Ways to Save Money, Invest Money and Help the World

Your money can help determine the quality of our planet's future.

| May/June 1984

Suppose that as a result of scrimping and saving—and more than just a little hard work—you've managed to save a few hundred dollars. Chances are, you've got that cash safely stashed in a local bank account. As an alternative, why not consider investing your money where it'll not only do well but also do good? Thousands of people—from the managers of multi-million-dollar pension funds to individuals like you—are finding ways to save money that generate both healthy earnings and positive social change . . . by putting those dollars into "socially responsible" or "ethical" investment funds.

There are now more than half a dozen fund companies in this country that place their members' money only in investments that meet certain criteria beyond the usual projected-earnings figures. These guidelines might require, for example, that a company have a good record in environmental protection, equal employment, labor relations, and/ or employee safety. Some funds won't invest in liquor or tobacco companies, defense contractors, or utilities that own nuclear power plants . . . while others avoid firms that do business in (or with) South Africa. Still other funds go a step further: They seek out relatively new firms on the leading edge of change (such as innovators in alternative energy, housing, or food production) . . . and then balance their portfolios with investments in stable, long-established businesses to minimize the overall risk.

Of course, one person's idea of what is "ethical" or "socially responsible" may be quite different from another's, and there's significant diversity among the companies specializing in such investments. Each has a different philosophy, not only in terms of what constitutes acceptable corporate behavior, but also in regard to its own investment strategies and goals. With some careful shopping you should be able to find at least one fund to suit your needs and convictions.

The Record

The first social-investment firms were created during the late 60's and early 70's to serve churches that wanted money-management programs that reflected their interests and beliefs. As more and more individuals learned of these companies, however, the fledgling funds grew and proliferated . . . and they now represent a small, but increasingly significant, revolution in American business.

Most ethical-investment concerns fall into one of two broad categories: money market funds or mutual funds. Money market funds (which are generally recommended for short-term investments) buy U.S. government agency securities issued by departments—such as the Student Loan Marketing Association, the Federal Farm Credit Association, and the Small Business Administration—that meet established criteria. On the other hand, mutual funds (which are considered better for relatively long-term investments) buy a mix of stocks in large corporations and/or small businesses, bonds or notes issued by U.S. government agencies, and perhaps foreign securities, long-term bank certificates, and the like. The exact makeup of any given company's portfolio will depend on its particular approach to the market. Some firms are ultra-conservative and lean heavily toward bluechip stocks, while other companies favor potentially higher-yielding, but also more risky, investments.

The performance of funds using social criteria has been scrutinized by a number of investment analysis firms and research groups . . . and the studies have produced varied conclusions. While some such reports caution that limiting the types of companies in which a fund will invest can also limit returns, others maintain that firms employing ethical guidelines have performed as well as, if not better than, the others.

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