Resources for Socially Responsible Investing (SRI)
Tuesday, 10 April 2007
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This past winter some friends and I got together one evening to discuss Socially Responsible Investing and since two of them had done a lot of preparation work on the materials, I asked if they would let me post it here. I know a number of people who are interested in SRI but don't know where to begin, so I thought that since the information was already all compiled, it would be a useful tool to make available to the general public. Thanks to
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! I am also going to set up the page so that one of them can maintain the information, add new resources, etc. as time goes on.
Outline for Financial Choices Discussion
I. Framework
"We read the Gospel as if we had no money, and we spend our money as if we know nothing of the Gospel."
– John Haughey, SJ
From the Bible, we know that God cares about economic systems. (See Isaiah’s prophecies, for example: Isaiah 3:12-15; 5:8-10.)
we know that Jesus warned about putting our security into stored up treasure for the future (See Luke 12:13 – 21; Matthew 6)
Christians should be concerned and vocal about economic issues—global poverty and wealth disparity—and advocating and working for a just and moral economy. But what do we do as individuals? We clearly belong in the category of “the rich” if you look at it with relative eyes.
One answer centers on what we do with our surplus household capital—our “stored up treasure,” meaning anything beyond what we spend on our needs. Not just investments, but checking and savings accounts. Surplus (“the plunder of the poor”) seems problematic in the kingdom of grace (the rich young ruler Mark 10; parable of the rich fool Luke 12; the early church’s selling and redistribution of possessions Acts 2, 4, 5; James 5:1-6--warning about surplus). Jesus and the New Testament talk frequently about redistribution of wealth. Paul taught a principle of equality and sharing with those with needs.
How much surplus capital is there in my household?
If I'm not willing or able to divest or redistribute, how can I make the surplus available to the poor?
What would be an appropriate social mortgage on my surplus?
Ched Myers, who strongly advocates for redistribution, believes we can retain surplus with Gospel values if we consider what the capital itself is doing. Money equals power and we usually give that power to banks and investment institutions—Wall Street.
He calls for a mission of moving money from Wall Street to low-income community development. Again, this includes any bank account or investment.
3 ways to use surplus: (per Ched)
Socially responsible (screened) investing—is the minimal and painless but a good step. 100% of your investments should be socially responsible. (Mutual funds, IRA, CD, money market, etc.)
If you are holding shares in mainstream corporations, then be involved in shareholder activism, advocacy and corporate engagement.
Community investing is the best option.
“Community investing is capital from investors that is directed to communities underserved by traditional financial services. It provides access to credit, equity, capital, and basic banking products that these communities would otherwise not have. In the U.S. and around the world, community investing makes it possible for local organizations to provide financial services to low-income individuals, and to supply capital for small businesses and vital community services, such as child care, affordable housing, and healthcare.” These are often called community development financial institutions.
The principle of community investing is to use capital to help rebuild social relationships. Examples of the things done with community investment are overseas microfinance loans, low-income housing development, community development banks, etc. Today, a number of funds are focused on Katrina rebuilding. Community investments often pay below market rates of interest.
According to Ched, billions in Christian household capital are on Wall Street. Less than 1% of SRI dollars are in community development financial institutions.
Community investing is a necessary, but not a sufficient step. Per Ched, we should:
examine the history and values surrounding our investment
experiment with communitizing our decision-making, to promote creativity and accountability
seek help to develop an investing plan.
II. Values, Risk, and the Doctrine of “Enough”
For the purposes of our discussion, by “investing” we mean the Investor expects to receive a monetary return, be that in the form of an interest payment, a dividend, and/or the return of principal. If none of these is returned, then we’re talking about making a donation.
Common textbook advice for portfolio investing assumes the Investor is seeking the maximum return on their investment (ROI), according to their particular tolerance of risk, and given a future income potential. However, the “maximization” principle also assumes the Investor is “rational” and by that definition, takes profit as their sole investment motive—end of story. In the financial industry as well as what is taught in economics and finance classrooms, all other considerations are non-rational, inefficient, or if calculable, lie outside the scope of finance.
As an alternative to mainstream finance, “socially responsible investing” (SRI) introduces other motives beside profit—such as one’s values or morals—to guide one’s investment choices: e.g., care for the environment; opposing trade that relies on unfair wages or abusive labor conditions; not benefiting from companies that produce weapons systems, participate in legalized gambling, or a host of other company practices and industries that a given Investor may find objectionable.
