May 10, 2007

The Root of All Evil?

Money is a touchy subject. As corporate America finally wipes the crust from its eyes and starts figuring how to capitalize on the sustainability movement, many proactive types cry greenwashing! and roll their eyes. But (as I commented on a design colleague's blog recently), there has to be a balance. We have to allow Big Business to join the conversation, however misguided their initial contribution might be. It is a step in the right direction, and now it's up to the rest of us to help guide these businesses by 1) setting examples, 2) sharing knowledge and information and 3) being willing to take risks ourselves.

This was brought home to me recently when I finally decided it was time to open an IRA for myself. I raised the issue of sustainable investing with my financial advisor, and I could see the gate come crashing down. Try as he might to remain open minded, he ended up spouting many of the same myths I hear over and over again: you're just limiting your options to make more money by doing this; socially responsible funds don't perform as well as traditional fund families; it's ultimately impossible to limit your mutual fund investments to only truly responsible companies.

And then he laid two portfolios in front of me. If you had invested $10,000 in Traditional Fund A seven years ago, he said, this is what you'd have earned by now. If you had put the same money into Socially Responsible Fund B, this is what you'd have. The difference was large, and it wasn't in favor of the socially responsible funds.

The problem with this approach is twofold: it does not take into account all kinds of variables that might have a significant impact on either fund's performance, and it failed to account for a very important detail. This detail is what everyone who argues that social responsibility is limiting overlooks. It is the idea that some things are worth paying for. I ended up investing in the Calvert family of funds, even though they were outperformed by some of the larger fund families out there.

Further reading (money is serious business; do your due diligence):

GreenMoney Journal
Co-op America's guide to socially responsible investing
Motley Fool's debate about the issue
Social Funds (an online guide to SRI)

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1 Comment(s)

Blogger Dani Nordin said...

if you need a new advisor, I can recommend someone while you're in Boston. They specialize in SRI funds.

9:32 PM  

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