, people continued to live in this house and instead of insulating it, over-consumed a limited resource and over-paid the oil and gas industries. Totally insane. I've insulated the house. And put on solar panels. Both actions employed local people and helped the local economy. I've also planted many fruit trees and edible shrubs in areas where they can grow using directed rain water.... There are many ways to invest with a social conscience that don't include Wall Street.
3
If you're not concerned with maxing out on returns, but rather supporting good causes, consider school bonds. I've put part of my investment money into them for years. Yes, yield is low ... that's why I included the first sentence. It was an Edward Jones advisor (back in the days of more personal attention) who suggested school bonds would satisfy my interest in social investing--low risk financially, and predictable social value. He was right.
There are two kinds of people interested in socially responsible investment. Those who are satisfied to make a personal statement and those who want their actions to change the world. This addresses the problems from the perspective of that first group. Are your investments in line with your worldview?
It doesn't really address the central problem for the second group, that their choice of investments has almost no impact on the world either individually or collectively. In truth socially responsible investing is mostly a marketing technique with different brands for different people. If you want to change the world, you have to look at the management of the fund and how the proceeds are used. There are funds that are associated with social change groups. They not only provide the opportunity to have investments that are compatible with your personal beliefs, but the proceeds get used to fund work that makes the whole world a better place.
7
No impact? Investing is like voting, only more powerful; one person's choice is rarely decisive, yet cumulatively, corporations have to listen. Just as Snapchat after they lost billions in stock value because of a comment by Rihanna. In a world where politics is skewed by political contributions, responsible investing seems like one of the most effective ways to for an individual to influence the world.
1
Some staple large scale corporations make intelligent decisions when steering their money and have the ability to influence markets. Take Campbell's for example. They now buy 100% RSPO certified palm oil. Granted, demand for said resource is now possibly higher than supply, tossing a different wrench into the machine.
Per Wikipedia - “The RSPO has been criticised by various sectors, especially the environmental NGOs. Issues include the impact of palm oil plantations on the orangutan population; destruction of tropical forest for the new oil palm plantations; the burning and draining of large tracts of peat swamp forest in Kalimantan, Indonesia. The fact that RSPO members are allowed to clear cut pristine forest areas, when there are large areas of Imperata grasslands (alang alang) available in Indonesia[8] raises doubts about commitment to sustainability.[9] In 2013, the 11th annual RSPO meeting was crashed by palm oil workers and others,[10] and Indonesian and international labour-rights groups have documented a litany of abuses, including forced labour and child labour. A 2013 study uncovered "flagrant disregard for human rights at some of the very plantations the RSPO certifies as 'sustainable'".[11]” The idea that
self serving organizations like the RSPO and the certifications they issue are environmental positives is misleading at best and likely deceptive greenwashing schemes that perpetuate environmental and societal harm.
2
'A global economy that works for more people' strikes me as being at odds with the nature, contrary to Paul Hawken speak.
1
I don't mind a somewhat lower return (OK, I'm lucky enough to be able to say that) to invest in one or more gun-free funds. In fact, I would like the "socially responsible" funds to get better prioritized. How about making the top priority avoiding companies whose products or processes contribute most to the sudden death and maiming of human beings or the slower death of the Earth (slower in human time frames, instantaneous in geologic terms).
18
I don't get it. If we want to change the ways of these terrible companies, shouldn't we be BUYING stock? We can then vote as activist shareholders and better hold the leadership and board of directors accountable. If we sell all our shares in the companies, they have a lot less reason to listen to us.
7
The problem is that the stock voting system is rigged. Nobody counts your votes. Whenever it looks like activist shareholders might win, they change the rules to block it. Shareholder democracy is a joke.
2
As I said before, the answer to why it's so hard to invest in good conscience is easy-- the commercial profit motive is in essence violence against other humans. If you invest, you are complicit with a system that rewards only competition, greed, dishonesty, and one-upsmanship. Companies that aren't ruthless don't survive. The ones that tart up their marketing successfully do. You can analyze and nitpick details of how to invest within the system all you want, but to find a way to come out with a clean conscience can't be done. Anybody who can follow a chain of causal analysis should be able to come to the greater conclusion. And that is, Marx was right. In a strange sense it doesn't matter anymore whether we value the higher good in our society (which we don't, except for a few outliers everyone disdains) because the consequences of our stupidity and selfishness will play out. Though that is a damn shame, and it's a damn shame that we can't value something other than our own prevailing.
