Paul Hawken, founder of the Natural Capital Institute, recently asked “Is Your Money Where Your Heart Is? (The Truth about SRI Funds)” in an Evergreen Monthly article criticizing many of the so-called "socially responsible investment" (SRI) mutual funds for a lack of standards, definitions and [social] accountability. Investors who want to put their money where their hearts are -- assuming they believe in [corporate] social responsibility -- may be investing in funds that are not, in fact, aligned with their values. The article was inspiring, and provoked a number of responses from leaders in the SRI community; one in particular inspired me to write a letter to the editor ... and post it here as well.
Joe Keefe, Senior Advisor for Strategic Social Policy at the Calvert Group and a member of the Board of Directors of the Social Investment Forum, countered with “What Is Socially Responsible Investing?”, where he takes issue(s) with one of Hawken’s criteria for socially responsible investment: that a company be “helpful to the world and it’s people.” Keefe claims that this is “more utopian than realistic”, a “grandiose philosophical determination” that individual investors do not have the “luxury” of indulging, and that adopting such “exacting standards” by an institutional investor would “reduce the universe of potential investments to an impossibly small number of companies.”
There wasn't always a distinction between raising financial capital and promoting political or social capital. At the dawn of legal incorporation, groups of people seeking a corporate charter were required to show that their mission was in some way at least compatible with, if not directly intended to improve, the public good. The application of this criterion of doing “public good” has, over the years, become so diluted and corrupted that it now often signifies nothing more than maximizing “shareholder value”. Keefe may be correct about the impossibly small number of companies that are helping the world and its people, but socially responsible investment -- when properly, openly and verifiably aligned with the principle of true commonwealth, rather than simply adopting the “SRI” label without accountability -- can become a major force behind increasing that number.
Guy Kawasaki, founder of Garage Technology Ventures and author of "The Art of the Start", recently gave an inspiring keynote at Entrepreneur University 2004, wherein he emphasized that the most important goal of a startup is to “make meaning,” which he defined as making the world a better place. If enough investors –- whether they be venture capitalists, fund managers or individual consumers –- share and take action based on this belief, perhaps we can succeed in making the world a better place.
As Margaret Mead might have said: “Never doubt that a small group of thoughtful, committed investors can change the world; indeed, it's the only thing that ever has.”
[Update: The Seattle Weekly published an interesting and highly recommended article on "Investing for Change" that references Hawken's report, and another of other dimensions of the SRI space.]