What's a Liberal Capitalist to do?

March 24, 2006 10:28 AM

I need to open an IRA, and probably another mutual fund account (or other investment) for shorter term savings, but I don't want to give money to evil corporations.

At least, I want to try to avoid the worst offenders on workers rights or environmental violations. I've been considering checking into the Calvert Group, since they do "socially responsible" investing, but I'm not completely sold on them. Are there other options? Are there financial advisers that specialize in helping progressive-minded people use the capitalist system for good instead of evil? Any resources you can recommend? Many thanks!

posted by Fenriss to work & money (11 comments total)

There are good resources at the Social Investment Forum and Co-op America. Both include directories of socially responsible service providers, including financial advisors, mutual fund companies, etc.

For what it's worth, I think you can create more social change by actually owning stock in regressive companies and then engaging in shareholder advocacy to reform their policies. (That's actually what I do for a living.) That said, most of the socially responsible mutual funds &etc are screened, because that's what the market demands.
posted by alms at 10:33 AM on March 24, 2006

Kudos for you wanting to invest your green in green funds. My .02 worth is probably the same you'd hear when considering any investment. Look at the load (or fee to invest). There are a lot of no-load funds with decent performance. Conversly there are a lot of no-load funds with higher than average fund maintenance fees. look for total fees to be less that .75% and preferably less than .5%. Look at the three year averages. The 5 year may be going into the post 911 era, and really don't reflect what has been happening in the past three or four years, and in some cases can make a fund look much worse than it actually is. If the fund is old enough look at the three and the 10 year averages. (I think 911 skewed a lot of funds artificially down). try looking here www.socialinvest.org/areas/sriguide/mfpc.cfm
posted by Gungho at 10:41 AM on March 24, 2006

One Social Investment firm I've researched recently is Domini. I decided to go with a more convential index fund, though.
posted by bcwinters at 10:57 AM on March 24, 2006

This has been asked a few times (1, 2, plus more I'm sure). I think the answer is that this is not an easy thing to do - your small amount of money, invested passively, is going against sea of money that cares only about maximizing returns.
posted by mullacc at 11:31 AM on March 24, 2006

The following is not actual investment advice. But...one of the more interesting companies I've dealt with in my short professional career is Interface (NASDAQ: IFSIA). They seem to take environmental sustainability very seriously and have served as a pretty convincing example of the rest of their industry (not to mentioned turning in pretty good financial results). Their chairman/founder was featured in the documentary The Corporation. I mention this company because it is the only company I've come across (not that I've been searching for this specifically) that looked at environmental issues as anything besides an annoyance to endure - in other words, your task is a difficult one.
posted by mullacc at 11:39 AM on March 24, 2006

Argh...of the rest of their industry = to the rest of their industry
posted by mullacc at 11:40 AM on March 24, 2006

Remember that unless your dollars go to a mutual fund that regularly buys IPOs, you're not giving money to evil corporations. Instead, you're buying shares of evil corporations from someone who held the shares of said corporations prior to you.*

This may be a distinction without a difference. But it might not. Your call.

*It's also true that corporations sometimes buy or sell their own stock ("treasury shares") in the open market, but such an occurrence is (in relative terms) quite rare.
posted by Kwantsar at 12:25 PM on March 24, 2006

Kwantsar, it is still the case that owning an equity supports their stock value, and they can leverage the value of their stock to raise additional capital, purchase another company, compensate their employees, etc. At a certain level you really are supporting a company financially by owning their stock.

That said, there are a million ways that you are connected to and indirectly supporting every company in the world by buying products and services. Rather than trying to disconnect in a way that is not realistic, it's better to engage and press the companies to do better. That's what shareholder activists do.
posted by alms at 12:57 PM on March 24, 2006

it is still the case that owning an equity supports their stock value

I think that such an assertion (in a market where short-selling is allowed) contradicts the semi-strong-form EMH. Which is okay, since it's just a hypothesis, and all, but I think your your statement is impossible to prove.
posted by Kwantsar at 1:44 PM on March 24, 2006

Why does it contradict semi-strong-form EMH, Kwantsar? I think I understand what you're getting at - the fact that a stock is owned by some particular investor doesn't alter the publicly-available information that is reflected in the market price of that stock. But what I think alms is getting it has more to do with the presence of a liquid market for a particular stock and to what extent that firm can count on its common equity float as "permanent capital" (as opposed to, say, an extremely volatile form of capital that is swapped back and forth between hedge funds). If a company's record of social responsibility limited the number of buyers in the secondary market or shifted the quality of those buyers (say, from highly desirable long-term-focused retail holders to hyperactive hedge funds), then that company may find that it is harder to use its common equity as a currency for acquisitions or employee-compensation. Of course, relative liquidity and volatility should be reflected in the market price, but the point here is that avoiding a certain stock for social responsibility issues may affect that particular stock negatively in these measures.
posted by mullacc at 3:03 PM on March 24, 2006

Check out Ariel Mutual Funds, especially the smaller cap funds. They still invest in some companies that make me unhappy, but by in large, they seem to have a pretty healthy philosophy re: doing no harm.
posted by ilikecookies at 6:46 PM on March 24, 2006