Socially responsible investing
|The dismal science|
|The Worldly Philosophers|
Socially responsible investing is the basic term for investing in congruence with one's ethics to maximize financial return with social concern.
The term has become a bit muddy as it varies by religious affiliation, environmentalism, dietary choices, and so on. There is no real regulation detailing what defines a fund or investment choice as socially responsible.
Originally started by Quakers in an agreement to prohibit members from being a part of, or investing in, the slave trade. It quickly expanded as an idea by John Wesley in Methodist sermons to do no harm to your neighbor and to discourage sin in his thoughts on "The Use of Money."
It had a resurgence in the 1960's with Dr. Martin Luther King wanting to put money towards projects that matched his civil rights movement. This gained traction quickly with those who disagreed with the Vietnam war, and the defense/chemical manufacturers that produced weapons for it.
It has evolved to current times as a broad range of mutual funds to support an investor's idealism on a wide variety of subjects, even available to many in retirement fund choices. As of 2007 it is said that there are nearly 2.7 trillion in assets under the broad umbrella of many socially responsible funds.
"Social Responsibility" is a nebulous term that subjective, and there are many funds that try to serve the customer. Many funds require a good deal of shareholder activism for fund managers to stay in line with their investors' ideals, so it's not simply "transfer the money and let the fund manager deal with it all."
Investment choices take a great deal of research by investors and staff. Many companies under consideration can also suffer from a great deal of green washing, where the public image differs considerably from what they do. General Electric is a good example, where there has been a huge push in advertising environmental concern while spending money lobbying against cleaning up a 2002 spill in the Hudson River and limitations on carbon emissions.
Often funds receive criticism for having lower investment yields than their competitors that don't care, which is often found to be incorrect. However, many responsible funds are very actively managed and have higher than average management fees associated with them. Some funds also devote a good deal of money in direct investment to small and startup ventures that can be extremely risky, and many fold taking investors money with them.
Any investments in large companies are also troublesome for responsible funds. Many large multi national companies are difficult to piece together, even before wheeling and dealing. Many have a number of different smaller subsidiaries that do many different things, such as Kraft that merged with Phillip Morris (cigarettes), bought Cadbury (chocolate), divested itself of Altria (the Phillip Morris part), took over Groupe Danone and sold it off… it's enough to make you reach for the Advil.