Aug 31, 2007

Revisiting Socially Responsible Investing

by Laura Starita

We have written before about the challenges and paradoxes of socially responsible investing. But even though achieving outsized returns from socially responsible investments is difficult, it doesn’t mean that investors should check their consciences at the door.

A recent New York Times Magazine article shows an approach to socially responsible investing that presents one alternative to the negative screen that most socially responsible mutual funds use. It profiles Sister Patricia Daly, a Catholic nun with the order of the Sisters of Saint Dominic, whose pension fund holds shares in ExxonMobil. Exxon stock has for decades been a great investment in terms of returns. The company has also been if not a full-blown denier of climate change, at least ambivalent to its impacts; it is the sole big oil company that is neither investing in renewable fuels nor committing to reduce greenhouse gas emissions from its operations and products. The Sisters of Saint Dominic have some restrictions regarding what kinds of companies they will invest in (no large weapons manufacturers, for example), but fossil fuel traders are not among them.

As part of her role as the executive director of the TriState Coalition for Responsible Investment, an alliance of Roman Catholic investors, Daly uses her position as an investor to submit a shareholder resolution that—if it garners enough votes—can force the company to do things differently.

Shareholder advocates have engaged in similar efforts to compel G.E. to stop dumping its toxic waste, for example, or to stop baby formula manufacturers from targeting poor women in Africa. Activist investing might be more productive as a strategy for bringing about change than boycotting, because as investors they have a personal interest in the company continuing to make a profit and are realistic about how the company can best do that; but as activists they want to ensure that profit does not come at the expense of others. Marrying the reality of making money with the necessity of doing so with humanity has a role at the heart of social responsibility, and that kind of investment can make a true difference.

New York Times Magazine: Public Corporations Shall Take Us Seriously