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Stephen Lim, CPA, CA
Henry Yan, CPA, CA

The Ascent Team
Suite 105- 3380 Maquinna Drive
Vancouver, BC
V5S 4C6, Canada
Tel. 604.291-0366
Fax. 604.291.0367

How do I invest in a socially responsible manner?

To be sure, many investors find their hands full these days trying to ensure that their investments are fiscally responsible. The implosion of Enron, the failure of K-Mart, and the collapse of the dot.com industry haven’t made your job easy. Some conscientious investors, however, add social responsibility to their list of requirements for inclusion in their portfolios.

Finding socially responsible funds

Do you have strong feelings about an issue or a cause? Are you anti-war? Pro-environment? Anti-gambling? Are you interested in putting your money where your ethics are? Polls have indicated that many investors are...but not all know how to separate the moral wheat from the chaff.

Of course, one option is to just refuse to place purchase orders with your broker for stock in, say, Remington, or Playboy, or Philip Morris. But what about mutual funds? Do you care enough to research the holdings of each mutual fund you consider investing in? And even if funds make the cut now, who’s to say that their future holdings won’t include stocks in the companies you boycott?

Help is available

A number of organizations will do the prep work for you. One place to go for information is the Internet. Several organizations maintain Websites that offer prodigious amounts of information on funds. http://socialfunds.com/, for instance, lists 75 funds that make its cut for various social or environmental issues. It has collected information on over 1,000 companies, which it then uses to sort its funds. Information is provided on the types of investments funds make, and their investment goals.

The Social Investment Forum at socialinvest.org has reviewed funds for a number of issues, and lists funds by performance and by "social screens”, showing the concerns that each fund screens for. Several fund families focus on the socially responsible funds they offer. The Calvert Group, for instance, provides in-depth information on its Website about its funds-- and also provides a search facility called "Know What You Own” that will tell you whether the fund you are interested in owns stock in one of the companies identified as promoting specific socially irresponsible products or services (e.g., tobacco companies, gun manufacturers, chemical companies, etc.).

Even with the help available, it’s sometimes difficult to ensure purity. While most of the socially responsible funds exclude the most notorious, such as tobacco, gambling, and pornography, others go farther and ban investment in a range of conscientious concerns, e.g. nuclear power companies, companies with poor environmental or working condition records, companies that have poor track records with minorities or women, and companies that have acquired notoriety as a result of their exploitation of foreign workers. But what are their criteria for identifying those companies and what about the interests those companies themselves have invested in? As Mother Jones will tell you, it’s not always black and white, and sometimes you just have to draw lines in the sand yourself.

Considering performance

But what about the bottom-line? Is there a significant difference between the performance of socially responsible funds and all others? Many socially responsible funds have done very well and have compiled more than presentable performance histories over recent years. In fact, as of September, 1999, Morningstar reported that 21 percent of these funds earned its five-star rating – more than twice the percentage of funds overall. The major caveat here: this was before the recent downturn, and changes in the dot.com bubble.

Still, the lesson seems to be that you can put your money where your morals are and still be a good capitalist. You just need to do your homework. That way you can have your cake and eat it, and feel good about it too. For more information about socially responsible investing, please feel free to contact the office.

The information presented in this document is of a general nature only and should not be relied upon to replace professional advice. Before acting on this information, talk with a professional advisor as laws and regulations are constantly changing. Readers accept full responsibility; no document found here is a substitute for a consultation.

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