Good bull case, Rick. I agree with you on some counts -- such as the fact that some socially responsible mutual funds have done quite well. But you've also left me scratching my head.
For instance, you advocate investors buying what they know and like -- as Peter Lynch and the Fool have also advocated. But I don't think it's so simply a matter of someone saying, "I like social responsibility. Here's a good socially responsible company -- let me invest in it."
You mention Starbucks (Nasdaq: SBUX). It's certainly a likable company, and many know it well from of personal experience. Many are drawn to its promise of great long-term performance and believe in the company's presumed mission of making high-quality coffee available everywhere. Yet even a seemingly wonderful company like Starbucks can earn strikes against it, socially. Protesters have found fault with the firm, accusing it of using genetically altered products in its coffee and not embracing Fairtrade coffee, a movement that gives coffee growers a premium price for their product. To its credit, Starbucks has been responding to these issues.
You offered a great way of thinking about the topic -- essentially pointing out how, if socially responsible investing is a matter of not buying what you don't like, that's pretty much the same thing as buying what you do like, which is what investors should, of course, be doing. (Phew -- long sentence! Let me catch my breath a sec.) So in that sense, we all sort of invest socially -- at least to the degree that we care about such things.
Let me offer yet another perspective. We're used to thinking of socially responsible firms as ones that do no harm, and socially irresponsible firms as those that do harm. But flip that around -- perhaps socially responsible investing should really be about investing in companies that do good and about avoiding socially irresponsible companies, those that do no (or little) good.
Coming at it from this new angle, then, a new set of companies emerges as undesirable. Yes, a company may harm no animals, not pollute and build no guns... but if it's all about feeding millions of people artery-clogging foods, or making expensive bunion-causing high-heeled shoes, or selling credit cards, or manufacturing vehicles with fewer safety features than are available... well, how much good do such firms really do for society?
Sure, shoes and cars and French fries and credit cards do make people happy and make life more convenient. But happy, fulfilling lives could be led without such products -- or with similarly satisfying alternatives. Maybe really socially responsible companies are those that do a lot of good for society. (Which companies or product lines would qualify here? Well, it depends on your point of view, but it's hard to argue that insurance and medicine, for starters, aren't big boosters of quality of life.)
If, as I tend to believe, it's just really hard if not impossible to find companies that qualify on all social counts, then maybe the best we can do is find companies that seem to do a heck of a lot of good and not much bad. My problem with this topic has always been the vast gray area where it's hard to draw any firm conclusions about various companies. But perhaps the best thing to do is just to accept the gray area and make the most of it.
Have you noticed? I seem to be inching closer to the Bull case for socially responsible investing. I didn't want to have to make a case for it, but at the same time, in my heart I can't entirely dismiss it, either.
I guess my bottom line is that I don't like the thought of "socially responsible investing," because I fear it may promise more than it delivers -- it may offer false comfort. But I do like the thought of investors not turning off their consciences when they evaluate possible investments. If you have a few issues that are important to you, then check out how companies you're looking at measure up regarding those issues.
Just accept that the firms might fall short on other social measures. If you want to approach things more proactively than reactively, then seek out firms that are doing a lot of good for society. Remember to also look for financial health, competitive strength, the promise of growth, and an attractive price, of course -- those are perhaps the most vital elements of any investment. Maybe "fiscally responsible investing" should be advocated instead, and social concerns should just be a natural component of an evaluation checklist.
I rest my wobbly case now, Rick. Since I can't really rule out the value of socially responsible investing, maybe I should wave a white flag here. You win!
By the way -- did I catch you missing a chance to pun, for perhaps the first time in your life? You said, "Every thorn has its rose. Invest prudently." Perhaps you meant to say, "Every thorn has its rose. Invest prune-dently?" OK, bad pun. But it's offered as a salute to you!
Some further reading on socially responsible investing (SRI):
A Fool Special feature on SRI
Strong support for SRI among Catholic investors (Morningstar)
Do-gooders can make money at SRI (Fortune)
If Selena Maranjian were a Spice Girl, she'd be "Anxious Spice." Fortunately, for her sake and yours, she's not a Spice Girl. At the time of publication, she owned no companies mentioned in this article. To see Selena's complete stock holdings, view her profile. The Motley Fool is investors writing for investors.
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