By Hal Brill, Jack Brill
and Cliff Feigenbaum
When we set out to write Investing with Your Values, we looked at questions that are fundamental to healing our relationship with money. How can people include their spiritual, social, environmental and ethical values when making important financial decisions? Why do so many conscientious, good-hearted people make investments that conflict with their own deeply held beliefs? There are of course no easy answers. We have found that the status quo "where money and values are separated by an impenetrable wall" is rooted in an outdated mechanical worldview that sees everything as parts of a giant machine. When we shift towards a natural worldview (of interrelated living systems), a new sort of investing emerges: Natural Investing.
Natural Investors are shunning conventional wisdom that says we must abandon ethics when making financial decisions. People of all income levels, from across the entire political spectrum, are using the tools of Natural Investing to find profitable investments. According to the Social Investment Forum, well over a trillion dollars is invested today using some sort of ethical criteria; this represents almost one-tenth of all investment dollars. Nearly every mainstream investment option now has a values-based equivalent. You don't need a lot of money - several screened mutual funds and community banking options welcome small investors who can start with as little as $50. All that's really needed is the willingness to identify and consider your personal values when making decisions about your money.
Answering the Skeptics
If you're reading this article, it's likely that you are at least curious to learn more about the interface of money and spirit. But it takes courage to examine honestly the ethical component of one's investments and become aware of any inconsistencies. So it is understandable that many people try to avoid the issue by leaning on one or both of the following myths. The fact is, these common claims are nothing but empty straw men, set up as easy targets but bearing no relation to the reality of Natural Investing.
Myth One: Limiting one's investment choices by using social, environmental, or ethical criteria results in lower financial returns.
The Facts: It is true that Natural Investors voluntarily limit their choices, but this has not led to any systematic underperformance in the universe of stocks typically chosen by Natural Investors. In fact, solid statistical evidence shows that investments chosen with social, environmental, or ethical criteria perform as well as or better than those chosen with financial criteria alone. In 1990, the Domini 400 Social Index was launched; it includes socially screened companies in a similar range of sizes and industries as the unscreened Standard and Poors 500. From its inception in 1990 through December 1998, the Domini 400 has outpaced the S&P 500 with a total return of 442 percent compared with the S&P's 366 percent. This is a truly remarkable feat, but it is only one of many studies that show a positive correlation between corporate responsibility and corporate profitability. So much for the myth that "good guys finish last."
Myth Two: Natural Investing is only for tree-hugging radicals and aging hippies.
The Facts: Natural Investing in the United States traces its origins to Quakers and other Christians who could not live with the inconsistencies between their beliefs and their investments. Today a diverse range of strategies are available to support investors with wide-ranging values, from conservative Christians to farm-belt traditionalists to environmental visionaries. Most screened mutual funds aim at a broad cross-section of common interests. Natural Investors are not antibusiness, nor are they dabbling in collections of fringe companies. For example, the Domini 400 includes many household names, including Home Depot, Xerox, Johnson & Johnson, Coca Cola, and BankAmerica. Although none of these companies is free of controversy, each has particular strengths that led to its inclusion in the index.
The Wheel of Natural Investing
Natural Investing enables you to bring your particular social, environmental, or ethical concerns to the money table. Although most Natural Investors grapple with mainstream topics like corporate responsibility and workplace conditions, your investments can be customized to focus on a nearly unlimited array of issues. A full range of financial objectives can be met with Natural Investing, using everything from conservative, government-guaranteed bank programs through socially screened mutual funds to high-risk venture capital.
The four spokes of the "Natural Investing Wheel" is a map of the four major strategies that Natural Investors use to bring their values into the financial world:
1. Avoidance Screening is the familiar method of choosing not to invest in industries by which you do not wish to profit; tobacco, weapons and environmental pollutors are some of the many commonly-used screens. For example, Philip Morris wouldn't get through the avoidance screens of an investor who has a "no tobacco products" screen.
2. Affirmative Screening, which we also call "prospecting", is where investors actively seek out investments in activities in which they do want to support, bringing their vision of a positive future into the world. This can focus on leading-edge companies in emerging fields like alternative energy and natural foods; or, it may include investments in large companies or even government agencies that are addressing the concerns of investors. Many prospectors buy stock in companies that demonstrate a high level of commitment to their workers, their communities, or the environment.
