|
|
 |
|
| Opportunities & Exposures: Investing |
Dividends and Devotion
Timothy Smith
09/01/2004
|
For decades, religious investors have worked to reconcile their investment
strategies with their faiths. Initially, many simply avoided investing in
companies that violated their moral principles. In the early 1970s, however, six
Protestant denominations collaborated to take this one step further. They
decided to pressure the companies in their portfolios to mend their ways. In
1971, the Episcopal Church filed the first religiously sponsored shareholder
resolution for a vote at an annual stockholder meeting. The company was General
Motors, and the resolution challenged the automotive giant’s involvement in
apartheid South Africa.
Following this example, an expanding number of
Protestant, Roman Catholic and Jewish institutions have fine-tuned their
approaches to create what we today call faith-based investing. Faith-based
investors behave in ways that are similar to other socially responsible
investors, although their motivation and values are rooted in their spiritual
principles. Typically, they employ three strategies:
Social Screening of
Portfolios. If an institution feels its mission conflicts with the behavior of a
certain company or industry, it can sell its holdings. For example, a Catholic
health care institution may choose to avoid investing in a company that makes
cigarettes.
Community Development Investing. Many religious investors choose
to allocate a portion of their portfolios—typically 1 percent to 5 percent—to
community economic development investments. These might include a low-income
loan fund, a micro-loan program or perhaps investments in housing for the poor.
Returns on these investments often lag the market (running around 2 percent to 4
percent per year), but some offer a higher return.
Shareholder Advocacy. For
more than 30 years, religious institutional investors have used their voices and
votes as shareholders to press companies in which they invest to act in more
socially responsible ways. Religious investors have filed thousands of
resolutions with companies on such issues as the environment, sweatshop
labor and human rights.
In recent years, religious investors’
shareholder initiatives have become increasingly effective. Usually one-third of
the resolutions filed each year are withdrawn because the company agrees to the
proposed reform.
While the vast majority of shareholder initiatives and
community investments come from institutions, there are many opportunities for
religious individuals and families to act, as well. For example, individual
investors motivated by their faith can and do vote proxies, write letters to
management and even support regulatory reforms.
Individuals may also
allocate a portion of their funds to instruments such as the Calvert
Foundation’s Community Development Notes, a pooled community investment vehicle
that provides only a modest return, or to socially responsible mutual funds. (A
list of such funds is available online at www.socialinvest.org.)
|
|
|
|
|
|
|