5
Yep, Marx was so right that he led to Mao, Stalin, Chavez, etc. Capitalism led to prosperity for most, national parks, pollution control, etc.
Thanks Mr Lieber for the most useful NY Times articles I have encountered in over 25 years of readership! Have been reluctant to start an investment saving portfolio based on crappy corporate choices but will do more research now with the cool invest info you and others in comment section have provided. Amazes me that haters leave disparaging comments about leftists/liberals wanting to invest their money in companies that actually care about important issues like environmental sustainability and workers rights. Geez Louise! Sorry guilt ridden haters but the future is clean energy, living wages and sustainable product creation - it's where all the big profits will be! Like the old hard core capitalistic saying goes - you will either be part of the steamroller or the pavement! God forbid we live in a better, cleaner and healthier sustainable world with 8 going on 10 billion consumers!
12
Regarding the headline of this article, I would have thought it would be very easy
to understand why: big capitalism especially, but commerce in general, is essentially violence against others. There it is.
3
No mention of the real world effect of disinvesting in companies that you do not approve of (kicking out wells fargo or equifax from your diversified portfolio). The effect is absolutely nothing, of course. Shares are traded on a secondary market, so for ever seller, there is a buyer. If enough people kick out a bad company and the price goes down, the only tangible outcome of disinvestment, then that presents a buying opportunity for either the company itself or other value investors.
4
The only point of investing is to make money. It's hard enough to do that without overly complicating things.
Better to invest for profits and be socially responsible with proceeds.
3
If ExxonMobil were to dissolve, their place would likely be filled by a lesser capable of greenwashing company, or a Russian one. (vegetarians aren't doing factory farm animals any favors, unless they are politically proactive)
2
Jens, some of us don’t consume animals because we don’t like eating them, incl. me, without any particular agenda.
Betterment may want to tidy up the office a bit when the NYTimes comes to visit.
1
Thank you Ron for this illuminating piece. We share your concern over the difficulty of small-scale investors to divest from harmful business activities.
For a list of prison-free and occupation-free mutual funds, check out: http://investigate.afsc.org/updates/2017-prison-and-occupation-free-mutu...
2
Hopefully the population will gradually stabilize, though despite graphs and data that may not happen. Nonetheless, all this good stuff needs to jump the gun prior.
Why aren't more self sustaining investment opportunities stemming from the well funded
military, as nuclear we're now aware should be made obsolete.
The object of investing is to MAKE MONEY, not right the supposed wrongs of this world!
So you would invest in heroin manufacturers if it were legsl and profitable?
2
Are you then suggesting the 'wrongs of the world' may be righted by political forces, ie stronger governmental controls?
1
I know that's what we're taught at businesses school. And it can certainly work that way for some. But why does it need to be that way for all? What if power to change something worth more to you?
A totally opposite way of thinking about it, which leads to the same conclusion: morality exists to keep us in a society that thrives - amoral groups of humanity died out. So especially for long-term funds, the wise money is on the funds that help the collective good. Pretty sure coal companies won't be worth much in 50 years.
I’m thinking of setting up a “vice fund” that invests in companies in tobacco, liquor, guns, gambling, defense, water, oil, pharma, trucking, and prisons (well-diversified, no more than 10% in any sector). I’ll let you know how it goes.
3
already been done. VICEX
1
It already exists. If the NYT readers are expecting to be successful by investing with a conscience they should read more than the NYT about how the markets work. There IS no conscience, and every investor is potentially your enemy.
The idea that in a pinch anyone in the market has a superego and won't stick it to you is another indictor of the magical thinking of the typical NYT readers from the urban, blue areas of this country and abroad.
Wake up NYT readers!!
1
And then use those profits as seed money for more responsible efforts.
American corporations have, in recent decades, somehow arrived at the morally bankrupt conclusion that shareholder profit and of course the personal compensation of executives are the only things they need to pay attention to. As socially responsible investing grows, and it is growing rapidly, they should get the message that they also need to pay attention to such things as workers' rights (including foreign workers), the environment (especially greenhouse gases), and giving consumers a fair deal. I've been trying to do socially responsible investing for decades and it is finally becoming easier and more financially feasible.
14
American corporations have a fiduciary obligation to conclude that the long term return to their shareholders is their only focus. Shareholder suits have resulted when this duty is neglected for other considerations. Only if consumers, not shareholders, decide to punish 'socially irresponsible' companies by not buying Apple products, for example, will social conscience become a valid concern.
