I'm working on a new project with the Institute for Responsible investment in which we're developing a curriculum of mini-cases for business school students on the topic of ethical investing. Yesterday I had my first interview, in which I discussed some of the draft cases with a portfolio manager who is also a Principal at an ethically-oriented investment house.
Some of his answers surprised me, but also made a great deal of sense. He argued that ethical investing is essentially a rich man's (or rich woman's) business, because without at least $300-$400k invested, the fees aren't enough to buy you thoughtful advice - unless you're being overcharged. And assuming we are never able to prove definitively that social investing comes without cost, the wealthy are better able to absorb the risk that social funds could conceivably under-perform.
So when asked which of several fictitious clients he would take on, my interviewee said it would be irresponsible of him to accept the account from the working mother with three children. For her, he would recommend a low-cost mutual fund with a social bent - while admitting that there are only a couple of good options in this space right now. Specifically, he had a high regard for the KLD Select Social Index.
The lack of choice for small investors made me a little depressed about my own ability to put my meager savings to good use, but when I opened up the news this morning I read about ThinkGreen, a new "no-load" (= no fee) fund with a minimum investment of just $1000-$5000 (depending on the type of account). While it's certainly not as broad and diversified as the KLD Select Social Index, and therefore is probably riskier, it also has a more active social/environmental agenda: supporting new companies and new technologies worldwide that could help solve environmental challenges.
Good post. I'm happy to have come acrosss your blog. You do not need $300-400k to have a portfolio that fits your ethical profile. It can be done on much, much less!
I've conducted ethical investing workshops in Canada and shown small investors how they can go about doing their own values assessments and stock picking with just minimal help from an advisor. Following this process, individuals with relatively small sums can have a diversified portfolio of investments that tally with their personal values.
I've been following socially responsible investing (SRI) for forty years and have a site that offers valuable resources for individuals interested in this subject. It also covers the latest global SRI related news and research. The site is at http://investingforthesoul.com/
Good luck with your blog! Best wishes, Ron Robins
Posted by: Ron Robins | April 20, 2008 at 10:47 AM