3. Community Investing. This rapidly emerging branch of Natural Investing is especially useful for getting your money into the hands of grass-roots programs and economically marginalized people, locally or globally. Community Investing initiatives include affordable housing, small business lending, targeted investment in both urban and rural areas of the country, and microenterprise development throughout the world. It is an excellent way to put your savings to work and provide a hand up to those who need access to capital.
4. Shareholder Activism. This potent strategy provides a means for changing companies from the inside. Shareholder activists have a wide range of tools available to them, including dialogue with companies on issues of concern and sponsorship of shareholder resolutions when companies refuse to talk or when the dialogue breaks down. These methods achieved stunning results in the campaign to end apartheid in South Africa and are now being applied to a wide range of foreign and domestic concerns such as sweatshops and excessive executive pay.
Towards Financial Wellness
In our work with investors, we develop relationships that go beyond superficial discussions of stocks and bonds. Our real job is to help people move towards "financial wellness" by helping them identify their hopes for themselves and the world, and to co-create a financial plan that balances all of their concerns. Most people wish for enough money to feel secure and happy, to support them in fulfilling life dreams, to take care of loved ones, and maybe to have a little left over just for fun. Natural Investing fills these needs by helping people develop a healthy relationship to their money. Living expenses, investments, and giving are balanced in ways that works for each person's unique interests and goals.
But money alone does not feed the soul. And no amount of money can guarantee security in a world facing its ecological and social moment of truth. When we delve deeper with our clients, exploring their true aspirations, two cardinal, nonmaterial desires nearly always come up. We began calling these desires "natural" because they transcend all class or cultural groupings. They seem to call each of us in a different wayspeaking for the human spirit, reminding us of our highest qualities. These yearnings-of-the-heart underlie the daily, personal choices made by the Natural Investor:
The natural desire to be of service, to "make a difference" and help improve life on Earth, for ourselves, our children, and children yet unborn.
The natural desire for integrity, to "walk our talk" and live in ways that are consistent with our values.
The world today reflects the unnatural separation of money and values. The United States is the richest country ever, and material progress has brought immeasurable benefits to the world. But the pursuit of wealth-at-any-cost is also responsible for human suffering, gross inequities in the distribution of this wealth, and environmental devastation. Our global economy is the central nexus of human activity on the planet; its influence radiates into every sphere of human endeavor. If we are to fulfill humanitys potential as stewards of a healthy, prosperous planet, each of us must connect with the seeds of our own natural desires and plant them smack dab in the middle of Wall Street and our entire economic system. As we learn to make money and make a difference, we are bringing essential human values back into the core of our society.
7 Steps To Natural Investing
1. Financial Check-up. Review your current financial situation and design a financial plan that will help you achieve your goals in life.
2. Values Check-in. Clarify your personal values and define how you want to relate to the social, environmental and ethical issues of our times.
3. Choose your Natural Investment Strategies. Review the Four Spokes of the Wheel of Natural Investing and decide which strategies (Avoidance and Affirmative Screening, Community Investing, Shareholder Activism) you wish to use.
4. Design your Natural Portfolio. Select specific investments that will enable you to both make money and make a difference.
5. Change your Life. Review your spending patterns and work situation in light of your values; make adjustments such as reducing consumption, creating your right livelihood and supporting causes that you believe in.
6. Change your Community. Bring Natural Investing into your community through supporting initiatives that strengthen local economies.
7. Change the Economic System. Become a player in redesigning the global economic and political system so that it better reflects humane and sustainable values.
Adapted from Investing with Your Values: Making Money and Making a Difference by Hal Brill, Jack A. Brill and Cliff Feigenbaum. Copyright 1999, published by Bloomberg Press. To order see www.NaturalInvesting.com, or send check for $26.95 (including shipping) to Natural Investment Services, Box 747, Paonia, Colorado, 81428. For credit card orders call 877-70-VALUE. Email: [email protected]
Hal Brill and Jack Brill are financial consultants who have specialized exclusively in values-based investing for over 10 years. They are members of the Social Investment Forum and co-founders of Natural Investment Services, serving investors and providing social research on mutual funds. Jack is co-author of Investing from the Heart. Email: [email protected] or [email protected].
Cliff Feigenbaum is founder and publisher of GreenMoney Journal, a quarterly newsletter that has emerged as a leading source of in-depth information on socially responsible investing. He may be contacted at The GreenMoney Journal, 608 West Glass Ave., Spokane, WA 99205. (509) 328-1741 and email: [email protected]. Also visit the GreenMoney Journal Online at www.greenmoney.com.
