“Un-American.”

That’s how socially responsible investing was summarized by a well-known stock market icon a number of year ago. The idea that a company had any responsibility other than to make as much profit for its owners as possible was totally alien to this Wall Street tycoon. His sentiments were not alone. But another group of people—investors—didn’t feel that way. They had strong personal feelings about certain issues and wished for a way to express those feeling through their investments. The Quakers had found a way during the 1800s to oppose slavery by not doing business with companies that profited from slave labor. Modern (Twentieth Century) investors carried that torch forward. Their opposition gelled around two major issues: Apartheid in South Africa and the war in Vietnam. Their vocal opposition to companies doing business in South Africa helped end that repressive government. Their efforts of pulling investments from defense contractors drew attention to the movement and raised it to a legitimate investment form.

Socially responsible investing today is still on a small segment of the total investment pie, yet the dollars involved are over $1.5 trillion invested. Most of the money, as in the traditional investment market, comes from institutional investors such as charitable organizations, religious groups, pension funds, insurance companies, and so on. These investment heavy weights have billions of dollars to invest.

The issue that has dogged socially responsible investing (SRI) for years is the idea that you will sacrifice performance if you choose this form of investing. The truth is that SRI mutual funds have their hot and cold streaks just the same as traditional mutual funds. Under some market conditions, the large cap growth SRI funds will flourish, while in different scenarios they may not. More SRI funds were added each year and with the new funds come new options and opportunities. One negative has been the fewer choices of SRI funds compared to traditional funds, but that’s changing.

A key issue for SRI investors is the environment. With global warming and greenhouse gasses a major issue, it would seem the investing community has discovered SRI. Investors, both individual and institutional, are recognizing that companies without an environmental plan have an unaccounted for liability on their books. When the market begins discounting stocks for this and other flaws that socially responsible investors follow, the movement will gain even more popularity.

When something gains a lot of media attention, you can count on people trying to take advantage of the situation. One issue SRI investors encounter is companies who make a token effort at changing their environmental policy and then spend more money on a media blitz to tell the world what a good steward of the earth it is. This is known as “green washing” and you will see more of it as unscrupulous companies try to gain points without actually doing anything.

This book is an introduction to socially responsible investing. It covers the movement and its history, where it is now and where it is going. The basic parts of socially responsible investing (screened investing, shareholder advocacy, community development) are covered. Mutual funds are the backbone of investing options for SRI investors and we explore those in-depth. We look at major issues addressed by SRI and why they are important. We also tell you how to get started in socially responsible investing.

What this book does not do is sell you on the idea of socially responsible investing. We try to present a basic idea of what SRI is all about, how it works, what to expect, and what some of the critics say. Whether you choose to pursue SRI is up to you. That is a very personal decision that only you can make. If, after reading this book, it feels right to you, then you’ll have a good start on the process and some resources to continue your education. If you read the book and SRI doesn’t work for you, at least you have made an informed decision based on facts and you are ready to move on to some other strategy.

This book is divided into five parts.

Part 1, “What Is Socially Responsible Investing?” defines SRI and talks about its history and the myths surrounding performance. It also includes a discussion of the role of corporations and those who are affected by its actions.

Part 2, “Important Issues to SRI Investors” discusses the five broad issues that are important to the SRI movement.

Part 3, “SRI Strategies” discusses two important strategies: stock screening and shareholder advocacy.

Part 4, “SRI Investment Opportunities” looks at the main investment options of mutual funds, stocks, and bonds.

Part 5, “How to Do SRI” helps you prepare to make the decision about SRI investing, including working with a financial professional and the personal and financial commitment.

Scattered throughout the chapters are the following sidebars, which will add to your knowledge of SRI and help you with terms that might not be familiar. Watch for these: