Holidays like Thanksgiving give us moments to ponder gratitude for all our blessings: family, friends, full stomachs, and the spirit of sharing and generosity. Here's another thing to be grateful for: the increasing validity, momentum, and profit potential of investing with a conscience.
Follow the money
In late October, the US SIF Foundation reported that assets invested in "alternative investments" -- such as sustainable and socially responsible investing -- jumped 16% last year. An investment philosophy that's long been relegated to the financial world's backwaters is increasingly flowing into mainstream financial thought.
The report, "Sustainability Trends in Alternative Investments in the United States," was prepared by the Center for Social Philanthropy at the Tellus Institute for the US SIF Foundation (affiliated with the Forum for Sustainable and Responsible Investment). At the beginning of 2011, investors had $80.9 million ploughed into 375 alternative investment funds, compared with $69.8 million invested in 346 such funds the year before.
These funds run the gamut of investment: private equity, venture capital, property investment funds, and hedge funds. That means sustainable and responsible investing is shedding its reputation for being unprofitable and only fit for the fringe.
These guys don't have your back
For too long, too many investors have believed a sure-fire way to build a highly profitable portfolio was to invest in the most ruthless corporate entities. If nice guys finished last, many investors decided they'd better go for the baddies.
These days, we're getting increasing signs that this is very flawed logic. Take a gander at Goldman Sachs' (NYSE: GS ) one-year chart, for example. The much-discussed ruthlessness of this financial company has actually exposed shareholders to tons of risk (and share price depreciation).
Continued moments of market-based disillusionment emphasize why sustainable and responsible investing deserves its newfound respect. Goldman Sachs' former chairman Jon Corzine headed up MF Global, which has not only recently plunged into bankruptcy but has apparently lost as much as $1.2 billion in customer funds. And it has literally lost it; nobody knows exactly where it is.
In summer 2010, in the midst of BP's (NYSE: BP ) Deepwater Horizon disaster, Dilbert creator Scott Adams penned a hilarious satire for The Wall Street Journal on "betting on the bad guys," pointing out that investors should "invest in the companies that you hate the most." (Awesome quote: "I hate BP, but I admire them too, in the same way I respect the work ethic of serial killers.")
The universe is bigger than you think
Fortunately, the message is becoming increasingly clear that in the stock market -- just like in real life -- throwing one's lot in with sociopaths and serial killers won't get anybody very far for very long. Responsible investment vehicles are proliferating, and there are more and more companies we can categorize as "good guy" stock ideas.
Take Johnson Controls (NYSE: JCI ) , which has been listed for years with major responsible and green indexes such as the Dow Jones Sustainability Indexes, FTSE4Good Index Series, KLD Indexes, Carbon Leadership indexes, and the Calvert Social Index, among others.
Zipcar (Nasdaq: ZIP ) and Tesla (Nasdaq: TSLA ) both fit into this universe, giving consumers non-traditional transportation options that slash carbon footprints, like car-sharing and gorgeous electric cars.
SodaStream (Nasdaq: SODA ) may have recently fallen from grace with investors, but its home-based fountain product could put a dent in the number of plastic bottles that end up in landfills. Its home page has a running ticker counting down the number of bottles it's saved the world from.
Those are just a few examples of stocks that fit within the sustainable, responsible universe. There's no reason to focus on stocks of the big, bad guys anymore; the market abounds with interesting do-good stocks, and many of them have bright futures exactly because of their goodness, not despite it.
Positive outcomes for progressive investing
Increasing funds directed into responsible investment of many kinds should yield another positive outcome. It could very well show shoddy corporate managements that their financial future relies on cleaning up their acts. If investors stop throwing capital into their sub-optimal or even shady businesses, you'd better believe they'll start getting the message.
So let's give thanks for signs that investors of all stripes are returning to reason after the speculative years, when too many corporations put profit before people and planet and investors mistakenly bought right into that flawed mind-set. Let's also be thankful that increasing numbers of responsible investors imply that after so many difficult years in the U.S. economy (not to mention the financial crisis), the message is starting to come across loud and clear.
The increasing power of progressive investing could yield a far more stable, growth-oriented marketplace. That's good for all of us.
Check back at Fool.com on Wednesday, Nov. 30 for Alyce Lomax's next column on environmental, social, and governance issues. Happy Thanksgiving!