what are the benefits of socially responsible investing?

**Scanner** · 07-30-2008, 12:01 PM

Originally posted by chad View Post

This is a question I have. Is there any benefit to investing in socially responsible companies (in place of socially irresponsible companies) besides feeling good about it? Are there any financial rewards in doing so, or could there actually be penalties (as in lower returns) for doing so? If there is a difference, why do you feel it is worth it or not worth it? I'm debating how I should be investing the little money that I do have.

The benefit is higher return. I read a recent article that socially responsible co.'s have actually outperformed their peers relatively speaking.

**disneysteve** · 07-30-2008, 01:11 PM

I'm not a fan of socially responsible investing. I think it is a scam in a way because it is nearly impossible to find companies that don't have their hand in something that you may find questionable or unpleasant in these days of global conglomerates.

When the field first got popular, returns were low. Little by little, some of the big fund companies have adjusted their guidelines for investment to include companies that were formerly not acceptable. In the process, they've improved their returns but, in the eyes of many, moved away from the "socially responsible" mission.

And we all have different feelings about what is and isn't "socially responsible". Perhaps you are opposed to smoking but you are okay with gambling. Maybe you don't want to invest in alcohol producers but you're okay with nuclear power. Maybe you want to avoid companies that outsource to certain other countries. But all of those things can overlap within companies and things change as companies merge and aquire different businesses and alter processes and procedures, so a company that met your guidelines last year might no longer meet them and vice versa.

**glock35ipsc** · 07-31-2008, 09:48 AM

It'll give you a warm fuzzy, that's about it.

**tripods68** · 07-31-2008, 12:55 PM

Originally posted by Scanner View Post

The benefit is higher return. I read a recent article that socially responsible co.'s have actually outperformed their peers relatively speaking.

That's interesting. I do know if that is really true.

If anything social funds actually limits investment options since there aren't enough companies out there that fits this criteria. Most are small caps probably which normally does not perform well in the down market. But then I again i could be wrong.

**Scanner** · 07-31-2008, 02:14 PM

You know, I wish I had the reference but perhaps the article was on "green companies" vs. "socially responsible" (which I suppose - "green" is a subset of being socially responsible).

I think the idea is (and why I disagree with DisneySteve that it is a 'scam') is

1. Socially responsible companies will have less lawsuits. I don't have to remind DisneySteve as a medical physician what effect lawsuits have on pharmaceutical giants. When you put profit above the well being of society, the co. will eventually suffer.
2. Socially responsible companies will have less gov't fines/criminal sanctions. Ditto.
3. Socially responsible companies will generally have more loyal following for just the fact they are socially responsible. I can only think of a bad example right now - Starbucks. People go pay $9.75 for a cup of coffee for the "experience" and the idea that Starbucks is saving the rainforest.

I think the article talked about the death of that guy Michael Douglas played in Wall Street where he said, "Greed is good."

That was the 80's Reaganesque Alex Keaton model of success and profit.

Now. . .it's more tempered and moderate.

Personally, I don't think being socially responsible scores you any brownie points with consumers any longer, it's just expected.

But I do think it's good business nonetheless.

what are the benefits of socially responsible investing?