Giving Your Investments a Conscience
Amy Domini was working as a stockbroker in the Boston area in the early 1980s when she began noticing clients choosing to avoid certain companies, such as those in the coal business or those that had big weapons contracts. This realization sparked some soul searching on her part. "I suddenly thought to myself: 'Amy, how far you've fallen. You would call people you like and tell them they should buy a company that's in the business of killing people?'"
Since that personal and professional revelation, Domini has gone on to write two books about putting your money where your conscience is -- most recently, Socially Responsible Investing: Making a Difference and Making Money (Dearborn Trade, January 2001). Today, New York City-based Domini Social Investments specializes in mutual funds and other financial products that meet the company's socially responsible criteria. In total, Domini funds have about $1.5 billion in assets under management.
Domini recently spoke with BusinessWeek Online's Heesun Wee about emerging trends in socially responsible investing -- including investment methods that take a stand on specific women's issues such as domestic violence and breast cancer. Here are edited excerpts of that conversation:
Q: How does the performance of socially responsible funds compare to investment funds
that don't have those kinds of criteria? A:
Q: How does the performance of socially responsible funds compare to investment funds that don't have those kinds of criteria?
A:Morningstar does a survey periodically of the funds. Its [latest] survey found that the funds Morningstar called socially responsible were more likely to have a four- or a five-star rating than average funds. There are several different studies of different types [that show] that.
Q: Has the economic slowdown put socially responsible investing on the back burner for
most investors? A:
Q: Has the economic slowdown put socially responsible investing on the back burner for most investors?
A:I haven't seen that personally. I think people buy into the philosophy that the way you invest shapes the world we live in, and if they feel that way, then they want to [express it in their investment portfolio].
[Socially responsible investing] has expanded to the point where there are many choices. You can have a small-cap value, and you can have an international fund. There's a social-research network going on in Hong Kong, Japan, Brazil, and throughout Europe. You've got Vanguard and TIAA-CREF in the industry. So you've got credibility that comes from having two of the largest money managers in America thinking it's enough of an industry that they want to compete in it.
We're also better understood nowadays. [Socially responsible investing] used to be thought of as not buying tobacco companies. Now, it's understood that we try to buy better companies. We try to be better investor/owners by filing shareholder resolutions with the companies we do own and by entering into direct dialogue to improve them.
Q: Are there specific stocks that might allow investors who are interested to focus
their investments on women's causes? A:
Q: Are there specific stocks that might allow investors who are interested to focus their investments on women's causes?
A:Companies like Johnson & Johnson, for instance, have long, strong programs [that address women's issues] -- in J&J's case, focused more on domestic violence. It spends $1 million a year on a hotline.
Avon Products' foundation focuses its charitable giving on women's and children's issues. In recent years, the company has focused particularly on breast cancer as a cause. In October, Avon announced that its foundation would contribute $50 million, its largest-ever single donation, to support breast-cancer research.
And Xerox in fiscal year 1997 placed approximately 13.8% [$285 million] of its total subcontracting for goods and services with women-owned and minority-owned companies, up from 6.3% [$138 million] the previous year. [Editor's Note: In 2000, Xerox' total domestic purchasing amounted to $1.5 billion. Of that, 16.8%, or $256 million, was for purchases from women-owned suppliers, and 10.7%, or $162.5 million, went to purchases from minority-owned businesses.]
Q: Have you changed your investing strategy since the events of September 11? A:
Q: Have you changed your investing strategy since the events of September 11?
A:We haven't changed our approach, but we do have two products that are community-development products -- a money-market fund and a bond fund where 10% is in community development. We're telling those two stories a lot more vocally now because we do feel that there's a desire amongst Americans to do something. And I think one very wholesome approach is to reinvest in communities in America.
Q: Are there personal investing lessons to be learned in light of what happened on
September 11? A:
Q: Are there personal investing lessons to be learned in light of what happened on September 11?
A:All of the old-fashioned things that you're always taught about finances become so obviously true when you face a thing like this. I think that during the last few years of the go-go stock market, a lot of people felt that they were foolish to have savings -- you know, bank-type savings. [You should have] savings equal to six months to a year's worth of your spending.
[Editor's Note: As of the close of the third quarter on Sept. 30, the Domini Social Equity Fund's (DSEFX ) one-year annualized return declined 27.31%, compared with a 26.62% drop for the S&P 500 index. Its five-year annualized return is a 9.9% gain, compared with a 10.21% increase for the S&P 500.]