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Socially-Responsible Stocks


What is Socially Responsible Investing (SRI)?

The idea behind socially-responsible investing (SRI) is to invest in companies that don't do objectionable things, such as pollute the environment, exploit workers, or kill animals. Who wants to invest in Shell Oil (for example) when Shell destroys the land of indigenous people on third-world countries — people who are often killed for protesting such destruction, as was Ken Saro Wiwa in Nigeria?

We buy stock because we hope the company will be successful, which will cause the stock price to go up, so we can sell the stock at a higher price and make money.  But if we buy stock in companies that do bad things, then we're profiting from their evil.  Do we really want to make our money that way?  Here's a cartoon that puts this idea into perspective:

       Cartoon reprinted by permission. Visit Troubletown.com for more funny political cartoons.

Incidentally, despite what the cartoon says, responsible investments don't have worse returns than unethical ones.  Even if they did, many of us would prefer to sacrifice a small amount of return for the ability to sleep at night.

That's the main reason to choose socially responsible stocks, to avoid profiting from evil.  It's not because we're trying to keep our money from going to bad companies, because when you buy stock you're usually not buying directly from the company—you're buying from other investors.  Investors like us just keep exchanging the stock amongst ourselves, and the company doesn't see any of the money.  (Except when the company issues new stock, which is rare.)  The reason we don't buy mainstream stocks is because our profit would be like blood money.

There's another reason to boycott the stock of bad companies: if enough people don't buy the stock, then the stock price will go down.  That might not translate into lost money for the company, but it means that it's harder for them to do things such as borrow money.  And since corporate executives receive much of their compensation in the form of stock, when the stock price goes down, it's the rich corporate officers—who are directing the company's bad activities—who take the hit. When they take such a hit, they have a strong incentive to stop offending investors with their questionable business practices.

So what criteria do we use to distinguish a "good" company from a "bad" company?  Here's a sample hierarchy:

  1. Companies whose very product or service is questionable (e.g., weapons manufacturers and tobacco companies).
  2. Companies whose product or service is benign, but who have poor records in areas such as the environment, minority advancement, community involvement, or charitable contributions.
  3. Companies whose product or service is laudable, but have poor records in the areas mentioned above.
  4. Companies whose product or service is benign and have acceptable records on social responsibility..
  5. Companies whose product or service is laudable and have acceptable records on social responsibility.

On the other hand, some say that no large company is completely clean—some are just "less bad" than others.  For example, the largest plastics recycler in the world is also the largest producer of virgin plastic.  And while producing bicycles is a laudable goal, critics allege that a major bicycle manufacturer uses sweatshop labor to produce its bikes.

There are still yet other complications: Over the years the small eco/responsible companies I list on this site invariably seem to get bought out by a larger company, or themselves grow bigger and then attract multinational investors, or go out of business. As an example of the second case, natural foods maker Hain Foods merged with tea maker Celestial Seasonings a while back and then continued to swallow up dozens of small natural foods makers around the country, and is now a big enough player that their biggest investor is Wellington Management, whose primary investors include Exxon Mobil, Pfizer, Alcoa, Gillette, Pepsi, McDonald's, and Wal-Mart! Who would have guessed?

Everyone draws the line in different places. Some people will invest in anything, some will invest in only certain companies which they feel are acceptable, and some people want nothing to do with corporate investing at all. This site is for those in that middle category, who want to invest but are choosy about which companies they'll invest in.

Can you make money with socially-responsible stocks?

Yes. A common misconception (and one perpetuated by the cartoon above) is that SR stocks underperform regular stocks. In fact, many socially-responsible funds outperform the general market. (source)

The reason is simple: While bad practices increase profits in one area, they cause losses in other areas. For example, companies can make extra profit by exploiting workers, customers, or the environment, but they're also more likely to be sued or fined for those same bad practices, which costs them money.  Also, companies that treat their employees poorly have less productive employees and thus earn less profit.  Research by Professor Alex Edmans of Wharton shows that very thing.  As he writes:

"There is a strong positive relationship between employee satisfaction and shareholder returns. Firms with high satisfaction outperform peers by 3-4%/year, even when controlling for risk, industries, characteristics and outliers. This contradicts the traditional view that a dollar paid to workers is a dollar lost from shareholders, and that firms maximize shareholder value by working their employees as hard as possible, and paying them as little as possible. By contrast, it shows that SRI screens based on employee welfare can improve returns, whereas the traditional view is that SRI investors have to sacrifice financial returns to achieve their social goals." (more...)

The companies with the highest ratings in corporate governance outperformed the S&P 500 by 16% over the past five years. (GMI) As Yahoo Finance said, "The GMI ratings incorporate hundreds of data points across six broad categories including, board accountability, financial disclosure and internal controls, executive compensation, shareholder rights, ownership base and takeover provisions and social responsibility. The majority of corporate governance red flags for US companies came from the executive compensation category."

