July-August 2000:
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Pentagon Assaults the Envirnoment
My Path to WRL
Investing for Activists
Brand-New Day Without the Pentagon
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Homepages:
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Doing Well While Doing Good
Investing for Activists

by Adam T. Lass and Chris Seymour

ast year, when David McReynolds left the War Resisters League staff after 38 years on the job, this magazine asked, “Do radicals retire?”

Here’s a follow-up question: If and when they do, what do they live on? How much financial planning have you done for your retirement years?

Uh-oh—the F-word. Does the very thought of financial planning put you to sleep? Worse, does it gross you out: Do you think it means buying into a system you’ve spent your life opposing?

Of course it does—to some extent. Yes, much of the financial world, including banking and investing, is owned by the military/industrial complex, which uses its financial leverage to crush lives and murder hope around the world. Yes, most investments incur federal income taxes, rendering some percentage of gains eligible for the one-way trip down the maw of the war machine. And yes, all investments, by definition, involve buying into capitalism. Social security isn’t enough for most people to survive on, so avoiding starvation when we stop working does require us—or our pension fund managers—to buy into the system.

Nonetheless, there is wiggle room—enough so that a judicious and well- researched financial plan can put your money into tax-free investments and/or a range of investment vehicles that, at least, avoid feeding the machine and, at best, actually help improve society. They may not be perfect, but they’re generally better than most banks’ savings accounts. (The tax consequences of these investments are by and large beyond the purview of this article and need to be investigated separately.)

Positively Ethical
If you want your money to actually be used for progressive purposes, you can place it with any of a number of community development banks or community development loan funds. These institutions take your money and lend it to non-profits developing low-cost housing, small businesses creating jobs in low- income neighborhoods and the like. And they offer returns that, while not even approaching the recent performance of the stock market, are comparable to savings accounts.

The community development banks, such as Chicago’s pioneering Shorebank and Brooklyn’s Community Capital Bank, operate like other banks as far as depositors are concerned, offering certificates of deposit, money market accounts and checking. But they focus their lending on the development needs of their communities. As at all banks, deposits are insured by the federal government up to $100,000. Community development loan funds are non-profit organizations that work closely with community groups and cooperative businesses, often offering technical assistance as well as financing. Larger funds, like the Springfield, MA-based Institute for Community Economics Revolving Loan Fund, operate nationally. Others, many of them founded with help from the institute, focus on specific geographic areas, for example, the Northern California Community Loan Fund. The various funds usually offer investors rates of return from zero to five percent, with typical minimum investments of $1,000. While investments are not government insured, these loan funds maintain reserves of grant money to protect individual investors from losses. For more information, visit the website of the Social Investment Forum, www.socialinvest.org; follow the “community investment” link. Or check with the National Community Capital Association, 924 Cherry Street, 2nd floor, Philadelphia, PA 19107-2411; (215)923-4754; fax, (215)923-4755; e-mail, ncca@communitycapital.org; website www.communitycapital.org.

‘Nice’ Corporations
Unfortunately for your retirement planning, these options, while they offer impressive “social returns” on your investment, can’t compete with stocks and bonds for financial returns. To try to reap the market’s rewards with minimal compromise, some activists have decided to make investments in individual companies they believe are good corporate citizens. Ben & Jerry’s was a favorite until the recent announcement that the Vermont ice cream entrepreneurs were being acquired by a multinational conglomerate. Founders Ben Cohen and Jerry Greenfield have pledged that the company will maintain their enlightened practices, including donating a portion of profits to peace and environmental work, but it remains to be seen how the new owners will honor that commitment.

You can, however, go looking for the next Ben and Jerry’s to invest in—with help from some socially conscious experts. For example, the Council on Economic Priorities, best known for its Shopping for a Better World guide for consumers, also issues reports on company practices that can help investors identify responsible corporations. They can be reached at (800)729-4237, website www.cepnyc.org. A look at the website turned up reports including Fortune America’s Best Companies for Minorities, 2000; 50 Best Companies for Asians, Blacks, and Hispanics, 1999; 1999 Corporate Conscience Award Winners Environment Ranking; Auto and Tire Industry Report Environment Ranking; and Petroleum Industry Refining Report.