1
That’s actually not true. Google “The Myth of Shareholder Primacy”
Thank you Ron for outlining some of the potential ways to move forward. Additionally, here are innovators bringing solutions to investors today:
* OpenInvest.co: an impact-focused online robo-advisor that enables everyday investors with low minimums to align their values to their portfolio, and screen in climate action, and high-gender-equality companies, and screen out fossil fuels, and Trump-affiliated firms. In addition, it has achieved the "dream" of swipe-left-or-right proxy voting for or against companies on their annual votes, including Board members.
* Aspiration Bank: a sustainable bank and investing firm that also achieves the "dream" of social media campaigns towards companies based on their Impact Metric related to People and Planet of 100s of retailers when using its debit card.
* MoneyIntel.com: an online 401(k) provider that personally calculates the impact rating of the funds in your portfolio, and what % is related to fossil-fuel holdings. Stok, a high growth company in San Francisco, has fossil-free and gunmaker-free funds and portfolios, and achieves 100% participation rates for long-term investing.
* HIP Investor Ratings portal: enabling investors of all types to see their personal portfolio score based on the 1000s of holdings of what is inside more than 2000+ mutual funds or ETFs, and provides a summary score of what you own.
Active citizens are allocating their portfolios to reflect their values to build a better world.
48
But does Stok use any fossil fuels to power their websites? Do their office facilities use any fossil fuels? Or do they rely on renewable energy sources like nuclear power?
1
Well said, Paul! An additional resource on the 401k side would be Rob Thomas' Social(k) platform. Additional research can be obtained from As You Sow.
1
What does “100% participation rate for long-term investing” mean?
Getting money from a Social Investing Bond funder is very difficult. SIB's want provider aplications to serve a variety of sectors in a city. It is like writing educational lesson plans to touching on a wide variety of topics.
One of the hallmarks of SIB funding is performance-based contracts provided by these funders, foundations, and government that improves the lives of people in poverty attain successful outcomes as developed by human service agencies or environmental groups.
The new method of funding such agencies that address housing, safety, health, education needs in one application is hard to do.
It should be easier to get funding
1
Simple. Invest with "LendersClub". The interest rates are great, better than you will get at any financial institutions. Easy to do.
This excellent articles shines a light on an important aspect of socially responsible investing. Even if returns don't quite match category averages (questionable) and even if the cost of the index fund isn't quite as low as another comparable one, this burgeoning category offers us all an opportunity to opt out of tacit endorsement of economic systems that propagate morally unpalatable collateral consequences. If we're not willing to accept a slight personal cost for that, they we can't honestly claim to place morality over money.
6
Good point. Joseph,
Always check out a fund's Alpha against its peers and benchmark. The Alpha is shown net of fees. You may be pleasantly surprised with some of the SRI choices.
2
Info:
In CO, the state tax office won't direct deposit your tax refund to your bank. Instead, it sends you a paper check, and informs you that only Wells Fargo will cash it without a charge. You then get multiple emails from Wells Fargo about your account with them.
YAARGH
4
Buying stocks rather than funds is best when engaging in ESG-socially responsible investing. You can better match your values directly to your investments, and stocks (if not frequently trading) usually have lower fees compared to funds.
6
Money is basically a tool.
It can be used for both good and evil.
How you decide to use it is ultimately up to you.
4
You can, if you can be sufficiently diversified, invest in individual equities and bonds, and eschew the players you don't want. It takes work, and a lot of thought to do it. But its certainly not impossible--and interestingly, a lot of the companies you are left with are stable, growing, well governed and pay decent dividends. You probably only need about 20, but even with 12, you can be diversified by sector and internationally.
2
Delusional with a capital D. The Liberal-Left has enough problems seeing and understanding the world as it is rather than the Socialist 'utopia' they want to create. Applying that same mentality to the science of investing is probably the most deranged symptom of that syndrome.
2
Horse Hockey.
I vote with my feet, my money and my mouse clicks every day.
Why would I not want my portfolio to reflect my values, to the degree that I can control my stock ownership in my IRAs and after-tax accounts and use broad based index funds in my 401k?
3
When I invest in a company, my only criterion is whether I believe the stock will appreciate in value over time. I would not invest in a company which was doing blatantly illegal or immoral things because I would not trust the value to go up if people no longer patronized it, but that is the only social value I have any interest in applying.
The purpose of investing is to make money for the investor, nothing more and nothing less.
