Socially Responsible Investing:
Making a Difference and Making Money
by Amy Domini
copyright: 2001, Dearborn Trade
copyright: 2001, Dearborn Trade
Amy in action...
In "my book", Amy Domini is one of the modern founders of Socially Responsible Investing ("SRI"). I bought her book thinking it was a must-read to increase my knowledge of the subject. However, what fascinated me more was the author herself. People that change the world have a special "recipe" to their genetic makeup. Their spirit entwines itself, becoming the very subject they're specializing in. Domini is just that - sprinkle in a bit of healthy disrespect for conventional wisdom with an intellectual curiosity of Einstein and moral authority of Reverend Martin Luther King.
Background:
Amy Domini is a preacher in her own right with a powerful message of corporate responsibility and human dignity. In 1989, Domini founded KLD Research, along with her ex-husband Peter Kinder and Steve Lydenberg. Domini helped create what was originally called the Domini 400 Social Index. She later founded the money-management firm Domini Social Investments. The firm's Social Equity Fund was the first to publicly post its Shareholder proxy-voting record (in April 1999).
Best For:
- Corporate Stakeholders (e.g., suppliers, shareholders, employees).
- Investors looking to become more familiar with SRI.
- Equity/Credit Analysts.
- Corporations wondering how the "other side" views them.
What I liked:
- The Case Study (comparing American Home Products with Johnson & Johnson) was interesting and insightful as it compared what at first appeared to be two similar companies.
- Ms. Domini gives several examples of companies that are socially responsible.
- The book is filled with reference material and Appendices.
- The reader gets a feel of Domini's personality, spirit & spunk.
And not so much...
- The case is made for the outperformance of investments in socially responsible companies. However, I believe the verdict is still out on this. (Though note that the KLD (Domini) 400 has outperformed the S&P500 since its 1990 inception.)
- A small number of recommended foreign companies' shares could not be purchased in the U.S.
- The book should be updated, especially in light of the new corporate charter (called Benefit corporation: see B Labs). Also, the profile of cited companies likely has changed.
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| Note: recent data not available. Source: KLD Research & Analytics. |
Biggest Surprises:
- Despite Domini's big following, the book had only one review on Amazon.com.
- SRI's main weakness is cited (you must read the book to discover it !)
- Social Investing actually stimulates Investors to become more actively involved in SRI via their purchasing behavior, voting, etc.
- The book has much more depth than I expected from its cover.
In her book's first page, Domini tells a resonating story about a little girl on the beach trying to save all these Starfish by throwing them back in the water. Her mother said, "Don't bother, dear,.. it won't make a difference." The girl thought for a moment, looking at the Starfish in her hand and said, "It will make a difference to this one."
That little story's a great thought-provoking start to a book which covers:
- Why SRI investing matters
- A short history of SRI
- Screening methods
- Shareholder Activism
- Community Investing
- How Global Finance affects economies
What's special about that story wasn't just that everyone's action (and vote) counts, but that this little girl (Amy?) was already thinking independently and questioning her world. Perhaps we can all do the same by thinking things through.
According to Ms. Domini, global commerce has destroyed the ability of governments to either protect its citizens from harmful business practices such as sweatshops (see below) or to benefit from taxing, since a company can move elsewhere in the world.
In 1996, CBS News' 48 Hours ran a piece detailing the abuse of Nike's workers in Vietnam. Nike became an overnight symbol of what's commonly known as "sweatshops." The company's come a long way since, but stakeholders must remain vigilant on Nike (see our Posting). A more recent expose is Here.
In my opinion, we all have blood on our hands. If we don't ask the hard questions, someone will pay the price. Unfortunately, that someone will likely be an innocent bystander in an Emerging Economy...or You...
