For years, stock pickers have advised investors to “buy what you know.”
Say, for instance, you love Sara Lee’s latest frozen dessert and your grocer tells you she can’t keep up with demand. That may suggest the company’s profits are about to rise, and now might be a good time gobble up 100 shares.
But what if you also routinely wear out shoe leather canvassing for the American Cancer Society? How would you know that Sara Lee, the conglomerate that makes bakery treats, Hanes underwear and Kiwi shoe polish, also owns a European tobacco subsidiary that accounted for 4 percent of its profits last year?
That’s where Cliff Feigenbaum comes in.
He publishes The GreenMoney Journal newsletter from his North Spokane home, and operates an online guide that gets 15,000 hits a week from around the world.
Feigenbaum, 35, is part of a small but growing movement of concerned individuals and advocacy groups that encourage investors to look beyond the bottom line and consider how corporations treat their employees, their customers and the planet.
“The social investment industry has the potential to change the world,” says Amy Domini of the $160 million Domini Social Equity Fund. “…It’s not enough to wear our Birkenstocks and Patagonia as we sip Odwalla juices. We must do more than no harm. Social investing is a means to social change.”
Tracking which companies have been naughty or nice is getting easier, thanks to the Internet. But for those disinclined to do their own research, there are mutual-fund and portfolio managers eager to oblige.
Ethical investing may be in vogue, but it’s hardly new. A century ago, Protestant churches excluded tobacco and alcohol companies - “sin stocks” - from their portfolios.
The first ethical mutual funds, Pax World Fund and Dreyfus Third Century Fund, began during the Vietnam War, shunning companies with military contracts.
Today, 50 mutual funds use environmental and/or social “screens” when picking stocks, and another 50 are planned.
Positive screens recognize corporations for charitable giving, good labor relations and recycling programs. Negative screens may exclude those doing business with repressive governments or using animals for product testing.
Feigenbaum’s attempt to screen his own meager investments led to his launching GreenMoney Journal in 1991.
After graduating from Whitworth College with a business degree and a minor in religion, Feigenbaum went to work for Empire Health Services, where his employer-sponsored 401(k) savings plan allowed him three investment options: a stock fund, bond fund and money-market fund.
“I enrolled without doing much research,” Feigenbaum admits. “When I finally got around to looking at the annual report, I was surprised by how much (of the stock fund) was invested in tobacco.”
Feigenbaum says he questioned Empire Health’s 401(k) coordinator about the appropriateness of a hospital group owning tobacco stocks, but the irony of the situation was lost on the money manager.
“As I was leaving his office,” Feigenbaum recalls, “he said, ‘By the way, don’t tell anyone, because they won’t care.”’ Indeed, when Feigenbaum mentioned the tobacco investments to a nurse friend, she joked, “Well, it keeps us in patients.”
(Garman Lutz, Empire Health’s chief financial officer, says employees now have more investment options. “Our investment consultants still concentrate on performance rather than any particular investment exclusion,” he explains. “But if we had a group of employees who felt strongly about investing in a socially responsible fund, we could set that up.”)
Feigenbaum’s GreenMoney Journal got off to a slow start. But as competition among socially responsible mutual funds increased, so did the newsletter’s advertising revenue.
The current issue includes 10 full pages of ads, along with an essay about balancing work and family, a mutual-fund performance update, a “green events” calendar and other resources. Circulation is 7,000, of which 1,000 is paid.
“We’re basically a clearinghouse for information,” says Feigenbaum, who invariably refers to his essentially one-person, one-room operation as “we.”
With so much going on, it’s easy to see why he thinks of himself in the plural.
Besides publishing the newsletter and maintaining a web site, Feigenbaum contributes to other publications and travels the country offering advice to corporations, brokers and investment groups.
He’s also co-writing “The Complete Guide to Socially Responsible Investing and Mutual Funds,” due out next year.
“Cliff’s fighting a battle that needs to be fought in a town in which it’s very tough to fight that battle,” says Patrick Morgan, a financial consultant with the local branch of Smith Barney brokerage.
Morgan says most investors don’t see any link between personal values and investment strategy. Those who do, he says, assume they have to sacrifice profits to invest according to principles.
“That may have been true in the past,” he says, “when socially responsible companies were defined more narrowly.”
But today half the largest 1,000 publicly traded companies meet social-responsibility screening criteria, and one-fourth of the ethical funds earned 20 percent or better last year.
Morgan’s clients are “mainly people still carrying the ideals they had in the ‘60s, both liberal and conservative.”
Most are women, he says, “simply because they seem to care more than men, quite frankly.”
Individuals aren’t the only ones investing according to their conscience.
The Spokane Catholic Diocese has an ethical guideline governing investments, says Steve Kocharhook, director of development.
“It’s actually pretty simple: We avoid companies whose business might endanger world peace, race relations, ignore traditional Catholic ethics or ignore equal opportunities for all people,” Kocharhook said.
Those concerns became an issue when one portfolio manager purchased shares in Hollywood Park, a Southern California race track.
The Catholic Foundation investment committee felt uneasy about the stock and asked the investment manager to explain.
“He said the race track’s land was about to be sold for a substantial profit, so the investment was really a real-estate play,” Kocharhook says. “But we didn’t think investing in a gambling business was appropriate, so it was sold.”
Whitworth College business professor George Weber teaches business ethics.
“But I have a problem with so-called social investing, because many of the mutual funds don’t have the right social issues,” Webersays. “They have PC - politically correct - issues.
“For example,” says Weber, “many of them wouldn’t buy stock in a firm that supplies any military equipment, because that’s not socially acceptable. I just reject that.
“It’s almost impossible to match your own ethics with an investment portfolio,” Weber scoffs. “We have companies today that do so many, many things.
“RJR-Nabisco makes products that are pretty much essential for life. They also make cigarettes.”
With the increasing focus on ethics, Weber says, business executives are accustomed to being put on the spot.
“They all claim very, very high ethical standards,” he says. “They talk a good line, but ethics is what you do, not what you say.”
Socially responsible investors would agree. But they point to incidents such as Texaco’s embarrassing “secret tapes” episode and the subsequent $176 million discrimination-lawsuit settlement as evidence that public opinion can influence corporate behavior.
And with the amount of money invested according to personal principles estimated at over $600 billion and rising, that influence is likely to grow.
Besides, says Feigenbaum, a former student of Weber’s, “This isn’t about being perfect. It’s about living consistently in a very inconsistent world.”
, DataTimes ILLUSTRATION: Color Photo
MEMO: This sidebar appeared with the story: GREEN INVESTMENTS Publications that focus on socially and environmentally responsible investing include: The GreenMoney Journal, 608 W. Glass, Spokane 99205; (509) 328-1741; www.greenmoney.com; quarterly, $35/year. The Clean Yield, Garvin Hill Road, Greensboro, VT 05841; (802) 533-7178; (no web site); bimonthly, $80/year. Franklin Research’s Insight: Investing for a Better World, 711 Atlantic Ave., Boston, MA 02111; (617) 423-6655; www.frdc.com/insight.html; monthly, $30/year. Social Investment Forum/Co-Op America Business Network Connections, P.O. Box 57216, Washington, D.C. 20037; (202) 872-5319; www.socialinvest.org; quarterly, $50/year. Good Money, www.goodmoney.com