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Socially responsible investing: Can you make money while investing mindfully?

Despite the stalling of global climate pollution talks, a new energy landscape is emerging. Here, a windmill near Arles in the plain of the Crau, southeastern France.

For some people, investing is about more than making money.  It's about morals, too.  The act of putting your cash into companies that share your values has a name: socially responsible investing, or SRI.

Raj Sisodia is a professor of Global Business at Babson College and author of the book, Firms of Endearment.  He explains why SRI is catching on.

"Companies have many effects on the world. Businesses create, but can also potentially destroy not just financial wealth," says Sisodia.  "So  it's important when we look at businesses to look at the totality of the consequences or the impacts that they have on the world and to look for businesses where they are aligning financial wealth creation with other forms of value creation at the same time."  That can include everything from good environmental practices to treating employees well to philanthropy.

Many of our listeners have asked us about socially responsible investing.  One of them, Kristin, has taken steps to start practicing SRI, but she was discouraged by what her financial planner told her.

Kristin says, "I have a few retirement accounts set up and when I met with the financial planner to set those up, I did mention to him that I was interested in trying to invest in companies that were more aligned with my values and he said he didn't recommend it because I wouldn't get as good of a return on my investment and that I'd have to pay more to have my accounts managed more closely because they might get kind of out of whack.  So I just stuck with the typical portfolio that they use with their company."

There are socially responsible mutual funds that people like Kristin can invest in, but Sisodia says they haven't proven to be as lucrative as traditional funds.

"Those funds generally have not delivered very good returns. So there might have been a slight penalty to the overall market in terms of investing in that and some people are, of course, fine with that, " says Sisodia.  "I think that imposes a trade off that is simply not necessary because if you really think about it, creating those kinds of value is also aligned with creating financial value.  In today's world where people are better informed, they're better connected, they're more intelligent, they've got a value system that’s more aligned with purpose and meaning, increasingly the companies that are able to create value are the ones that are in harmony with all of those changes.  So, I think that trade off that we have felt we've had to make in the past is really not necessary anymore."

About the author

Adriene Hill is a senior multimedia reporter for the Marketplace sustainability desk, with a focus on consumer issues and the individual relationship to sustainability and the environment.
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It is ridiculous for Mr. Sidodia to suggest that your caller, who was so confused with fund info that she gave up, can make better investment choices than fund managers who know everything she does and a whole lot more. Wanting to "do good" does not make up for knowing financial analysis. Stock investment is not for amateurs (who don't even invest in mutual funds or etfs well - they invariably buy high and sell low). The best SRI advice i ever heard was to make your investments, then donate some of your profits to the causes you espouse.

By socially responsible investing, do you mean investing in companies whose businesses do not rely primarily on rent-seeking?

If by SRI you mean something else, please explain how NOT addressing rent-seeking is consistent with Socially Responsible Investing.

Rent-seeking doesn't add to what society produces; it merely funnels that which society creates into individual or corporate pockets. Were we to treat rent, in its various forms, as natural public revenue, we would have a healthier, more stable, more just economy in which all of us could thrive.

As Thoreau said, "There are a thousand hacking at the branches of evil
to one who is striking at the root."

Keep nibbling at the leaves, if they taste good. But don't try to convince others that you're doing more than tasteful pruning.

Henry George pointed to way to a society in which rent is treated as natural public revenue. All too few of us know his ideas enough to advocate for them. Inform yourself.

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