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Which socially responsible investment funds (SRIs) hold stock in gas and oil companies? And why?
Today on Marketplace I chatted with Kai Ryssdal about socially responsible investing.
The oil spill has inspired more investors to consider funds and investments in line with social goals, in no small part because BP stockholders lost a whole lot of money. Damage to the environment meant economic damage, too.
But are socially responsible investment funds the way to go if you want to avoid oil and gas companies?
Socially responsible with exceptions
Not necessarily. One example, the Dow Jones Sustainability Index, actually included BP up until the spill. (Here's the press release DJSI issued when they dumped BP.)
You've really got to look beyond the labels and fund names and dig into their holdings--do they make sense to you? Are they in line with what you believe?
I asked Morningstar for a list of the largest socially responsible investment funds by size, so I could sniff around for myself. (This is how they define an SRI.)
Want to guess how many of the top 10 SRI funds have oil and gas companies among their 25 largest holdings? Seven.
Top 10 SRI investment funds
Here are the 10 largest socially responsible investment funds, listed from largest (PIMCO) to smallest (GuideStone). Click on any of the funds below for more information about their oil and gas holdings.
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PIMCO Total Return III Instl (PTSAX)
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Parnassus Equity Income - Inv (PRBLX)
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Ariel (ARGFX)
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Pax World Balanced (PAXWX)
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Amana Trust Growth (AMAGX)
6 Ariel Appreciation (CAAPX)
I noticed that Amana is listed as having no energy holdings although Nobel is listed in its top 25 holdings. The quick blurb for Pax World Balance cites it for having Nobel (an off-shore drilling company) in its top 25 holdings. Why the different treatment for Amana? Am I missing something?
Adriene, did this Marketplace piece include your conclusions after you sniffed around? The holdings information is the easy piece... publishing information you found about WHY these funds hold oil & gas companies is the piece that is hard for the public/consumers to find. How does each fund justify those holdings given that most include environmental guidelines? Do they do any type of active engagement with these companies? What oil and gas measurements do they track year over year and compare (safety statistics, for example, or Coast Guard/MMS/BLM data about spills?)
Thanks Adriene -- but I'd heard that in the interview, and it wasn't satisfactory either. Accepting that they want to make money" and are 'looking for sort of “best of industry' or 'best of class'," that doesn't explain why each of these funds has different fossil-fuel industry holdings from the others. By what criteria has each fund selected the particular companies in which they invest rather than others, and what do independent industry and environmental analysts think of those criteria and selections?
Hi Michael and Andrea,
You're right. The blog post didn't really deliver on the "And why?". Sorry about that. I did take it up with Kai in our conversation. You can find that online here: http://marketplace.publicradio.org/display/web/2010/08/10/pm-socially-re...
Here's the relevant part of our conversation:
Ryssdal: Well, let me ask you about that because it sort of seems a little oxymoronic, right? Socially responsible investment in oil and gas companies -- help me understand that.
Hill: Well, socially responsible investments cover a broad swath of social consciousness, in part. It's not just environmental consciousness, but also, you know, these companies want to make money. I called up a socially responsible investment expert named Cary Krosinsky. He teaches about sustainability investing and has written about SRIs. This is how he explained it.
Cary Krosinsky: The social responsible fund doesn't wanna leave possible returns on the table. So, if they are concerned that not investing in oil and gas will have them underperform, they felt the need to invest in certain sectors like oil and gas.
Hill: So basically, they want to make money.
Ryssdal: The whole "leaving money on the table" thing is an interesting insight.
Hill: Yeah. So lots of times, these funds were looking for sort of "best of industry" or "best of class" type investments. BP checked all the right boxes, they had the fancy logo and they started showing up some of these lists.
Hi Adriene. I listened to this segment with interest. If "socially responsible" includes environmental sustainability, and if we believe writers like Tim Jackson in Prosperity without Growth (even with efficiencies, we're plundering the planet), then it's hard to imagine many of the offerings of typical investment portfolios--SRI or otherwise--can allow one to invest "responsibly." For myself, I put all my money into short-term notes a while back, feeling that general stockmarket investments bank on high returns by a) lowering wages to workers--or going overseas (which I don't object to, except that typically the workers are paid slave wages) b) cutting environmental corners c) further plundering the planet's resource base to produce products that for the most part we could live--often better--without.
I'd be glad for any comment--
Best wishes,
David Radcliff
New Community Project
If by "short-term notes" David means T-bills, one would hope he has thoughtfully come to the conclusion that funding wars is a more morally acceptable investment than paying low wages to voluntary workers.
(Side note: Isn't "slave wages" an oxymoron? Why would a slavemaster bother to pay wages?)
Of course, most financial markets are enormous, liquid, global markets. For each person who refuses to pick up profits because they're immorally begotten, there is an equal and opposing person who will gladly pick up the slack. At least, that's the premise behind so-called "sin funds":
http://www2.tbo.com/content/2010/aug/23/sin-cigarette-liquor-stocks-rise/
"These are stocks with the (financial) characteristics everybody says they want, and we're getting them at a discount. That's because certain people don't want to own them."
Hi David,
Thanks for your message. I'm curious: have you ever considered stock market (or other?) investments?
What do you think of the strategy of investing in companies in order to push for change? http://latimesblogs.latimes.com/unleashed/2010/05/peta-stock-shareholder...
Adriene
