Mark Brandon is the Managing Partner of First Sustainable (, 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.

Tuesday, February 21, 2006

Ten Tips for No-Nonsense Socially Responsible Investing, Part 2

Continuing on the theme from yesterday's posts, here are tips six through ten.

6. One percent in community investments makes a huge difference. If you are buying a CD, buy one from a local bank, so that your money stays in the community. Preferably, buy the CD from a community development bank that makes loans to underserved communities. Heck, it's all federally insured.
7. Investments in Eco-efficiency pay off huge. For commercial building owners, every dollar saved in energy expenditures equates to about six dollars in appraised value, if you go by cap rate valuation. For homeowners, $1 saved in operating costs equates to about $20 in appraised value. This is according to Fannie Mae, which is falling over itself to lend money to homeowners who are willing to invest in efficiency improvements.
8. Costs can be controlled, returns can not. Ok, this is an echo of Clements' column. The average mutual fund charges 1.57 percent in expenses every year. If you go with the low cost options charging less than .5 percent, the one percent difference will result in a six-figure difference over 30 years. Meanwhile, diversification and asset allocation are the keys to minimizing the downswings of the market.
9. Socially Responsible Investing is not a fad... unless you make it so. Although the 60's generation would like to claim it, people have been making choices to not let their money enable injustice in the world for thousands of years. It's in the religious texts of Christianity, Judaism, and Islam. However, it is now easier than ever to accomplish thanks to focused research, institutional will, and communications technologies that spread ideas. That said, even an SRI portfolio that is not sufficiently diversified can crater. For example, don't concentrate your portfolio in clean energy technologies, climate technologies, or green building technologies. Those fields can, and probably will, result in a bubble some day.
10. Have a plan. This, too, is no different than our non-SRI brethren. Just as in any journey, you have to know where you are and where you want to go before you can get there. To sound a little less like Tony Robbins, you need a strategy in place that takes into account where you are now, for what you want to save, how long you have, and the shortest journey to get there. I am consistently shocked and amazed at how many people take a cavalier, do-it-yourself attitude with their long term finances while at the same time, spending days on end comparison shopping buy a refrigerator.


Anonymous Anonymous said...

With all the decisions that we make about where to shop and where to eat, it surprises me how little thought most people give to how they invest their money. People who work tirelessly to change laws through the political process make no effort to change the behavior of multinational corporations (often more powerful than governments) by changing the way they invest their money. People need to wake up to the power they have as investors.

3:00 PM

Anonymous Anonymous said...

I agree with Claire. I checked the mutual funds I had selected somewhat haphazardly through my employee-funded 401(k) plan and the most-represented ones were all oil companies and pharmaceuticals. I'm lobbying hard to get more SRI choices; meanwhile, I've done more research and have gotten the heck out of Shell and Mobile.

11:39 PM

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