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What is Socially Responsible Investing?

Socially Responsible Investing (SRI) is the style of investing that is mindful of the impact of its investments on the earth and on society.

The idea is that every dollar you spend or invest influences the world. In what direction would we like to influence it?

There are three main strategies to SRI: Screens, Shareholder Activism, and Community Investing.


SRI tends to avoid (aka "screen out") investments in companies that do things like:

  • predatory lending,

  • pollute

  • privatize prisons

  • discriminate against women, minorities, and the LGBT community

  • lobby against environmental policies

Avoiding companies is also called "negative screening."

SRI tends to invest heavily in (aka "screen in")

  • clean energy

  • companies with diverse boards

  • companies that don't discriminate

  • companies that have exemplary reuse and recycle policies

  • companies that, in general, are working towards a world we'd like to see

Actively seeking companies is also called "postive screening."


What about the companies that are mostly good, but could be better? That's where shareholder activism comes in.

In the case of mutual funds, pensions, 401(k), foundations and other large investing organizations, the influence can be enormous. Most of us contribute to these organizations, either because we have a retirement account at work, or because we are investing on our own.

Because most of us don't have enough money to make anyone listen to us personally, I prefer to use mutual funds from companies that I know will work on my behalf to make changes I approve of. I want a mutual fund that will use its assets to ask companies to stop their bad behavior.

Many many mutual funds (and other organizations) lobby hard to get the companies that they hold to change their behavior, but far fewer ask them to change towards a better world.

If letting a mutual fund lobby for you isn't enough for you, you can also go into shareholder meetings directly, as part of a shareholder action. There are two ways to do this. If you have a little bit of money (about $2,000) you can buy stock in that company and voila- you have an entry ticket into the meeting. To be more effective, you can coordinate with a group, like Amnesty International, a mutual fund, or one of the religious organizations that work so hard to make the world a better place.

If you don't have money, you can often arrange to attend a meeting as a "proxy." That means you're representing a shareholder who's unable to attend him or herself. Proxies are usually arranged by a bigger organization that wants some bodies in the room to support them.

STEALTH EDIT: Here's a mutual fund in action!


Another important part of SRI is community investing. Community investments keep money in our communities and supports people and businesses that othewise have a hard time getting funding, like a grocery store in a food desert, getting people out of predatory mortgages, or starting healthcare clinics in poor areas.

There are a few ways to get involved in community lending, including buying "community notes", but the easiest is simply to use a credit union for your banking.

(I'm sure I'll write a blog post extolling the virtues of credit unions in the near future.)


Impact imvesting has made a big splash in the Bay Area over the last ten years. At its simplest, it is simply investing in companies that do something you believe in, without the "middle man" of a credit union or other similar entity. What people usually mean around the Bay Area, though, is directly investing thousands of dollars in a company or organization, often in a "venture capital" capacity. Contributing in this way is out of reach of most of us, although there are more and more companies working to make it more accessible to everyone.

Impact investing has been since the 1960s, in the form of Program Related Investing and Mission Related Investing, but until recently it was solely the domain of foundations. These days, individuals are getting involved in droves.

I am not as excited about Impact Investing as many people are, although I am glad it exists. I think my hesitancy is less about what it does as how it's starting to be abused and over-used.

Remember Kiva? The company that lent tiny amount of money to women entrepreneurs overseas? Well, Citibank is doing it now, too, and making lots and LOTS of money off of it. A net good? Probably. Icky? I think so.

There is a tendency in the Bay Area (especially Silicon Valley) to think that every problem has a solution (preferably web-based) that you can make money off of and still feel good about yourself.

That said, we have a lot of incredibly bright, incredibly wealthy people in the Bay Area and I'm glad they're looking around to see what good things they can use their resources for.

* * *

A quick note: If any of this sounds familiar to anyone from the Bay Area, it could be that you've heard it from Lincoln Pain.

For well over a decade I worked for Lincoln Pain, who has specialized in Socially Responsible Investing for nearly 30 years, (LONG before it was well known!). If many of my words sound like his words, that's why. Lincoln is still a fantastic teacher, friend, and mentor and his positive influence on nearly every facet of the person I am today simply can't be overstated.

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