Mark Brandon is the Managing Partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. In addition to Socially Responsible Investing (SRI), he may opine on social venturing, microfinance, community investing, clean technology commercialization, sustainability public policy, green products, and, on occasion, University of Texas Longhorn sports.

Thursday, December 15, 2005

What's Your SRI Style?

After several posts that focused on the financial aspect of SRI, now I would like to get back to the social aspect. This is pretty basic for those that are already on the SRI bandwagon.

Many people view Socially Responsible Investors as a bunch of fuddy duddies who want to screen out tobacco, alcohol, and gambling companies, but it is so much more. For one, there are more issues than those big three: weapons, animal testing, nuclear power, adult entertainment, corporate governance, board diversity, labor relations, etc. For two, SRI is not just about screening out the bad guys from your portfolio. I have come to the conclusion that the bad guys really don't care that some people are screening out their companies...at least, not yet. This is called a positive screen. You look for those companies making progress on emissions, waste, and other drains. This practice does not and should not have to be a money loser. Eliminating wasteful processes means that your operation is leaner, cheaper, or faster.

Even when positive and negative screening are considered, there is still much to flesh out. Consider these questions:

  • Do you believe in screening out companies with a history of bad behavior, even though they are currently making great strides? Case in point: General Electric. In the history of corporate polluters, GE ranks as one of the most prolific. However, today, GE is a company that is on the forefront of being clean energy technologies to market through their GE Wind and GE Osmotics (water usage) subsidiaries.
  • Can a company be a little bit pregnant? Would you screen out all cosmetics companies because of animal testing, or would you still invest in, say, Avon Products, which is the best of the sector in this regard?
  • Are you an activist? Do you care about your shareholder privilege of filing shareholder resolutions to affect a company's policies, or is your method of voting by selling a stock?
As a business, SRI needs to be about more than screening. I don't think the CEO's of large tobacco corporations care about the small fraction of potential shareowners who won't invest in their companies.

What do you think? I'm interested in those comments.

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