Certainly among equal rates of rates of return, it would be obvious to select those investments that not only maximize profit, but also satisfy one’s moral or ethical motivations at the same time—I would suggest this could be considered “Stage One” or a basic awareness of SRI. For an Investor in this category, assuming the Investor has access to the vast array of choices in most western financial markets, profit maximization remains the lead criteria, where moral or social responsibility acts as a winnowing but secondary guide.
The next question might be: what happens when holding to one’s moral or socially responsible choices begins to moderate, limit, or even preclude higher rates of return? These choices would be highly Investor specific, without a universal or across-the-board guideline. How much of a tradeoff the Investor is willing to assume would depend upon their relative financial and SRI objectives. We might refer to this concept as an Investor’s “social responsibility threshold;” given the prospective opportunity, the Investor is willing to forgo additional profits. I would suggest this is Stage Two of SRI.
A third level of SRI—Stage Three—would fall just shy of a donation. The “Investor” in this case does not expect to lose their nominal principal. If we one consider inflation (real rates of return); however, there is a “real” loss to the value of the investment. In Stage Three, the profit motive is set aside completely, and the Investor only requires the return of their initial principal at a later date. In this case, there is usually a communal or “societal” investment goal that the Investor is trying to promote, such as enabling women to have access to credit, or providing capital to the creation of alternative or sustainable technologies. SRI for the purpose of promoting the Investor’s preferences can typically be prioritized according to the Investor’s values. In the end, should the investment yield a positive rate of return arise, the interest or dividend is typically shared or donated altogether. Of course, investment (downside) risk remains in any case, since some of the principal may not even be returned.
Basic questions to review prior to investment:
Stages or Levels of SRI Commitment
Primary Motivation
Secondary Values
SRI Guideline
Stage I – Basically Aware
Profit maximization
Morality or social responsibility
No sacrifice of financial gain
Stage II – Prospect Dependent
(Mixed)
(Mixed)
Investor specific; marginal tradeoffs considered
Stage III – Values Driven (Shared Risk)
Morality or social responsibility
Maintain nominal value of investment
No sacrifice of SRI for added financial gain
Stage IV – Risk Fully Shared
Returnable donation
Seek to avoid a total loss but negotiable
Willing to accept any loss outcome
Compromising maximization: What are my goals for investing? How much is “enough” for me?
Typical Financial Investment Questions: How much investment risk am I willing to take? How much of a return do I need (ROI) to achieve my financial goals? How much can I regularly invest toward that end?
Typical Socially Responsible Questions: What type or level of SRI do I want to consider? What type of SRI/moral threshold do I have? What types of social activities would I like to promote? Do some social issues hold higher priority to me than others?
Practical Application #1 – Clarifying “Enough”
What are my goals for investing? E.g., a certain project, providing for others I care about, or building a retirement account;
With these goals in mind, what is “enough” for me? E.g., what is my current budget and how does it reflect my values?
Practical Application #2 – Using Investment Screens (more in detail below)
Having answered some of the basic SRI questions, you can begin to construct an “investment screen” to implement your threshold choices;
List and prioritize the range of social issues that you would like to promote;
III. Community Investing Institutions and Resources (see resource list)
Community Investment Banking Institutions
City First Bank of DC
Research and Resources on Community/Socially Responsible Invest
Only community investment bank in DC. Focuses on putting resources into affordable housing and small businesses. Has both personal and business banking. For individuals, offers checking, savings, money market, and CDs. Location is at 1432 U Street, NW.
Provides deposit accounts to all members of the Center for Community Self-Help, which is Self-Help Credit Union’s affiliate nonprofit organization. Center members share a commitment to community development and wealth-building for low-income people. There is a one-time membership fee of $25. Offers savings accounts, money market, CDs, and IRAs. Based in NC and banking online is possible.
ShoreBank (not local)
Research and Resources on Community/Socially Responsible Invest
If you’re willing to bank out of town, ShoreBank is a community development and environmental bank operating in Chicago, Cleveland, Detroit, and Portland, OR. Has checking, savings, money market, CDs, IRAs.
