Kirk has a post up from last Monday on Socially Responsible Investing that I want to recommend to you all.
Alot of people have no interest in socially responsible investing because they believe that investing this way hurts your results. All they care about is making the most money they can – and they believe socially responsible investing gets in the way of this.
But I’m not necesarily sure that this is true. Sure, if the company is spending all this money on “do gooder” causes that hurt the bottom line, that’s going to hurt the stock.
But there’s also a case to be made that people like to do business with companies they trust and respect. Companies that do things the right way can be relied upon in ways that companies who are just looking to make the most money can’t.
There is also the whole issue of what exactly is ethical and what isn’t. There is alot of disagreement about this!!!
Are defense companies unethical? What about the right to protect yourself? Okay, but what about the War In Iraq?
What about alcohol or gambling companies? Are these leisurely activities that, if practiced with moderation, can contribute to a happy, healthy life? Or are they categorically wrong?
I’m not going to try and settle any of these issues right here but if you’re the kind of person, like me, who believes that you should never compromise what’s right for what’s expedient, these are issues you’ll want to think about when it comes to investing.
I also want to recommend an important new book on the issue of if firms with a commitment to right really do underperform: Firms of Endearment: How World Class Companies Profit From Passion and Purpose (this link has an interesting chart comparing the performance of what the authors call “firms of endearment” with Good to Great companies from Jim Collins’s book of the same name and the whole S&P 500 over 1, 5 and 10 year periods – very eye catching).
It’s my belief that the criticism gets things exactly wrong and there are big opportunities here for investors who understand how ethics and profits really relate.