Socially responsible investment needs more muscle to build a better world.
The thought seems simple and to the point: If money is sending the world towards ecological and social disaster, it could also be the means to building a greener and better world. Do you want to stimulate biological agriculture? Invest in a green fund. Are you angry at Monsanto’s genetic manipulation? Buy shares and sound off at shareholders’ meetings.
For years ethical investment has been the modern way to build a just world. But advocates for social responsibility are always looking for new ways within the capitalist system to transform ideals into reality. Not because such investing is a failed adventure; on the contrary, many such funds on both sides of the Atlantic are thriving. At the same time that reports of stock exchange scandals and financial mismanagement have become an accepted part of the daily news, ethical investment has become the fastest-growing sector in the provision of financial services. The Social Investment Service has estimated the amount of money in such funds in the U.S. at well over $2 trillion. That means that one dollar in every nine is invested with some measure of good faith.
But even this impressive sum can’t bring about a world without pollution and inequality, in part because the effectiveness of selective investing – that is, avoiding bad companies and rewarding good ones – is modest. Because the purchase of shares on the stock exchange is purely speculative, it has much less direct impact than when you ignore a supermarket and instead go to a health food store. On the stock exchange, money has only a symbolic value, which is why even the sale of shares on a massive scale does not necessarily result in big and lasting consequences for the value of a company.
Hal Brill, co-author of Investing With Your Values, wants to bypass the stock market in favor of direct investment in private projects. In an issue of Green Money Journal (Spring 2004) devoted to responsible investment, Brill writes of his quest to set up a fund that puts money in the hands of ecologically friendly and socially progressive initiatives.
Ethical investing can also take the form of small loans intended to make communities self-supporting. In both prosperous and developing countries, financial institutions provide such support to small-scale projects like improving a town district or helping individuals to set up a business. However, less than 1% of responsibly invested funds goes to such projects. Because they are low-risk, low-return investments, they attract limited interest and have little impact on major world problems. Brill says that the introduction of higher risks and, presumably, higher returns could overcome this obstacle.
There is also the option of using shareholder power to push for change in corporate direction. You need buy only one share of McDonald’s to have a say at the annual meetings and to submit resolutions requesting change. Unfortunately, it’s time-consuming and therefore expensive to push for social responsibility in this manner, and the possibility of changing the world via shares is slim. Granted, Rainforest Action Network did force Home Depot to commit itself to phasing out the sale of old-growth timber – but competitors who are not bothered by activist shareholders still contribute to logging.
In a joint article in E Magazine (March/April 2004), Marjorie Kelly, chief editor of Business Ethics, and Marshall Glickman, author of The Mindful Money Guide, say that the real problem is that even the most social-welfare-oriented company on the stock exchange has to produce good numbers. The movement for ethical investment has focused on persuading companies to act on a voluntary basis, but the pressure to squeeze out profits is relentless. A case in point is Enron, which won many environmental prizes and attracted investment from responsible funds but rolled over its own accountants because of the need to hit profit targets.
Kelly and Glickman suggest that a small percentage of the total value of socially responsible investment go to social organizations working for systematic changes in the present-day capitalist system. Another idea is to spend a small portion on lobbying for a tax system that penalizes polluters.
But inevitably those who want a progressive future for the world will have to look at a bigger picture. The Corporate Sunshine Working Group, an alliance of American investors, environmental organizations, labor unions and public interest groups is attempting to enforce and expand SEC corporate social and environmental requirements. Likewise, the Global Reporting Initiative, a coalition of business, nonprofits and government agencies, is working to set up uniform, globally applicable standards that measure environmental impact.
The Christian Science Monitor (November 17, 2003) reports a possible merging of the movement for ethical investment with that of spirituality in a wider sense. More than 20 years ago, Terry Mollner became a trendsetter when he began the first socially conscious investment fund, the Calvert Foundation. Now he says that such investment is not enough because it fails to incorporate higher spiritual values. At the Global Mind Change Forum held in March 2004 in Santa Barbara, California, Mollner announced the next step: a spiritual investment fund.
To be continued.