1
There are cheap, socially-conscious index funds that might appeal to New York Times investors. While they don't nix every iffy company, they're worth researching. (VFTSX and TRSCX come to mind.) But I'm incredibly wary that people who want completely divest themselves of every trace of evil in the corporate world—firearms, fossil fuel, nuclear energy, palm oil, labor disputes, privacy concerns, the list goes on and on—are liable to get ripped off by inevitably embracing active management.
I used to own an actively-managed, socially-conscious fund with an expense ratio approaching 0.9%. It was regarded as one of the best in its peer group, and it got trounced by the S&P 500 for three years before I decided I had enough. I moved my money into Vanguard's Total Stock Market Index, where I currently pay an expense ratio of 0.04%. If you hold such a fund for thirty years, those 80+ basis points add up to hundreds of thousands of dollars. Where does that money go if you don't keep it? Straight into the pocket of some of the wealthiest people on the planet. Not very progressive, right?
Index funds are a game-changer and deserve a place in most Americans' portfolios, because they remove Wall Street middlemen from the equation entirely. Yes, 0.02% of your money gets invested in gun manufacturers. But that's a small price to pay when your investment serves you and only you, not your fund manager. There are better ways to fight the gun lobby than making the rich richer at your expense.
5
Kyle, check out the net of fees long-term Alpha on some of the socially responsible funds. You may be pleasantly surprised.
2
I've looked around a little, but I haven't been terribly impressed. The best socially-conscious index fund I've encountered is Vanguard's FTSE Social Index Investor (VFTSX), which lands in the 36th percentile of large blend funds over the past fifteen years, tax-adjusted. That's honestly pretty good, but why stop there? Vanguard's Total Stock Market Admiral (VTSAX) does so much better: top 6% of large blend funds, tax-adjusted! It's also more diverse (3,600 companies vs. ~400 in VFTSX), and cheaper (0.04% expense ratio vs. 0.20%). (I own shares of VTSAX, and not VFTSX, just to be transparent.)
A lot of mutual fund managers stand to gain tremendous amounts of money by convincing you they're a responsible choice to fight [insert social cause here]. I argue you should completely abandon those people, and simply pick a better fight. Don't fight guns through your investments—fight Wall Street. Cut them out of the financial equation. They do not deserve your money. Every dollar you part with in the form of fees simply goes into their wallet, rather than staying in yours.
You can own the entire stock market through a cheap, transparent index fund. If you stick with it for thirty years, it will create more wealth through simple mimicry than the most seasoned and educated professional could ever deliver. To top it off, you're forcing a superfluous and overpaid management class to find a new line of work. About time they experience what it's like to lose a job to automation.
1
The whole Mutual Fund 401k/403b thing as it exists in most people’s financial lives needs to be replaced. The menu of funds is not very good, fees are excessive to the point of eating up most growth and like is shown here- it impossible to invest in a morally acceptable way.
It would really be nice if employers would offer direct stock investment with partial share sales to allow constant Dollar investing as part or optionally all of the retirement plan. My investments in a few technology companies in the early 2000s have easily surpassed all my employer based retirement savings. Not a lot of money invested in Amazon and Apple years ago have generated an impressive return.
2
"It would really be nice if employers would offer direct stock investment ..."
You are joking, right? Have you paid attention to anything other than the recent bull market?
All your plan guarantees is lawyers making lots of money off of class action suits. An employer allowing direct purchases of its stock through the 401k plan is just asking for trouble and providing red meat for liberal hate-mongers.
1
"Bloomberg Intelligence" recently analyzed the performance of all socially responsible type ETFs (24). Most came on line in 2016. 2017 performance was evaluated and 2 of 24 funds outperformed the S&P 500 Index.
That’s pretty poor performance for 2017
Warren Buffet argues that he doesn't run the companies that comprise the Berkshire Hathaway portfolio, although he allows that it his responsibility and that of his advisors to oversee the people who do, (run the companies). Although Berkshire Hathaway's position in Wells Fargo is minor, you kind of wonder what a word from the BH chairman could do in cleaning up that mess.
4
Ron,
Thank you for the article. You've highlighted a few of the solutions for investing responsibly, but I think there are a few other options that investors could consider:
Firstly, a new generation of roboadvisors such as Swell and OpenInvest allow investors with very small balances to access the market responsibly. OpenInvest allows users to focus on a set of issues that they'd like to screen out of their fund. These platforms are targeted at millennials and folks with basic investing needs.
Secondly, there is a cohort of mutual funds and financial advisors that have invested responsibly for over 2 decades. The First Affirmative Network has a great network of financial advisors focused on sustainability issues. Pax World, Parnassus, and Green Century have been creating sustainable mutual funds for almost as long.
