Socially Responsible Investing
Written by Corinne Garcia Tuesday, January 04 2011
It’s 2011—do you know where your money is?
Hopefully, you have some tucked away in IRAs, college funds, mutual funds, and/or stocks. And most likely someone is managing this money for you, because it’s hard to find the time to pay bills much less figure out sound investments.
But imagine if your money were invested in a socially responsible way, meaning that it’s invested in companies that aren’t polluting the environment, killing animals, or manufacturing products that you’re against. How about investing in companies that are really making a difference, such as nonprofits, those seeking solutions for clean drinking water, reducing global poverty, or working toward clean energy solutions?
They’re called social investment funds, and they range from stocks and mutual funds that bring a return on investment to funds set up on a donation basis, both helping to promote a better world. And they’re on the rise.
The Acumen Fund
Jacqueline Novagratz had a successful career in international banking with Chase Manhattan Bank, but during her travels to other parts of the world, she discovered her desire to leverage her work-acquired knowledge to help struggling communities. She left the corporate banking world and ended up in Rwanda, where she started a micro-finance bank along with local women. From there, she pursued an MBA at Stanford University and went to work with the Rockefeller Foundation, working to make philanthropic giving more effective.
And pulling all the threads together from these various pursuits, Novagratz founded the Acumen Fund in 2001 as a combination of the best ideas of business and best idea of philanthropy. “We are a pioneer in this space,” says Mariko Tada, Acumen Fund communications manager. “Jacqueline founded it in 2001, and while currently this idea has become more and more popular, we were one of the early entrances.”
Acumen is an example of a donation-based social investment fund, modeled on venture capital. “We aim to end poverty by investing philanthropic capital, money donated by a network of supporters,” explains Tada. “We invest that in businesses that support the poor, delivering goods and services to the poor – health care, food and water, clean energy, housing.”
With offices located in the United States, India, Kenya, and Pakistan, Acumen is networked with the companies it invests in and able to build relationships in those areas. The end result is not about making a profit from these investments, but helping these socially responsible businesses with loans and capital. The goal is to make that capital back and reinvest it. And because the money is donated, Acumen has the leeway to focus on what it calls “patient capital,” meaning that it gives longer-term loans.
“The businesses in which we've invested are truly changing lives,” says Novagratz. “They've reached more than 40 million people and created more than 35,000 jobs, not to mention bringing critical goods like safe water, health care, and clean energy to people without access.”
And since Acumen is a pioneer in this field, it has a solid base of committed supporters, companies, and individuals that believe in the cause and donate money that really goes the distance. Instead of donating to one specific need, this money gets invested, returned, and reinvested. It’s recycled in a sense.
“There's a long way to go, to be sure,” Novagratz says. “But we truly believe that one day every human being will have access to the critical goods and services they need so that they can make decisions and choices for themselves and unleash their full human potential.”
For more information, see http://www.acumenfund.org.
Other Forms of Socially Responsible Investing (SRI)
Many socially conscious investment funds exist today that focus on making investors a return – often a very good return. And because of the rise in social investment funds and the desire for people to make conscious choices about where and how their money is working, many investment managers, now referred to as SRI experts, are becoming more familiar with the funds that are out there.
In developing an SRI plan, there are three primary strategies that investors tend to follow, according to SocialFunds.com, touted as the largest personal finance site devoted to SRI. These include:
- Screening: The exclusion of companies that negatively impact communities, the environment, or any other practice investors deem unacceptable.
- Shareholder activism: Investors may buy into a company to make a positive statement or use their small percentage of ownership to help shape and communicate with companies they believe are creating positive change.
- Community investing: Investors make a loan to grass-roots development in communities, similar to the Acumen Fund model.
Once investors have determined what they’re comfortable with, both the return on investment and the social good they’re accomplishing, they can sit back and let their money get to work for them and the world.
For more information about Social Investment Funds, check out:
http://www.socialfunds.com/
http://www.socialinvest.org/
Corinne Garcia is a freelance writer and editor living with her husband and two young boys in Bozeman, Mont. She has also written for Women’s Adventure, Christian Science Monitor, Northwest Travel, Pregnancy, Fit Pregnancy, and Fit Parent.