Community Investment Credit Cards
Shorebank Pacific, based in Ilwaco, WA, offers its Salmon Nation Visa card with a 12.9 percent APR and no annual fee. Fifty percent of Shorebank’s income from the card funds efforts to grow a community of citizens that practice environmental stewardship of “Salmon Nation,” a bio-region stretching from Alaska to Oregon where wild salmon live. The card is not issued with a mega-bank, but rather in conjunction with TCM Bank, which is owned by the Independent Community Bankers Association, a trade association that advocates for community banks. You do not need to have an account with Shorebank to apply.
Oregon’s Albina Community Bank offers the “Scholastic Plastic” Visa cardesearch and Resources on Community/Socially Responsible Invest with a 11.99 percent APR and no annual fee. Profits from the card not only support Albina, but one percent of every purchase goes to Portland’s schools. You do not need to have an account with Albina to get the card, and it is not connected to a mega-bank.
Community Investing Options (mutual funds, etc.)
Calvert FoundationResearch and Resources on Community/Socially Responsible Invest (Community investments—faith-based, international, etc.)
Provides access to several other community investments including Oiko Credit (established by World Council of Churches—providing microfinance loans in the Global South) and Opportunity Transformation Investments, another microfinance provider. Mennonite Mutual Aid (MMA) Praxis Mutual Funds partner with Calvert Foundations for community investments.
Domini Social Investments. Domini provides socially responsible mutual funds. Two of their investment options, the Domini Social Bond Fund and the Domini Money Market Account, are devoted, in full or in part, to community investing. Other investment funds are simply screened.
Upstream 21 (for larger investments over $100,000)
Community Investing Resources
Co-op America (Social Investing). Provides a great deal of information on socially responsible investing, community investing, and shareholder activism.
Community Investing Center. Provides a huge database of community investment institutions for all kinds of funds and investments.
Socially Responsible Consuming
Responsible Shopper, An exciting new tool to help you learn more about the companies behind the products you buy -- from clothing to shoes to toothpaste.
IV. Social Investment Criteria – “Investment Screens”
Having determined the level of SRI we are willing to assume, what then must we do with our investments? How can we not only conceptualize our SRI values, but also actuate them and begin assessing the range of competing investment options available? The simplest way to begin is for the SRI Investor to determine what they are NOT willing to invest in. The following list of web links provides resources explaining the use of investment screens.
Socially Responsible Investing (SRI). A comprehensive personal finance site devoted to socially responsible investing, featuring 10,000 pages of SRI mutual funds, community investments, corporate research, shareowner actions, and daily social investment news.
Corporate Register: Lists corporations that issue socially responsible and environmental "sustainability" reports.
CSR Wire: Gives access to sustainability reports issued by some 100 companies, plus dozens of corporate press releases tied to socially responsible subjects.
Foliofn: Investing service that offers six preselected baskets of socially responsible stocks based on different screening criteria; these folios can be customized.
Motley Fool: Offers a socially responsible investing discussion board.
VII. Some Key Scripture References on Economics and Money
Economic Systems and Surplus
Isaiah 3:13-15
The LORD takes his place in court; he rises to judge the people. The LORD enters into judgment against the elders and leaders of his people: "It is you who have ruined my vineyard; the plunder from the poor is in your houses. What do you mean by crushing my people and grinding the faces of the poor?" declares the Lord, the LORD Almighty.
Isaiah 5:8-10
Woe to you who add house to house and join field to field till no space is left and you live alone in the land. The LORD Almighty has declared in my hearing: "Surely the great houses will become desolate, the fine mansions left without occupants. A ten-acre vineyard will produce only a bath of wine, a homer of seed only an ephah of grain."
James 5: 1-6
Now listen, you rich people, weep and wail because of the misery that is coming on you. Your wealth has rotted, and moths have eaten your clothes. Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. You have condemned and murdered the innocent one, who was not opposing you.
Warnings on Finding Security in Money
Matthew 6:19-21
Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.
Matthew 6: 24-34
No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money.
Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more important than food, and the body more important than clothes? Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? Who of you by worrying can add a single hour to his life?
And why do you worry about clothes? See how the lilies of the field grow. They do not labor or spin. Yet I tell you that not even Solomon in all his splendor was dressed like one of these. If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you, O you of little faith? So do not worry, saying, 'What shall we eat?' or 'What shall we drink?' or 'What shall we wear?' For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.
