Socially responsible investing

Socially responsible investing can enhance a portfolio while giving investors a sense of doing the right thing for the planet, a Talent financial adviser says.

Personal opinions, however, will dictate where an investor's money lands in the "green" scheme of things, says Jimmie Smith, who runs the Edward Jones office in Talent.

"What's socially responsible for one person, it might not be for another," she says, giving an example of mutual-fund holdings in alcohol companies. "Some people might have a problem with the alcohol, others won't."

In most cases, Smith steers inquiring clients toward holdings inside the Calvert family of mutual funds, which have a proven track record of earnings and social responsibility, she says.

According to the Wall Street Journal, the most common SRI technique is the use of positive or negative screens to include or exclude securities in a portfolio, factoring in social or environmental criteria including strong records on community involvement or safe products.

A second part of SRI involves shareholder activism, where investors use their ownership to influence a company's behavior. Finally, community investing targets low-income communities, where money is lent for mortgage and small-business credit.

"I think screening is extremely difficult," Smith says. "You have to intimately know companies, subsidiaries, and you have to keep up to date on philosophical changes within a company. That's why I go with Calvert. They do the work for you."

Smith says she hears more about SRI now that she's moved from Medford to Talent, although she estimates that fewer than 5 percent of her clients are invested in socially responsible funds.

But the numbers are growing nationwide.

A report released in March by the Social Investment Forum, the national umbrella organization for the social investment industry, shows that SRI assets jumped more than 18 percent to $2.71 trillion from 2005 to 2007, compared with a less than 3-percent rise for the broader spectrum of professionally managed assets. About 11 percent of assets under professional management in the U.S. "are now involved in SRI," the report states.

Smith warns that "many funds are coming out claiming to be green that don't have a proven track record."

"There's a lot more risk there, and it's the job of an investment adviser to educate the client to the fact that not everything is 'green' and will make you money," she says.

In the end, Smith says some of her clients decide to step into green investing while maintaining more-traditional portfolio holdings.

"Some people want to be totally green, but others just want to invest to help out," she says.

Share This Story