Spoiler Alert! Values Meet Value: Doing Well By Doing Good

As the Morrissey & Company team prepares the last details of our 2010 Q4 Mount Vernon Report, we wanted to give you a taste of what’s the come.  Enjoy – and happy holidays!

Ethical investing.  Sustainable investing.  Socially-conscious investing.  Whatever you choose to call it, socially responsible investing (SRI) blends financial rewards with social initiatives, and in a depressed economy when mistrust of Wall Street pervades, investors are making this a trend worth watching – and joining. 

According to the 2010 Report on Socially Responsible Investing Trends in the United States by the Social Investment Forum Foundation, SRI is growing at a faster rate than the total amount of investment assets under professional management.  Of the total amount of professionally managed investments in the U.S.: 

  • SRI investments have increased by more than 34 percent since 2005 - more than ten times that of regular professionally managed asset increases.
  • Approximately $1 out of every $8 is contributed to SRI activities.
  • $2.51 trillion is now managed under policies that incorporate environmental, social and governance criteria into investment analysis and portfolio construction.

Image courtesy of YesInvesting.com

Instead of simply concentrating on the bottom line, SRI incorporates environmental impact, social implications and governance (ESG) criteria into the investing equation.  Organizations like the United Nations are helping to popularize this investment strategy with their Principles of Responsible Investment (PRI) initiative, and even top academic institutions are paying attention.  A recent London Business School and Harvard Business School study, The Impact of Corporate Social Responsibility on Investment Recommendations, asserted that organizations with strong corporate social responsibility (CSR) practices are increasingly being rated more favorably than competitors without these policies. 

An analysis of SRI in USA Today cites its origins in Biblical times – Jewish law decreed that people should invest ethically.  In the 18th century, the Quakers revived the practice, banning investments and business related to the slave trade.  And in the 1960s to 1970s, SRI focused on “sin stocks.”  From Civil Rights to apartheid and even the Vietnam War, investors tried to “punish” companies affiliated with defense programs and linked to social injustice with their investment activities.  Eventually, sin stocks included tobacco, alcohol and weapons manufacturing, and most recently, investors boycotted companies operating in Sudan as a means of protesting the genocide in Darfur. 

SRI continues to evolve.  Today’s focus is on rewards, not punishments.  SRI practices now screen-in positive attributes instead of only screening-out negative practices.  Investors are looking for corporate governance, low carbon footprints and community involvement.  They examine safety records, diversity and consumer protection with the assumption that companies in SRI portfolios have greater transparency.  And more transparency means less risk – a bonus for both investment value and investor values. 

From a reputation communications standpoint, this means that CSR programs are finally being recognized for boosting both corporate reputations and bottom lines.  And despite the overwhelming pessimism about our economy and Wall Street’s lack of values, SRI is reviving our faith in companies doing well by doing good.

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