Investing to Save the World

Earth | Source: DonkeyHotey on Flickr via CC BY 2.0 LicenceThe following is a condensed, less academic excerpt of a paper I recently wrote for my final graduate course. It also represents the completion of Task #3 on my 9-Week Productivity Challenge and the conclusion of a series of posts here on Earth and Money related the social and environmental impacts of our investments. The series began two weeks ago with a look at an emerging type of investment vehicle, community bonds, then introduced how we might be funding our own demise, what corporate social responsibility represents, and whether ethical mutual funds are a better way to invest.

In the environmental health world, decisions are frequently made based on a concept called the precautionary principle. The principle states that in the absence of scientific evidence for the safety of a product or action, we should act on the side of precaution. This can be achieved through four central actions:

“Taking preventative action in the face of uncertainty; shifting the burden of proof to the proponents of an activity; exploring a wide range of alternatives to possibly harmful actions; and increasing public participation in decision making.” (Kriebel et al., 2001)

The reality is that this doesn’t apply exclusively to environmental health. In fact, as investors, we can enact the precautionary principle, to make better investment choices that promote a healthier, better world.

Shift the Burden of Proof to the Proponents of an Activity

a)    Review your investments to determine where your money is going and what activities it is supporting.

b)    If you are invested in mutual funds, it is likely that you will not be able to determine where your money is invested beyond the top 10-25 holdings of the mutual fund. Write to your mutual fund provider to request a complete disclosure of the holdings of the fund, and demand that such information be easier to access.

c)    Write your local politicians at every level to advocate for a change in the ease of access to information within the banking industry. The impetus for gaining access to information about investments should not be on the investor, it should be on the investment firm. Banks and other investment firms should provide full and freely available disclosure when it concerns how consumer money is being invested. But this will not become a reality until citizens stand up and demand change.

Take Preventative Action in the Face of Uncertainty

d)    Withdraw money invested in companies or activities that do not agree with your values. Then write to those companies, or to your mutual fund providers, to inform them why you have withdrawn your money. Action is one thing, but people withdraw money from mutual funds every day. In order to transform the system into what it needs to be, investors need to educate investment providers about the reasoning behind their actions. Supporting your action with reasoning is more effective than action alone. If everyone who withdraws their money does this, then companies will start to get the message that the value system of society is changing, and that environmental health matters.

Explore a Wide Range of Alternatives to Possibly Harmful Actions

e)    Look for investment alternatives that align with your values. If you’re unsure of where to start, speak to a financial advisor who specializes in socially responsible investing. The Canadian Social Investment Organization keeps a database of such financial advisors. Also, talk to someone with a masters of public health degree to make sure your maximizing your ability to help out.

f)     Focus on local investment opportunities that will have immediate impacts on your own life. Community-shared bonds, such as SolarShare and ZooShare, are a terrific way of investing in projects that will benefit the local community. Not only do they stand to improve the environmental health of the community, but they also keep the money in the community which has many benefits such as local job creation.

Increase Public Participation in Decision Making

g)    Continue making smart consumer decisions. Every time you make a purchase, you support a product or company as much as if you invested in that company. Consumers should begin to think of their lives and decisions on a whole-system basis. Advocating for change through consumer decisions is only part of the solution, just as investing in companies that support your values is a part of the solution. All the parts of the solution must be enacted together in order to facilitate real societal change.

h)   Educate others about your decisions and choices. It is not enough to lead by example when it comes to finances. Financial matters are generally considered a taboo subject in society. In many cases, it is not typically considered acceptable to converse about investment choices, successes and failures with friends and family. Break down these barriers. Create an open conversation about finance and about the impacts of financial decisions. Challenge others to question their investments in the same way you have. Frame the question appropriately – if you notice someone has purchased an organic product for example, ask them if they are also investing their money in companies that promote organic agriculture. This kind of lead-in can spur the conversation in the direction that it needs to go and can cause others to question their own behaviours. Nikiforuk recently reported about several studies that showed that the greatest social change in terms of environmental improvement came not when people were shown a message to save the environment, but when people were shown a message outlining how much more others were doing to save the environment than they were.

The banking and investment system is built to keep as much information as possible away from the average investor. This will not be modified until consumers demand to see more information, and this will not happen until consumers begin to realize the impact that their money can have. With the advent of socially responsible investing, these transformations can only grow in number. Corporations that once responded only to stockholders seeking information on financial performance now must answer to stockholders calling for responsibility on environmental and social issues. And through this process, we, as a society, can stop funding our own demise.

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7 thoughts on “Investing to Save the World

  1. I admit that when I try to learn more and more about investing, the knowledge tables do feel like they are turned against me… I have been told by many folks that your Average Jeff isn’t going to be able to make intellegent investment decisions on their own. Which is kind of a bummer, because it sounds like fun 😉

    • Part of the problem is how much time we’re willing to invest into gaining the knowledge. It can be a really big burden and time suck to spend hours reading through corporate reports and the like to evaluate investments. But we have to do what we can!

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