Little article on “Socially Responsible Investing”

This is from a professional journal which is sent to me gratis, and which for some reason is allowing free access to anyone for this article.

Hearts & Minds – Investment Advisor Magazine

The feature is about so-called "Socially Responsible Investing" and I have several clients who do try to invest in what they view as a socially responsible manner. Here’s a broad description of SRI from the article:

With such a large total of investments, it’s not surprising that SRI encompasses a large spectrum of players and approaches. “It goes all the way from mutual fund investors who want screens on their portfolios to many investment entities such as the State of New York’s public pension funds, which don’t have any screens at all but are very active in using their voice and vote to leverage companies,” Smith explains. “You’ll sometimes hear socially responsible investors talking about a three-legged stool. The three legs are: screening; shareholder engagement and advocacy; and community development investing.”

A big part of the SRI movement, especially for institutional investors, is shareholder advocacy. Two areas that Smith highlights to show the widespread influence of the movement toward socially responsible investing are the U.N. Principles for Responsible Investment and the Carbon Disclosure Project. (You can download reports on both initiatives at www.investmentadvisor.com, in the Web Extra section of this month’s issue.)

One problem is that one person’s view of social responsibility can vary considerably from someone else’s.

…socially responsible investing is a rather broad term that can encompass a wide variety of philosophical approaches and even definitions of what “socially responsible” means. Advisors who want to help their clients to find socially responsible investments would be advised to make sure they understand what those words mean to the client. Angela Thomson of Coastal Financial Planning in Lincoln, Rhode Island, learned that lesson the hard way. …

“We were not on the same page as far as socially responsible investing,” Thomson recalls. “When I think of it I think of no nuclear weapons, no gambling, no tobacco, and so forth.” Based on those criteria Thomson bought a block of Pfizer stock for the client, who was outraged because Pfizer makes birth control.

“It was a good lesson for me because “socially responsible” is not the same to all people. I would never have considered birth control not being socially responsible. I would never have made that connection,” Thomson observes. “Some people are anti-gay rights, some people are pro-gay rights. Some people are pro-green forests, some people don’t care about forests. Everybody has such a broad base of what is socially responsible that I don’t hold myself out there anymore as that type of advisor.”

Indeed. However the Socially Responsible Investing universe is so big, that virtually anyone can skew their portfolio for or against just about anything.