What's the difference between Socially Responsible Investing (SRI) and Socially Responsible Stocks?

To understand this we need to first understand about investing and stocks in general.

Investing simply means putting your money somewhere in hopes of getting more money back. Examples include:

  • Putting your money in a savings account and earning interest
  • Buying a house and then having it appreciate in value
  • Buying stocks and selling them when the price goes up

Investing in stocks is called investing in the market, short for the stock market. There are two ways to invest in the market:

  • Individual Stocks. You open an account with a broker and then buy and sell individual stocks yourself. Most people don't do this because they think it takes too much time, or they're not confident about their ability to pick good stocks.
  • Mutual Funds. Or you can buy shares in a mutual fund and let someone else do the work in picking the stocks. A mutual fund purchases large amounts of stock in lots of companies, perhaps hundreds of them. When you buy into a mutual fund you own a tiny chunk of that fund, along with all the other investors. That way you don't have to worry about what stocks to pick and when to buy and sell; the mutual fund manager handles that for you.

So to do SRI you have two choices: buy individual stocks from companies that do good, or buy into a socially-responsible mutual fund which screens the companies whose stock they buy on a list of socially-responsible criteria.

This website covers the former, reviewing dozens of companies for those who want to buy individual stocks. We list some SR mutual funds below for those who want to buy into a mutual fund instead.

How common is SRI?

SRI isn't some fringe idea practiced only by rich hippies. One out of eight dollars under professional management in the U.S. is involved in SRI, and Americans have over $2 trillion in SR investments. (source) Even the Motley Fool approves of SRI.

What's on this site

I spent a lot of time trying to find companies whose stock I might be willing to buy, and I created this site to share the results of my findings. I looked mostly for companies whose revenues came from attractive areas (e.g., recycling, solar energy, natural foods), but didn't dig too deep to find out the extent of their social responsibility. In many cases, the companies are so small that socially responsible information on them is hard to come by, and I also figured that most companies formed around positive products or services would have more responsibility about their business practices than would typical companies.

I found several companies which I felt are definitely unattractive, but whose unattractive features might be unknown to you, leading you to mistakenly invest in them based on research you did elsewhere which didn't happen to uncover their less-than-desirable qualities. For example, Kaiser Aluminum may be involved in recycling, but if so they certainly didn't mention it on their website, and notorious forest-clearcutter MAXXAM owns 2/3 of Kaiser. I listed stocks like these in a special section at the end of each category.

Cost of this service

I am happy to share the results of my research at no cost to you. If you want to help, you can let me know when you find broken links, information about companies listed here that's not on the site, or new companies that I should add to the site.

Getting Help with Your Investments

Mutual Funds

Where your tax $ *really* goes.
Nearly half of income tax money goes to the military! See the REAL pie chart. Or see the excellent animation by TrueMajority. (It's a little slow getting started, but it gets much, much better.)

Maybe you're a new investor and are wary about buying individual stocks yourself, preferring something less risky or less time-consuming? Then you might be interested in investing in a mutual fund, or letting a management firm invest your money for you.

With a mutual fund, a company takes your money and other investors' money, and then invests it in stock of several companies (maybe 10 to 400 companies, depending on the fund). You own shares of the mutual fund instead of owning shares in dozens of different companies. You get the advantage of diversity, without having to invest a lot of money. (If you were buying the individual stocks yourself, the commissions on trading would eat into your profits, unless you had a lot of money to invest, say more than $30,000.) Investing in a mutual fund instead of individual stocks is simpler, saves you a lot of time, and gives you diversity when investing smaller amounts of money. But you don't get to make the choices about what individual stocks to buy and sell. Most mutual funds will invest in anything as long as the fund managers think the stocks they buy will make money, but there are over 100 socially-responsible mutual funds which only buy stock in companies which pass certain social responsibility screenings. Here are some examples:

Socially Responsible in General: Domini, Calvert Group (Java), PAX World Fund
Environmentally-Oriented: Green Century and New Alternatives
Cruelty-Free (no animal abuse): Cruelty Free Value Fund
Women-Oriented: Women's Equity
Gay/Lesbian-Orinted: Meyers Pride Value Fund
Water-Related: Summit Global

Note that some "socially-responsible" funds seem to have very lax criteria -- after reviewing which stocks they hold, you might think, "Gee what WON'T they invest in?" On the other hand, some funds intentionally buy stock in "bad" companies so they can file stockholder resolutions, allowing all the stockholders to vote to require the company to phase out the use of environmentally damaging materials, allow independent auditors to review the working conditions of their third-world workers, etc.

