We have followed with interest the discussions that occurred over the SIF listserv regarding Paul Hawken’s critique of SRI (Dragonfly Media, October 2004). While there have been some good points, we are afraid the SIF community has missed an opportunity to learn and grow from Paul’s analysis.

I remember when I first became involved in socially responsible investing as a stockbroker at E.F. Hutton in the early 1980s; the broker in the next cubicle said to me, “Oh, socially responsible investing? Honesty as a gimmick!” Thankfully, much has changed since then when SRI was often scoffed at. Yet our collective challenge now is to clarify our message without gimmicks.

Since joining the Social Investment Forum in 1985, the socially responsible investment community has grown exponentially with the important inclusions of stockbrokers, financial planners, mutual funds, and money management firms dedicated to SRI. In the mid-1980s, I remember sitting down with clients interested in SRI and carefully examining the prospectuses of the handful of socially responsible mutual funds available at the time. Specifically, we would look for the paragraph or two that identified the social criteria used in screening investments for inclusion in the portfolio.

I remember when Amy Domini and Peter Kinder formed a company to provide social research to institutions to provide access to important screening and analysis of social impact. And, I remember when they came up with the idea for a socially responsible equity index. The Domini Social Index gave our movement a way to quantify and compare performance of equities with social screens to the unscreened S&P 500. They drove home the idea that you don't have to sacrifice return when you apply basic, progressive screens to your investments.

Over the last two decades, SRI has become a very popular investment method. The growth of the industry has expanded the movement, enabling us to claim great victories in social justice and social change. The growth, like any capitalist enterprise, has also attracted new SRI professionals. So, we have learned to compete in the broader marketplace. We advertise so that our SRI services can stand out, not only against standard financial services but also against other SRI firms.

SRI advertising and marketing has been a benefit for all SRI advisors building the movement, but for many potential investors we created a belief that one can just sign on to “do SRI” and that the world will be better for it. Close examination of mutual fund prospectuses and the research methods, criteria, and strategy used by individual managers to achieve a social portfolio has gone by the wayside for the average investor.

As you all know, the slogan “investing for good” can mean many different things. Are we making the world better for gays and lesbians or fundamentalist Christians? The appearance of Coca Cola in an SRI fund may be fine for some but causes a nuclear reaction for others.

I believe that we can create the portfolios that reflect our values, whatever they are, but when we talk about ourselves as socially responsible investors, we must take time to define it to potential clients, in marketing and in the press. I think it is time for us, as an industry, to put forth standards for disclosure, even to establish our own regulatory criteria so investors are fully aware of what their money manager or mutual fund screens entail.

For example:
1. Under what circumstances will a company be included/excluded as an investment?
2. What are the specific social areas examined when selecting stock?
3. What are criteria for shareholder dialogues and filing resolutions?
4. Which research resources do you utilize in evaluating a company?
5. Do you offer community investing? Or sustainable venture capital?
6. What makes our investment approach have social impact?

We all know that there is incredible value in the work we do. It's time to disclose our social investment strategies as SRI advisors. Yes, it’s true we all “do SRI,” but we all do it a little bit differently. We need to identify the differences and make sure our clients, colleagues, media and investors understand them as well. If we can force mainstream mutual funds to disclose their proxy voting, we can certainly make the effort to describe for our clients EXACTLY how we each “do SRI.”

Julie N. W. Goodridge
President
NorthStar Asset Management, Inc.
P.O. Box 1860
Boston, MA 02130
617.522.2635
jgoodridge@northstarasset.com

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