Marry your money with your values in socially responsible investing
By Sheri Wallace
Along with other antiquated stereotypes, dismiss the old maxim that women are too emotional, too cautious, or too relationship-oriented to be stellar investors. In fact, a recent study by Money.com indicates that women-only investment clubs averaged a 10% higher return than clubs comprised exclusively of men, and that the estrogen-only groups received a full 5% higher return when compared to co-ed alliances.
A good argument can be made that the very qualities eschewed by our unenlightened brothers - our tendency to care deeply about relationships, our ability to nurture, and our vigilance and prudence - are assets in the world of investing. Indeed, many women have combined their wish to make the world a better place with savvy investment strategy, thereby making money while making a difference.
Socially Responsible Profits
The marriage of your values and your financial plan results in "socially responsible investing," a strategy of investing only in companies that offer goods or services that contribute to a better world, or which have corporate policies that promote environmental or social change for the better.
Proponents of socially responsible investing say that it is possible to not only make a profit, but to outperform investments that aren't socially responsible. Amy Domini, a veteran of over 20 years in the investment field, and president of the Domini Social Equity Fund, says that investing intentionally, and with social responsibility as a primary goal is actually one of the best ways to make your investments shine.
To illustrate how this works, Domini points to a favorite essay by Denis Diderot, an 18th century French philosopher, in which he bemoans the gift of a new dressing gown. Apparently Diderot was given a very stunning new gown, and being very taken with the gown, he threw away his old one. But then things in his office started to look shabby in comparison, and soon he had replaced the lamp, the furniture, the cushions, and the drapes - and ended up not feeling at home in his own office.
Domini asserts that this same mindset develops when you begin socially responsible investing. "When a woman makes the decision to invest in something like a socially responsible mutual fund," she says, "even though the decision might have been made for a casual reason, she suddenly starts to define herself as one of the people who isn't just buffeted by forces beyond her control."
Domini maintains that women who make the decision to invest with their values and choose investments that directly influence key issues in their lives tend to become deliberate shoppers, read more about environmental issues, educate themselves about international issues and feel like they have more control over their investments and their future in general. And guess what? All of these things make you a better investor, and better investors retire with larger nest eggs.
Women's Issues Are Important
Nikki Daruwala, a social screener at the Calvert Group - a socially responsible group of mutual funds - spends her days researching labor issues. She specializes in workplace issues, such as women in the workforce and discrimination, and looks at the practices of companies in which the Calvert Group is considering investing, or that it currently holds in one of their portfolios.
She asserts that corporate policies that relate to women's issues are a very important indicator of a company's broader attitudes, and that they can even be an indicator of the financial health of the company. "An example of this might be a bank that doesn't lend money to minorities or women," she says. "If the bank's discriminatory policies are discovered and the bank is fined, the bank's investors could lose money."
While Daruwala does not make any financial decisions, her opinions and findings determine whether the Calvert Group will invest money in a particular company. Sometimes Daruwala says she recommends investing in a business, but also following up with shareholder activism. Daruwala will then talk to the executives at the corporation and ask them to change certain policies that she finds discriminatory or less than optimal. She reports that shareholder activism is a very effective way to convince companies to release data on the number of women in executive positions, and to look for opportunities to change other policies so they are more favorable to women.
Geeta Aiyer, CFA, is proof that women can be born with investing in their blood. Aiyer manages both the Walden/BBT Domestic Social Index Fund and the Walden/BBT International Social Index Fund, and is a well known investment expert and role model for women in business. It is because of her actions and the actions of others at Walden Asset Management that 100 corporations released their heretofore-confidential equal opportunity reports - detailing the exact numbers of women and minorities in top positions.
Walden is well known for its aggressive shareholder activism work, and this year alone has filed over 30 shareholder resolutions, asking that companies change their policies at the demand of shareholders. Along with environmental, health, and labor issues, Walden has been at the forefront of women's issues, and can take partial credit for the lawsuit settlement that forced Home Depot to stop discriminating based on gender.
"The 32 companies with which Walden has filed resolutions include some new companies and new issues for us but also companies where we have been knocking at the door for years," says Heidi Soumerai, director of social research and co-manager of the Women's Equity Mutual Fund, a fund that focuses exclusively on women's issues. "For example, we had been urging Home Depot to make full disclosure of their diversity programs and statistics even before the company settled a $100-plus million gender discrimination suit."
Both Aiyer and Soumerai evaluate new start-ups, and keep a constant watch on businesses that have had less than ideal management policies in the past. While finding that women's issues have come a long way in the past ten years, both women stress that these gains have come only because everyday shareholders have told corporations that they won't tolerate discrimination.
The bottom line, say all of these investment experts, is that women can - and should - stand together to advance issues they believe in. And choosing to support companies that support your values doesn't mean that you can't earn top returns.
Since we live longer than men, tend to stay out of the workforce to raise children more often than our male coworkers, and often earn less than male employees, we must give our investments and retirement accounts extra consideration to ensure that we build a stable financial future for ourselves and our families. Because we see our future and our society's future as inextricably intertwined, we can use our beliefs to invest not only for financial reward, but for social awareness as well.
Advice from the Experts
Amy Domini, president of the Domini Social Equity Fund, says that learning about investing is no different than becoming familiar with any other new concept. "If a new supermarket is built in your neighborhood, would you be able to tell me where the toothpaste is located on the first or second day the store was open? Of course not. But after a few weeks, you would be able to tell me not only where the toothpaste is, but also where the canned peanuts and tofu are located."
Domini suggests that beginning investors read the Wall Street Journal's "Heard on the Street" column every day, which features news about the stock market. "After you read the column a few times, you'll start to understand what makes stock prices go up and down, and what kinds of events cause what reactions. Becoming exposed to investing information is the same as going to the supermarket time after time - it's a process of learning a new skill."
Nikki Daruwala, a social screener at the Calvert Group, advises, "When you invest your money in a company, you should have access to all the facts, so I find the free service on the Calvert Group's website (www.calvertgroup.com) called "Know What You Own" to be indispensable. You can search by company name, the particular issue you are concerned about, or any of several other options."
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