Note also that many socially-responsible funds lose money for their investors, or earn less money than beginning investors could have made themselves! Be sure to check out a fund's performance and investment criteria thoroughly before giving your money to them. Lists and reviews of various SRI mutual funds are available from:

Social Investment Forum  |  Social Funds  |  Green Money

Holding Mutual Funds accountable. Owning stock means that you're a part owner of the company whose stock you hold and you can vote on issues at the annual stockholder meeting (by mail, if you can't attend). But when you own shares of the mutual fund it's really the mutual fund company that owns the stock, not you, so they're the ones who get to vote. For years most funds kept their voting record secret, but a law that took effect in Aug. 2004 now requires funds to disclose their voting records. Not surprisingly many mutual funds are looking for loopholes in the law, and Co-op America is encouraging citizens to demand accountability from the mutual funds.

Management Firms

In contrast to buying stocks or mutual fund shares yourself, a management firm invests your money for you, carefully picking stocks and/or mutual funds that meet your investment criteria, for a fee.  Examples of firms which handle investments for socially-conscious clients include Rocky Mountain Humane InvestingNatural InvestmentsNew Ground, and Gred Wendt.

Investment Clubs

An investment club is a small group of people who pool their money together to invest, and decide collectively which companies to invest in. In some clubs the members make all investment decisions directly, and in others the members elect a board of directors to make the decisions.

An investment club is like a very small mutual fund. The advantages are that you can start investing with a very small amount of money, because you're pooling your money with other investors, and you have some say in what companies to invest in. A club you might be interested in is RainFrog Ethical Investment Partnership.

Information about Companies


Good & Bad Companies

Responsible Shopper lists companies according to various criteria.

SocialFunds.com has SR information about hundreds companies.

MoneyWisdom.com. Links to lists of socially-responsible companies.

PETA lists which companies do and don't test their products on animals.

The Council on Economic Priorities used to rate hundreds of corporations on issues such as environmental commitment, workplace issues, community outreach, minority advancement, and military contracts, but in Dec. 2004 they seemed to have disappeared off the face of the Internet. Back when their ratings were up, sometimes they seemed very lenient, giving good marks to some notorious multinationals.

Good Companies

SustainableBusiness.com publishes a newsletter profiling socially-responsible companies.

Good Money links to various lists of companies with good records.

Clean Edge publishes reports about companies involved in renewable energy, alternative transportation, clean water, and non-hazardous materials.

Renewable Energy Stocks reviews exactly what you think they would.

Bad Companies

Multinational Monitor recognizes the 10 Worst Corporations every year. Here's their list for 2007 and for previous years.

Russell Mokhiber (co-author of Corporate Predators) lists the 100 Worst Corporations of the decade (1990-2000).

On a related note, a site called Responsible Consumption highlights products that are organic, eco-friendly, sweatshop-free, etc.

Know of Other Companies?

I'm always happy to hear of other stocks to list on this page. If you know of other stocks which fit into the categories on the left, please let me know. But please don't put me on a mailing list to receive your company's press releases -- I need to know about a company once, not all the time.

Related information

Other SRI resources include:

 

Fan Mail

You have one of the best lists of SRI options on the web.  This is a public service that I wish more people would use. -- Tucker Gilman, Jan. 2003

Credits & Legend

Descriptions that contain no attribution came from Yahoo!
Descriptions from the Green Money Online Guide are followed by"GMOG".
Descriptions from Citizens Trust (which no longer exists) are followed by (CT).
Descriptions written by me or my assistant are signed by our initials (MBJ or RS). These were usually written from information we got from the company's website.

Notes that were added by me to a description found elsewhere are listed [inside brackets]. If there's no date on an entry then it was one of the original ones I added, in June 1998.

The symbol at the beginning of each entry is a link to Yahoo!'s profile of that company. If no profile is available, I linked to the chart. If no chart is available, I linked to the quote.

The name of each company is the link to its home page, if I could find it.

Companies listed in italics are bulletin board (over-the-counter) stocks.

Canadian Stocks. Stock symbols ending in ".V" or ".AL" are traded on the Canadian Venture Exchange

Disclaimer

I make absolutely no guarantee as to the accuracy of any of the information contained in this site. Nothing herein should be construed as advice to buy or to not buy stock in any particular company. Any investment decisions you make are your own, and you should realize that 100% of your investment is at risk when you invest in stocks. Mutual funds and management firms are listed for information purposes only and listing does not constitute an endorsement.

1998-2011 Michael Bluejay | All rights reserved

 

If you like this site, you might also like some of my other sites:

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How to Save Electricity

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The Military Budget as Cookies

This excellent animation from TrueMajority shows in graphic detail (using Oreo cookies) how ridiculously, large the military budget is, and how we could solve many domestic problems with a modest 12% cut. A must-see. (watch it now)

I'll cry if you don't link to me.

MichaelBluejay.com