Talk about money: Investors want to do well, and do good
by Mark Rosenberg
Oct 17, 2013 | 1296 views | 0 0 comments | 7 7 recommendations | email to a friend | print

The popularity of socially responsible investing is on the rise. Forbes magazine reports that $1 of every $9 under professional management in the U.S. is an SRI investment. A recent survey by Merrill Lynch shows that 29 percent of young adults support values-based investing.

As a financial adviser, I like to recommend companies that have a conscience. I wish that separating the good companies from the bad ones were as simple as the westerns I grew up watching, where the good guys wore white hats and the bad guys black. In reality, there are many shades of gray.

I have a hard time separating the good companies from the bad, and so, apparently, do the mutual funds that call themselves socially responsible. The number of SRI funds has more than doubled to 166 in the past 10 years, according to MarketWatch, and 475 of the companies in the Standard & Poor’s 500 show up in one of these funds.

In other words, if you put your money into an S&P 500 index fund, 95 percent of the companies you’re investing in qualify as socially responsible.

It’s hard to draw lines between which companies are socially responsible and which ones aren’t. Let’s look at four industries that are shunned by SRI mutual funds:

- Alcohol: It causes much misery and used to be illegal in the U.S. — but wine and beer have both been shown to have health benefits.

- Weapons: Defense contractors make products that kill. But some of them make systems that shield us from being attacked.

- Gambling: Are companies that run casinos worse than the lottery our state endorses?

- Tobacco: This is one of the clearest examples of a harmful industry. But I know a woman who is 81 years old, has been smoking since she was 16, and has made a bundle of money since she bought shares of cigarette maker Philip Morris 11 years ago. That investment has helped her provide for herself and not become a financial burden on society, she says.

She has no qualms about investing in cigarettes, since she’s spent many thousands of dollars buying them over the last 65 years. She says smokers know they’re harming their health: Packs have displayed a warning label since 1964. She says her only regret about investing in tobacco is that she didn’t buy more.

Overlooked in her views are the people harmed through no choice of their own, like those who get stuck inhaling secondhand smoke or have to subsidize smokers who can’t pay their health-care bills.

There are many subtler shades of gray in this discussion. My clients’ portfolios include companies that make chocolate and soda pop and potato chips. Those products are as American as apple pie, but they all contribute to the nation’s obesity epidemic. Is that socially responsible?

These questions must be decided one company and one investor at a time.

- Mark Rosenberg is a financial adviser with Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 831-439-9910 or

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