For those investors who would like even more customization, some options are Aperio, Parametric, and Just Invest (full disclosure: I am the Chief Investment Officer at Just Invest). These firms allow investors to filter out securities based on their values. They then optimize the remaining securities to track the parent index (say the S&P 500 or the MSCI EAFE). This provides a high level of customization, low tracking error, and low costs for the investor.
Vijay Rao, CFA, FRM
CIO
Just Invest, Inc.
Disclosure: Nothing above is an offer to buy or sell any security. Please consult a qualified investment advisor before making any investment decision.
4
Would love to hear a counter point article to this one.
1
Sure. Pick a socially responsible stock. Do they deal with everyday consumers? Are some of those consumers employees of sporting good stores or retailers who sell AR-15s? Bzzzzzt! Your socially responsible company is taking "blood money".
Thank you for playing.
I've invested in a fund called EcoPlan for years, and the companies included are good citizens.
1
Making a profit from socially responsible investing? LOL!!! That's an oxymoron if I've ever seen one.
1
Mark. check the Alpha on some of the SRI funds (net of fees) against their peers and benchmark. You may be surprised.
Perhaps watching the film Metropolis would incentivize you.
Hi Mark, I recognize that SRI has a bad name when it comes to returns, and yet, that has largely been based on myths. Adding the additional ESG screens is an additional way to assess companies that in theory should add alpha. Our returns at Nia Impact Capital are proving our thesis of investing in solutions focused companies, all of which have diverse leadership. Cnote is another fantastic option with high impact and solid, predictable returns. There are too many others to name here.
Simple solution own individual stocks.
6
It is absolutely time to move away from indexing. While diversification is important to most investors, that can certainly be achieved by building a portfolio from the ground up, with companies that matter for people and planet, as opposed to starting with a large index based on size or location of company.
1
Ron, thank you for a very interesting article which adds to previous articles on how difficult it is to avoid owning stocks in gun manufacturers or other industries you do not favor.
Some years ago I thought of this and looked closely at the prospectus of mutual funds I owned. I owned a consumer staples mutual fund and the 3rd and 5th largest stocks it held were Phillip Morris and Altria and down the list other tobacco or liquor companies.
Additionally, breaking down it's holding by sub-industry diversification the leading holdings at 25% were soft drinks companies. Tobacco products were 4th at almost 14 %. Distillers were lower at about 3 %. That left about 58% for what you might think of "staples" such as paper and health products and more in this line of thinking.
I sold that mutual fund and don't miss it.
You can search for funds that invest in alternative energy verses fossil fuel exploration or drilling or mining.
This takes time but looking at the holdings within your funds or indexes can help you understand what you hold yourself and shape your own portfolio.
26
But some of those paper suppliers sold goods to to tobacco companies. Hence they made profits from tobacco. Have you no shame?
I don't understand your point.
I don't know which companies sell what to each other.
I don't hold shares in funds that are heavily invested in tobacco companies and gun companies listed in their prospectus. These funds churn and I don't know if they may buy these stocks at other times. I think many people are making the point that large mutual funds may hold diverse stocks and if you don't want these stocks in your portfolio, don't buy those funds. You can buy individual stocks or follow ESG ( Environmental, sustainable, governance) indexes. You are not controlling commerce - only what you choose to own.
Many comments have excellent suggestions.
1
I will never forget closing my B of A account in college way back when, when social activism was a force to be reckoned with, over South African apartheid and American corporation's investment in South Africa propping up the government there. I believe that the social activism movement worked as within a year, B of A divested from SA investment. Now, considering that my biggest pool of investment money is my 401k, it is impossible to act socially responsible when one's employer holds the reins on investment of these funds. A while ago, when it looked like the world might melt down, all i wanted to do was limit my exposure to investment outside the US. That turned out to be impossible as EVERY SINGLE FUND offered by my employer had at least some exposure.
In reality, the offerings given by employers don't have much difference between them at all. The glossy blurbs about them aside, underneath they are pretty much the same. This keeps the big bad boy companies out there sailing happily along without consideration of the social conscience of you or me. The swamp is rigged to stay on wall street!
23
Great points. You can be a socially responsible investor with the accounts you completely control, but most 401ks have limited options. Rarely are ESG funds included. Try screening out companies you would prefer to avoid if your plan only offers index funds. The investment management industry needs to respond.
1
Fair point, jca but as an employee of the company, you have the right to talk to your 401k plan's Investment Committee and ask for different types of funds.
