ETHICAL INVESTING

1. Do it for the great returns!
2. How does it make a difference to me?
3. Does it actually make a difference in the world?
4. What are the pitfalls?
5. Children, money and values

1. Do it for the great returns!

I have talked with people about investments, friends included, some of whom say "I want to make a buck, I don't care if somebody spilled some oil some where." The simple truth is that ethical investments have provided an excellent return. Two mutual funds, Pax World Fund and Dreyfus Third Century fund were founded in 1971 and 1972. They have provided average annual returns a bit above the stock market averages for a quarter century, even after management expenses! And more recent ethical funds such as Parnassus, except for one bad year, have returned almost double the market averages. Keep in mind that after expenses, the average stock mutual fund does worse than just throwing darts at the Wall Street Journal and picking the stocks you hit.
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2. How does it make a difference to me?

Everyone I know is making ethical choices every day. But translating that into the profit arena has seemed hard. And it used to be daunting, particularly before the 1970's. But today it is easy. There are numerous web sites devoted to socially responsible investing (SRI) and today it represents one in ten investment dollars in the U.S. alone. And the choices are quite varied. For example, strict followers of Islam or strict followers of Born Again Christianity can buy mutual funds run specifically for them. And literally dozens of more mainstream SRI investment funds are available. Thus, it is easy to invest ethically. I have a 24 item questionnaire, for free by E Mail when you contact me.
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3. Does it actually make a difference in the world?

Money talks. And when investors have spoken up as shareholders, corporations listened. Look at what happened in South Africa in 1983. Ethical investors got companies that weren't all that clean on their own internal race relations to stop supporting apartheid and sign on the Sullivan Principles that aimed at reducing racist practices in that country. When Exxon dragged its feet dealing with the oil spill in Alaska, ethical investors got behind and enabled the Valdez Principles which resulted in enormous corporate pressure and improved controls over oil transport. And some of the best ethical mutual fund firms are themselves activists both in corporate resolutions they help create or support, and even in writing letters of demand to firms they own. For example, Morton (Salt) was very responsive to Citizen's Trust Fund asking for certain things about an old waste site that needed immediate attention in 1997. This kind of thing is happening every day. People and ethical institutions are voting with their investment dollars.
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4. What are the pitfalls?

Performance is not a problem, but your emotions and your time can be. Even my very favorite ethical mutual fund has on one occasion owned shares of a company I feel has put a lot of wealth in the hands of Sam Walton's family at the expense of thousands of small towns and their small businesses. I wrote to the fund and they have responded that they no longer hold those shares. It was emotionally horrible for me to keep recommending what I felt to be the cleanest and best of the ethical funds while they held a stock I held in contempt. If you do not have enough money or time to own specific, individual stocks that you follow then you run the same emotional risk.

Another emotional issue for me was best stated by a person who wrote a question on the nonviolence web site last year: "Is it an oxymoron to say invest ethically?" What the writer meant was that the capital system (and investing in it) are inherently bad for human beings and the environment. That debate could go on forever. I have found no easy answer even with the most careful weighing of the issues that I can.

By comparison, the other pitfall is a piece of cake: TIME. If you set aside a half hour a month to read appropriate information, then you can meet your ethical goals in investing. That six hours a year needs to be done at least four times a year if you manage your own investments. It is not a one time, six hour crash course because things change. And you must be prepared to spend roughly a half hour a month or hour and a half, quarterly. If you can't or won't do that, consider getting a fund or manager that you trust, and hope for the best.
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5. Children, money and values

Children raised in a loving and thoughtful environment seem to have an inherent sense of what is right and fair. If as a parent you have at least an elementary accountability for yourself and the children you raise, it will necessarily include money and possessions around us.

Your kids will do what you practice and may or may not do what you "preach." Four principles follow this thinking:

a. Use some material possessions that belong the community of which you are part. Library books, walking paths, public buildings with art or artifacts, all qualify. By not providing everything from your own family coffers you communicate connectedness and sharing. And give some time to that community. Even little kids can volunteer for a museum car wash or something.

b. Build accountability into daily life. If Johnny breaks Suzie's toy, put thought and time into how to rectify that without running out and replacing it. First, determine what Suzie wants to happen. If it's okay to fix it, perhaps "brainstorm" how to repair it. If she wants it replaced, help the children look at yard sales or flea markets for parts or a replacement toy. If you do not have a system of allowance (fifty cents a week or something simple), let Johnny bring up to you that he wants money to fix or replace Suzie's toy. Take time and include them both to figure a way to do it.

c. Consider these "DO's."

- Make promises that you are very likely to be able to fulfill.
- Set reasonable limitations.
- Teach simple savings, even if it is Halloween candy instead of money.

d. Treat your kids equally and fairly, regardless of gender, personality, or intelligence. I am talking about basic fairness. Of course you will have different expectations and consequences for each one. And expect them to earn or legally gather some of the means to some of the ends of what they possess.
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