In the News

Jack Sirard: Reward of social principles

Sunday, November 13, 2005 2:15 am
by Jack Sirard -- Bee Columnist

This story is taken from Jack Sirard at

Money manager and author for years has been an ardent supporter of "socially responsible" investing, encouraging his clients to invest in mutual funds that share their values. But now he believes it's time for investors to take things into their own hands - and portfolios.

His advice is simple: Stop using socially responsible mutual funds and invest directly in companies that you believe in.

What's his problem with those funds that have been the cornerstone of most socially responsible investing (SRI) for years? They're too broadly based, he says.

"Mutual funds are designed to speak to mass audiences and, as a result, reduce socially responsible screening to the lowest common denominator," he says. "While they block you from holding shares of alcohol or tobacco companies (for instance), they don't speak directly to most people's core values."

In addition, by excluding broad classes of industries, investors run the danger of having a less diversified and more volatile portfolio.

The 59-year-old money manager says that SRI mutual funds deserve enormous credit in showing the way to socially responsible investing, allowing investors to avoid supporting such industries as defense, nuclear power, gambling, tobacco and alcohol.

"But we want to take it to the next level, speaking directly to investor values," he says.

That's why prefers Advocacy InvestingSM: putting your money directly into companies that earn exemplary marks in the issues that are important to you.

says he zeroes in on companies that display the values most significant to an individual investor. , who just published his 32nd book, "Profitable Socially Responsible Investing?," says investors first need to make certain the company they are thinking of investing in measures up financially.

If it does, he says, then you should start looking at how it performs in two areas: environmental performance and social justice, which includes diversity, employee relations and human rights.

, who works as a money manager, writer and teacher from his Chicago office, says, "If a company is good to its employees, it will have less turnover, lower recruitment costs and greater productivity and efficiencies."

While there are costs in being a socially responsible corporation, says those companies "ultimately are seen as better credit risks and ultimately their cost of capital will drop, and their return on equity will increase."

claims his strategy of investing only in companies that earn the highest marks for social justice and environmental concerns has generated results that outperformed the Russell 3000 over the past eight years.

Asked for examples of investment choices that can test an investor's social concerns, points to Wal-Mart Stores Inc. and Costco Wholesale Corp.

"The two companies are in the same business but are an obvious contradiction in business models," says , who teaches law at Northwestern University and a finance class for MBA students at the University of Illinois.

"Wal-Mart built its business on low-cost employment and has passed those savings along to consumers and ultimately shareholders." But, he says, the company's wages and benefits "are below par and it has been subject to charges of discrimination against women and minorities."

Costco, he notes, takes a different approach. "It wants high-quality employees and pays them better. Costco believes that yields more productivity and better results," he says.

For , Advocacy InvestingSM means investors can take control of their portfolios and use them to push for social change.

"If you can effect social change in the boardroom and still earn the same rate of return, why wouldn't you do it?" asks.

Good question.

Marc J. Lane is a Chicago attorney, a Master Registered Financial Planner, and the President of Marc J. Lane Investment Management, Inc.




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