Luke 12:13-21—The Parable of the Rich Fool
Someone in the crowd said to him, "Teacher, tell my brother to divide the inheritance with me."
Jesus replied, "Man, who appointed me a judge or an arbiter between you?" Then he said to them, "Watch out! Be on your guard against all kinds of greed; a man's life does not consist in the abundance of his possessions." And he told them this parable: "The ground of a certain rich man produced a good crop. He thought to himself, 'What shall I do? I have no place to store my crops.' "Then he said, 'This is what I'll do. I will tear down my barns and build bigger ones, and there I will store all my grain and my goods. And I'll say to myself, "You have plenty of good things laid up for many years. Take life easy; eat, drink and be merry." ' "But God said to him, 'You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?' "This is how it will be with anyone who stores up things for himself but is not rich toward God."
Calls to Redistribution
Mark 10: 17-22
And as he was setting out on his journey, a man ran up and knelt before him and asked him, "Good Teacher, what must I do to inherit eternal life?" And Jesus said to him, "Why do you call me good? No one is good except God alone. You know the commandments: 'Do not murder, Do not commit adultery, Do not steal, Do not bear false witness, Do not defraud, Honor your father and mother.'" And he said to him, "Teacher, all these I have kept from my youth." And Jesus, looking at him, loved him, and said to him, "You lack one thing: go, sell all that you have and give to the poor, and you will have treasure in heaven; and come, follow me." Disheartened by the saying, he went away sorrowful, for he had great possessions.
Acts 2: 44-45
All the believers were together and had everything in common. They sold property and possessions to give to anyone who had need.
Acts 4:32 – 5:3
All the believers were one in heart and mind. No one claimed that any of their possessions was their own, but they shared everything they had. With great power the apostles continued to testify to the resurrection of the Lord Jesus. And God's grace was so powerfully at work in them all that there were no needy persons among them. For from time to time those who owned land or houses sold them, brought the money from the sales and put it at the apostles' feet, and it was distributed to anyone who had need.
Joseph, a Levite from Cyprus, whom the apostles called Barnabas (which means "son of encouragement"), sold a field he owned and brought the money and put it at the apostles' feet.
Now a man named Ananias, together with his wife Sapphira, also sold a piece of property. With his wife's full knowledge he kept back part of the money for himself, but brought the rest and put it at the apostles' feet.
Then Peter said, "Ananias, how is it that Satan has so filled your heart that you have lied to the Holy Spirit and have kept for yourself some of the money you received for the land? Didn't it belong to you before it was sold? And after it was sold, wasn't the money at your disposal? What made you think of doing such a thing? You have not lied just to human beings but to God."
2 Corinthians 8: 1-15—The Collection for the Lord’s People
And now, brothers and sisters, we want you to know about the grace that God has given the Macedonian churches. In the midst of a very severe trial, their overflowing joy and their extreme poverty welled up in rich generosity. For I testify that they gave as much as they were able, and even beyond their ability. Entirely on their own, they urgently pleaded with us for the privilege of sharing in this service to the Lord's people. And they went beyond our expectations; having given themselves first of all to the Lord, they gave themselves by the will of God also to us. So we urged Titus, just as he had earlier made a beginning, to bring also to completion this act of grace on your part. But since you excel in everything—in faith, in speech, in knowledge, in complete earnestness and in the love we have kindled in you—see that you also excel in this grace of giving.
I am not commanding you, but I want to test the sincerity of your love by comparing it with the earnestness of others. For you know the grace of our Lord Jesus Christ, that though he was rich, yet for your sake he became poor, so that you through his poverty might become rich.
And here is my judgment about what is best for you in this matter. Last year you were the first not only to give but also to have the desire to do so. Now finish the work, so that your eager willingness to do it may be matched by your completion of it, according to your means. For if the willingness is there, the gift is acceptable according to what one has, not according to what one does not have.
Our desire is not that others might be relieved while you are hard pressed, but that there might be equality. At the present time your plenty will supply what they need, so that in turn their plenty will supply what you need. The goal is equality, as it is written: "The one who gathered much did not have too much, and the one who gathered little did not have too little."
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