Another important resource is Coop America. A non-profit membership organization founded in 1982, Coop America conducts a wide range of programs that encourage businesses to “create jobs, care about their communities, engage in fair trade and protect our environment.” Relevant Coop America publications for do-it-yourself socially conscious investors include The Financial Planning Handbook for Responsible Investors, the National Green Pages™ directory of socially and environmentally responsible corporations, and Boycott Action News, a quarterly that lists companies being boycotted for a range of bad practices. Coop America can be contacted at (800)58-GREEN, website www.coopamerica.org.

Finally there’s the Green Money Journal, published quarterly since 1992 by Cliff Feigenbaum, which goes one step further than any of the other resources mentioned here with the socially, environmentally and spiritually responsible approach it calls “Natural Investing.” GMJ can be found at (800)318-5725, website www.greenmoney.com.

Tax-Free Safety
Or you could go the classic route and buy municipal bonds. Munis are used by major cities to raise funds for capital improvements. They are usually quite safe—and tax-exempt. Municipal bonds won’t be financing the next high-tech weapon system, but they’re just as likely to be raising cash for a luxury-box laden sports stadium as for mass transit or schools, so caveat investor.

The problem with doing your own investing is that you need to spend an inordinate amount of time watching the market and the individual stocks and bonds you own. The next Ben & Jerry’s may be topped out, or the whole market may appear to be overpriced or overly volatile. Municipal bonds offer gains that are occasionally below the rate of inflation—in other words, providing a loss disguised as a gain.

The Responsible Funds
Fortunately, you don’t have to become a stock expert to secure your future. There are an ever-increasing number of what are called “socially responsible” mutual funds that select the entities they invest in, screening out those that do the most harm—like arms manufacturers, tobacco companies, nasty polluters and sweatshop operators—and emphasizing those that do less. Others screen in companies with family-friendly employment policies and good records on affirmative action.

Different funds have different screens, however. Some screen out tobacco but leave in military contractors, for instance, and you might need to look around to find the one(s) you most approve of. In addition to its information on community investment, the Social Investment Forum website has a ton of relevant information on socially screened mutual funds. They also provide information in such categories as business/organizational financing and venture capital; community development non-profits and loan funds; financial consultants; mortgage companies; social investment research; and shareholder activism. The Social Investment Forum can be reached at 1612 K Street NW, Suite 650, Washington, DC 20006; (202)872-5319.

The Money’s Not Bad, Either
But what returns do these funds provide? Is it really possible to make money morally?

One broker we talked with compared responsible investing to bowling’s “classic 7-10 split.” He claimed that you couldn’t make legitimate gains if you were always worried about doing the right thing, too. When he looked at the facts, his jaw dropped.

Seventy percent of the largest social investment funds earned the highest performance ratings in 1999. Year-end numbers from the three major mutual fund tracking firms (Wiesenberger, Lipper and Morningstar) show that, in addition to the largest funds, the wider group of socially responsible funds performed throughout 1999 at the top of their asset classes. Morningstar found that 21 percent of socially responsible mutual funds it tracked earned top five-star ratings through 1999, compared to just 12 percent of the total mutual fund universe.

And two socially responsible indexes, the Domini 400 Social Index and the Citizens Index, both outperformed the Standard and Poors 500 Composite Index last year. The Domini 400 Social Index clocked in at 24.49 percent and the Citizens Index at 29.58 percent for the calendar year, while the S&P 500 gained only 21.01 percent during the same time period. In fact, these two social investment indexes have outperformed the S&P 500 on a total return basis since their inceptions, the Domini 400 in 1990, and the Citizens Index in 1994.

According to Social Investment Forum President Steve Schueth, “One out of every eight dollars is now being invested responsibly, and the performance numbers for 1999 show why. Not only does socially responsible investing make a difference, it also performs strongly. Investors wanting to put their money to work fostering social and environmental change do not have to sacrifice returns in order to do so.”

The Trade-Off
It’s not quite that simple, of course. If you were to screen out all the polluters, discriminators, military contractors, union busters and sweatshop operators, etc., you’d have about two companies, if that. Most of the screens, for instance, don’t screen out all military contractors; instead, they screen out those companies that get more than a certain proportion of their income from military contracts.

So, yes, there are choices to be made, and different people of conscience draw their own lines in different places, from trying to stay out of the money economy altogether to investing only in community development loan funds or municipal bonds to investing for themselves in the most responsible mutual funds to pressuring managers of their pension funds to invest more responsibly. Where you draw it is up to you—but at least you can do it based on the best possible information about where your money is and what it’s doing.

Adam T. Lass is a Maryland-based writer and editor on finance. Chris Seymour is a folksinger, writer and labor researcher living in Brooklyn.