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WHAT IS SOCIALLY RESPONSIBLE INVESTING (SRI)
"The environment is too important to be a charity"
-David Saltman, CMO, Kafus Industries
In most SRI models, companies are screened first for financial performance. Then the companies that do not meet a set of social criteria are screened out. SRI is not searching for entities that are doing good and giving them money. That is charity.
Typical Investor Concerns that might cause a company to be screened out are:
 Environmental issues
Use of child labor or sweatshops
Bad employee relations including discriminatory practices
Harmful (or dangerous, shoddily manufactured) products such as tobacco
Reprehensible business practices
What are your concerns?
Our role at IPAM is to help you identify your social and ethical concerns as well as your financial goals, risk profile, etc., and then to find the investments that best match your social and investment goals.
SOCIALLY RESPONSIBLE INVESTING OUT-PERFORMS
Yes, it's true. SRI is financially out-performing. Here are some examples:
The Domini Index, a socially screened index established over ten years ago to mimic the S&P 500 Index, has consistently out-performed the S&P 500. It out-performed whether growth stocks or value stocks were in favor at any given time. Morningstar Ratings: *(Jan., 2001 Social Investment Forum Study)
SRI funds were more than twice as likely to receive 5-star ratings
SRI funds were four times less likely to receive one star ratings
88% of SRI funds with over $100 million in assets received 4 or 5 stars, as did 65% of all SRI funds, according to a *Jan., 2001 Social Investment Forum study. Only 32.5% of all funds receive 4 or 5 stars. The Eco-Logical Trust, a unit trust launched by Merrill Lynch and screened by a team led by Progressive Asset Management,was the second best performing Trust at Merrill Lynch during its time period of 1991-96.
Past performance does not predict future performance, but in the last ten years, to our knowledge, there have been no studies that claim that SRI has lower performance.
WHY DOES SRI OUT-PERFORM?
Here are some theories:
- SRI reduces hidden risks and liabilities. Companies with harmful or shoddily manufactured products risk lawsuits. Companies which damage the environment risk regulatory restrictions or fines, as well as lawsuits from individuals or communities who have been harmed. Companies with poor community or labor relations risk strikes or boycotts.
- SRI identifies well-managed companies. Social screening may act as a deeper form of fundamental analysis to find companies with good management. Companies with management that addresses the above issues proactively, preventing these risks and liabilities, tend to be companies that are also well managed and proactive throughout the company.
Conversely, companies cutting corners on regulatory compliance, community or employee relations may be doing so in part because of financial problems, and social screening can avoid this potential financial risk.
WHAT GOOD DOES SRI DO?
SRI investment capital has topped $2 trillion, and its share of the market is growing. In contrast, online investing, with all its attendant publicity, has only about $550 million in investment capital. Companies pay attention to numbers like this.
Shareholder activism has another powerful impact. The SRI community works together to co-ordinate activities such as Shareholder Resolutions that force companies to bring up SRI targeted policies at Annual Meetings.
Examples of recent shareholder victories include DuPont agreeing to stop strip-mining in the Okefenokee, Disney agreeing to require human rights standards to stop the use of forced child and sweatshop labor by its suppliers of licensed logo clothing, and Ford withdrawing from the Global Climate Coalition (the industry organization which promotes the idea that global warming is bad science).
In the July 3, 2000 issue of the National Law Journal which mentioned PAM, Professor Richard Koppes of Stanford Law School predicted that "shareholder activists will stir up corporate America with shareholder proposals on a host of social issues";
WHY NOT INVEST SOCIALLY
If there were no measurable loss in performance, why would anyone refuse to reward, through their investments, companies with better records on environment, child labor, sweatshops or other similar issues? Even if a company seemed to be outperforming while harming the environment, health, or its own employees, would you want to invest in it? When tobacco stocks were outperforming, was it true financial out performance, or just bad accounting? The true cost of tobacco was simply being subsidized by the rest of society. SRI identifies other investment sectors that may be temporarily performing at the cost of health or the environment, and screens them out.
OUR SERVICES
We offer a full range of SRI products for every portfolio size, including:
SRI Mutual Funds, including no-load, Utility, and International funds *
SRI Corporate pension, 401k, and other employee benefit programs
SRI Actively Managed Stock Portfolios
SRI short-term cash mangement instruments such as money markets
Limited Partnerships in investments such as real estate and natural gas
SRI shareholder Advocacy and Community Investment Programs
POWER PORTFOLIO of alternative stocks
INCOME PORTFOLIO for those needing income from their investments
We look forward to finding the best match for your financial and ethical goals.
NOTHING HEREIN SHOULD BE CONSTRUED AS AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL ANY SECURITY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
* The offer and sale of mutual fund shares may only be made by fund prospectus. You must consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company and should be read carefully before investing (and sending money). Please call IPAM at 800 509-9096 for a prospectus containing complete information, including fees and expenses.
IOWA PROGRESSIVE ASSET MANAGEMENT
505 N 4th Street, Suite 200
Fairfield, IA 52556
800.509.9096 641.469.4000
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