Ethical Investing: Buffet, the Pope and Others Take Action
Floyd Keene is member of the Commission on Social Action. He is Past President of Lakeside Congregation in Highland Park, IL, and is active in various national groups promoting philanthropy and ethical investing. Socially Responsible Investing (also called Ethical Investing) is like a freight train rolling downhill: More and more people and entities are jumping on board, and the train is going faster and farther than ever before. The facts make this clear: According to the Social Investment Forum, about 11% of all investments in the U.S. are made while considering these investments' ethical aspects. This totals about $2.71 trillion of ethical investments in the U.S alone.
Ethical investing is an attempt to invest in a manner that continues to earn a fair return, but also serves the social goals of the investor. If this can be done, ethical investing becomes a no-brainer. According to the Social Investment Forum, many studies and analyses show that ethical investments can earn returns equal to or greater than other investments.
The URJ has long been a strong supporter of socially responsible investing. In a resolution passed in Dallas, Texas in 1997, the URJ declared:
"Religious organizations ... are bound to seek correspondence between the values they profess and their investment policies and practices. For the Reform Jewish Movement, devoted as it is to tikkun olam, socially responsible investing policies and practices are not an optional commitment.
In 1997, the URJ created the Chai Investment Program (CHIP), which encourages Jewish organizations to invest 1.8% of their assets in economic development investing to aid distressed communities. Such investments are often totally safe, FDIC-insured activities.
Over the next 12 years, ethical investing nationwide has grown from childhood to adulthood. Today, interest in ethical investing is at an all time high. For example:
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In April, the Novo Foundation, run by the Warren Buffet Family, issued a formal RFP to investment managers, indicating that a significant portion of its $300 million in assets would be ethically invested.
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In late 2008 the California Endowment announced that it was designating $75 million of its assets to be invested in a socially responsible manner.
- In early July, Pope Benedict XVI issued a "papal encyclical," (one of the highest forms of Church teachings) insisting that the global finance system work for the 'common good' and be guided by morality. Pope Benedict stated, "The economy needs ethics in order to function correctly ... Financiers must rediscover the genuinely ethical foundation of their activity."
The above facts raise the question of "why?" Why is ethical investing experiencing an amazing resurgence? The answer to this question involves the "return" component of ethical investing. Frankly, ethical investments have often performed amazingly well during the economic upheaval of the last 18 months. For example:
- The Annie E. Casey foundation, one of the largest foundations in the country, invests a significant portion of its assets in social investments, many of which are like those encouraged by the URJ's CHIP program. During 2008 these investments yielded a 3.5% return and were the only portion of this foundation's portfolio in positive territory.
- According to the More for Mission group at Boston College, certain smaller foundations, which use ethical investing extensively, actually showed positive returns in 2008, compared to 30-40% decreases in market indices.
This raises the issue as to whether Ethical Investments should be considered, not only to correlate investments with ethical values, but also as a valuable hedge against a market downturn. In other words, ethical investments can hedge the rest of a portfolio with stable, less risky investments.
In short, ethical investments are an alternative whose time has come. Both for social reasons, and to enhance long term return, ethical investments should be a standard portion of any well balanced portfolio. For more information on socially responsible investing, visit the RAC's resource page or read more about the CHIP Program.