Socially Responsible Investing and Going Green

More people ask about Socially Responsible Investing (“SRI”) and about “going green” these days.

My usual response is that you give up performance with SRI and suffer with higher fees and a limited universe of investments. It is therefore better to have a good investment plan and use money from that to support the causes important to you.

I have an article that I can send to you that gives both sides and some statistics. I have also read more in depth articles on SRI and specific funds.

The key observation is how broad or narrow the definitions of being socially responsible get in order to still have reasonable performance. Some funds even stray to get performance ……

On going green specifically, we have seen environmentally oriented mutual funds pop up since the oil scare of the 1970s. The conviction that alternative forms of energy will be necessary to meet global demand in coming decades has lead to responses by regulatory, corporate, consulting and other groups. Investors see that thinking green will be more than a passing fad.

As with SRI in general, the term “going green” has different meanings to different people and, unfortunately, to different managers and mutual funds. You need to be careful (1) that the fund invests in a way that you consider “green” and (2) that, in so doing, it has the potential to do well over time (i.e., its environmental goals do not frustrate its investment goals). The funds may be large cap, for global impact, or smaller cap, for more localized impact. The managers may not have experience with the new technologies. Furthermore, regulations are changing, which could have an impact on the companies in which the funds invest. Furthermore, large or small cap, the fund may not be well diversified because there are few companies that meet their investment criteria. So, you need to be careful in your selection.

As we said before, you may be better off to recycle, purchase conscientiously, invest well, and contribute to causes that will have a global impact rather than hoping for “making green from going green”.

If you want to discuss this, let me know please.