Investment Values

Original article posted on InterVarsity: Women Scholars and Professionals here.

A treasured maxim applies to investing at least as well as it does to the medical profession: first, do no harm.

I started thinking about how this guideline relates to investing almost 5 years ago when I read an article in the Los Angeles Times about how the Bill and Melinda Gates Foundation has decided not to let their philanthropic goals affect their investment strategies and decisions.

According to the Times piece, the result was a systematic undermining of the positive effects of their own program investments. One example that the author cited was in Nigeria where the Gates Foundation was funding, with their charitable money, a polio vaccination project literally down the road from a cancer-causing oil plant supported by a portion of their endowment. The article reports, “…a Times tally showed that hundreds of Gates Foundation investments — totaling at least $8.7 billion, or 41% of its assets, not including U.S. and foreign government securities — have been in companies that countered the foundation’s charitable goals or socially concerned philosophy.” I was struck by the absurdity of it — investing to try to clean up some of the mess your own funding is helping to create. First, do no harm.

Before I read the article, I had never heard of ethical investing. But it struck a chord with the work I had just finished in grad school on social policy in developing countries. My grandpa had just given me my first investment money for Christmas, and I knew after reading this article how I was going to invest it.

During my master’s thesis process, I had become mildly obsessed with applying system dynamics theory to the mechanisms of poverty production. Poverty production is the idea that poverty doesn’t just exist, it is very often created by injustice, those systemic mechanisms that — whether from sinister or negligent motives — oppress, boost inequality, separate families, and exploit the vulnerable. System dynamics says that these mechanisms can be stopped, changed, reversed, even turned upside down with informed, inspired action.

Businesses, like individuals, have an important role in these poverty processes. Companies make decisions all the time that produce poverty or prevent poverty in their areas of influence. Some companies make quality jobs available in low-income communities and others abuse their power by exploiting workers. We see companies that dump toxic sludge and others that go out of their way to be responsible with the created world.

As shoppers, we know we’re voting with our dollars for the types of companies we want to support. So, many of us choose companies that don’t use sweatshop labor. We avoid blood diamonds, and we look for companies with fair trade practices. But what about our role as investors? As investors large and small, we’re part owners, and whether we pay attention or not, we vote with our 401(k)s and Roth IRAs.

Just as the Gates Foundation could do a better job making sure all of their resources are aligned with their mission and that they first do no harm, so could the rest of us.

Put simply: many of us care deeply about poverty and justice and give to people and charities that are dear to us, but are unwittingly undermining our giving with our investments. This is not the kind of stewardship we’re called to. We’re called to a stewardship of all areas of our lives that is purposeful, informed, and puts others, particularly the poor, first.

So what’s a girl to do?

Enter ethical investing. Also called SRI for “socially responsible investing,” it has been practiced in many forms and for many centuries by faith and justice advocates. The prophet Amos exhorted the Hebrew nation not to exploit the poor in business dealings. Isaiah challenged religious practices that did not have the corresponding practice of justice to the poor. Quaker leaders in the 1700s refused to profit from slavery-related business. Islamic mutual funds exclude interest-bearing accounts. Catholic and Methodist leaders have been on the forefront of encouraging parishioners to view investing from a Kingdom perspective, through a moral and spiritual lens.

For those who heed the call, the switch to ethical investing is relatively simple. Ethical mutual fund companies have done the hard work of finding stocks that not only have good financial prospects but also have good records on social responsibility, environmental sustainability, and sound internal governance policies.

The first part of their process is to eliminate the irresponsible companies. This means screening out businesses that, for example, manufacture weapons, dump sludge, or use exploitative child labor.

The second part of the process is to find the ethics stars. The hundreds of companies that develop creative business solutions to poverty issues get gold stars. Giving health insurance to employees — that’s gold stars. Having low-footprint environmental policies, ethical supply chain policies, fair trade practices — more gold stars.

Investors can choose from a variety of more than 200 ethical funds and exchange traded funds. The SRI website, www.socialinvest.org, has a fairly comprehensive list of specific funds to choose from.

Interestingly, financial returns for ethical funds are on par with regular stock funds. Some are surprised when they hear that there is no financial sacrifice involved. But it makes sense that companies that consider the long-term picture, such as how effects on the environment will look beyond next quarter’s earnings, to develop wise strategies for long-term growth. And we can imagine that companies with ethical employee relationships would have more innovation and a stronger work force.

More importantly, ethical investing is making a difference. Business leaders have growing incentives to consider and step up their ethics because they know more shareholders are banding together to evaluate those factors.

This is still a really dynamic arena. We desperately need more funds to become available in emerging markets where capital can help grow ethical companies and provide high quality jobs for people in developing countries.

But more than that, we still need many more people to invest ethically. Close to 90% of the investment dollars in the United States are outside of ethical funds.

Even so, the growth of ethical investment vehicles in the last 15 years has been astounding, growing from $12B to $569B since 1995 (see this report). And some of the most growth has been in institutions like universities and state retirement systems that have begun to invest ethically to match their larger social vision. Does your university or retirement fund invest ethically? They may if you ask.

In a world where money talks, more and more people who care about justice are refusing to invest in poverty production and choosing to remove their stake in companies that give the corporate world a bad name. Quietly, effectively, they’re mixing smart investing with collective corporate activism and preventing poverty, investment by investment.

“Do no harm,” indeed. And God does so much more, inviting us to treat everyone around the world as our family, calling us to love our neighbor as ourselves, to do justice and to love mercy.

We have the opportunity to align our investments with our values. Join me in making a difference.