My question is, what's the point of not owning stocks in unethical companies? Unless you're buying an IPO, you're not providing funds to the company itself--you're just paying another investor. In fact, the term "investor" itself is a misnomer--the vast majority of stock owners aren't investors, they're speculators, people hoping to sell the stock later after the price has gone up. When you buy a stock, you're bumping up the price a teeny bit, but otherwise, what difference does it make who owns it? In fact, an argument could be made for intentionally buying unethical companies in order to have some leverage to change their behavior.
8
A rising stock price can change a company's fortunes dramatically. Stock can be used for acquisitions, and will attract top talent, just look at Amazon.
So yes owning stock is helping companies that you own the stock of.
In fact as companies are owning most of our government through lobbying, making ethical investment choices may be a valid and potent way to enact social change on a large scale if it gets well organized and gains wide adoption.
32
They stock price aggregates all those tiny bump-ups and bump-downs.
3
Stock prices go up when people are willing to buy that stock and they go down when people are trying to dump that stock - right? If people stop buying the stock, the value goes down, which causes the value of the company to diminish. Who would want to work for a company when its stock is suffering? Stocks are used as an incentive within the company - and when that goes away, management will change, etc.
17
Get your money out of the gun stocks and mutual funds if you can. Social causes work like when people and universities and corporations made a stand against apartheid. Money talks.
31
Didn't the NY Times write an article about how university endowment investing is as much responsible for lurking in the morally corrupt investment shadows as anyone?
Link to NY Times Article: https://nyti.ms/2hRQCye
Given this NY Times report, I don't think pointing to universities is a shining example.
2
I wonder where your pure money comes from.
1
This article does not include IRA's which are almost double the value of investments in 401k's. 401k's represent 19% of invested retirement funds.
I mention this because in an IRA, unlike 401k's, one can invest in individual companies. This makes it much easier to isolate those companies you "don't" want to invest in, i.e. Smith & Wesson. In effect you can build your own mutual fund made up of companies you value. Whether it be 3 or 20 or more.
25
Great point, or if you think a company is undervalued and meets your needs you can invest in it. Force the price down enough and a decent if not socially correct business will find investors.
1
With substantial transactions fees!
1
"...can use self-organized social media campaigns to pummel the management and board members of misbehaving companies."
That will really show them.
5
Be careful now. That socially responsible company might make money by having a customer who works at a socially irresponsible company. A socially responsible retailer would have to filter out all of those customers who work at Walmart or Dick's Sporting Goods.
This will be fun to watch - just keeping you honest.
8
Yes, jp, it is a challenge to truly eliminate the socially irresponsible. For example, while you can divest from fossil fuel extraction companies, you are liking supporting the industry by simply turning on the lights at your office.
To be truly divested of fossil fuels might mean living in a cave and wearing only clothes made of bark from fallen trees (hand scraped with a handy rock).
You have to start somewhere.
The socially responsible company may employ an environmentally irresponsible employee.
Wow, Ron! When I saw the headline I thought we were in for a Marxist critique (i.e. capitalism cannot be reconciled with a social conscience). But seriously, it's hard to invest even without considering one's social conscience (if one cares to do so while investing), and shortcuts to personal investing, like assigning responsibility to another person or a robot, may make it easier, but they don't make it better. Why should ESG or SRI be any different? If you're separated from these "bad" companies by a robot and an index ETF, how much "ownership of evil" is really on you? Or is this just feel-good? Hey, it's your money.
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Social responsibility is not the big hurdle, rather environmental.
How about creating your own portfolio of stocks in companies you like? Isn't that the most appropriate way to start remedying the sickness of society?
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Sure to make yourself feel better. Otherwise individual investors like most have little to no impact. Surely you understand that.
I'm a newbie investor (IRA through work) and am attempting to do just that: invest in companies whose products I believe will "make the world a better place".
The idea works fine as long as one doesn't care about how much money one stands to make. And how many investors are *not* looking to make as much as they possibly can?
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Kevin,
Profit and socially responsible values are not mutually exclusive.
I wanted to stop using Charles Schwab as a brokerage when I found out that Mr. Schwab was a Trump supporter. But most of the other brokerages seem to either also have a right wing CEO or have donated to the Republicans.
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check out Vanderbilt Securities as one ESG broker
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Charles Schwab's robo-investor sucks anyway. They pretend to be 'free', but charge you a premium through their own expensive index fund. UI is a mess. Very bad user experience. Customer service representatives don't know anything. My experience with Wealthfront is way better, they don't treat you like an idiot like Charles Schwab does.
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