Jeremy Russ, a stay-at-home dad in Tempe, says he couldn’t live with himself if his money was invested in any companies that don’t respect all people and the planet.
“I believe that if everyone started investing in socially responsible companies, then those are the ones that would succeed rather than other ones which may or may not be destructive to people and the planet,” he said.
Teresa McBride, a naturopathic physician in Tempe, said she didn’t feel good about where her investment dollars were going in her 401(k)s.
“I could have been supporting manufacturing with child labor, or some horrendous environmental nightmare in their manufacturing practices,” she said.
Russ and McBride are part of a grassroots trend of people who are dropping out of mainstream investment vehicles and turning to green or socially responsible investments for their retirement savings.
Paul Mosier and Mara DeFilippis are certified financial planners who left the mainstream investment industry to help people like Russ and McBride become “socially responsible investors.”
Mosier founded Invest Green, which is affiliated with Professional Planning Associates. Their clientele includes many individuals in the East Valley.
“I think it’s safe to say that our clients ... are more endeared by their investments than the average person because they feel a real connection with their investments,” Mosier said. “They can say, ‘Yeah, I’m invested in companies that are good and I’m avoiding the ones that I think are bad for the environment and bad for humanity.’”
Socially responsible investing is “definitely a wave,” DeFilippis said.
“It does take a little more time and a little more expertise to know what you’re looking for, where to look for it, and see what you’re actually holding,” she said.
WHAT IT MEANS
A wide variety of mutual funds are categorized as socially responsible, meaning they include a screening process for current and potential holdings.
Screenings can focus on such social concerns as:
• Profiting from alcohol, tobacco and/or gambling.
• Animal testing.
• Manufacturing of weapons.
• Treatment of the environment.
• Community investment.
• Equal employment and positive labor relations.
• Human rights.
• Women’s rights.
• Gay/ l e s b i a n / b i - sexual/transgender issues.
Mosier said he’s had clients who were sickened when they took a closer look at their mutual fund holdings in their 401(k)s.
“We have clients who say they’ll never shop at a certain place, and yet they’re unwittingly the owners of these companies in their 401(k)s or IRAs — investments where you’re going to own everything without discrimination toward how those people go about their business,” he said. “(Socially responsible investing) is a real way of voting with your dollars just as much as shopping with your dollars is.”
Russ and his wife, Blue Swadener, now have their money invested in mutual funds that include companies focused on alternative energy sources and the organic production of foods and other items.
“The companies we’re invested in are doing very well,” Russ said. “It all depends on the company. Some do well and some don’t. It’s the same with the nonsocially responsible companies.”
McBride said some of her investment dollars go toward companies that are researching and developing alternative fuel sources, such as solar, wind and geothermal.
A common assumption is that socially responsible investments are low-yield losers.
“We have a lot of clients who said when they tried to become a socially responsible investor, their financial adviser said ‘don’t do it, you’re not going to make any money,’ but that’s not true,” Mosier said.
It’s largely a misconception that you automatically sacrifice performance if you choose socially responsible investments, said Todd Larsen of the Social Investment Form, the national association for the social investment industry.
“It has been shown over and over again that you can do just as well in socially responsible products as nonsocially responsible products,” he said.
McBride said she hasn’t noticed any drop in performance.
“The supply of what you can choose from has grown and the people who are managing the funds have some experience with managing them now,” she said. “You do the same sort of strategy where you don’t just dump it all in one, but you spread it over stocks and bonds. You still spread your monies out and decrease your risk that way.”
There are a variety of options for those interested in socially responsible investing, Larsen said.
If you have a 401(k) or equivalent plan with your employer, you can ask if there is a socially responsible option, Larsen said.
“A lot of companies already do, but for those that don’t, if enough employees will show interest in having an option or several options, they’re often willing to add them,” he said.
Outside of employer-related plans, you can open either a traditional or Roth IRA with socially responsible investments, Larsen said.
If you have a 401(k), it makes sense to continue contributing to obtain your employer’s match, Mosier said.
“If they have the ability to roll the money out of the 401(k) and do a rollover into an IRA, and there’s no ill consequences with the Internal Revenue Service ... then you have the whole universe of investment choices at your disposal,” he said.
• The Social Investment Forum (www.socialinvest.org) includes an extensive overview of socially responsible mutual funds and other investment products.