NYTimes on Socially Responsible Investing

tsnewnocerastill.162.jpg Joe Nocera takes aim at socially responsible investing in an article in the Saturday business section of the NYTimes. The article's title - "Well-Meaning but Misguided Stock Screens" - sums up his opinion pretty well.

Nocera's point is that companies like KLD Research and Analytics, which track companies in the Russell 3000 and publish indices of socially responsible companies, have too many companies to cover to do significant due diligence on the business practices of any of them. Also, the companies place extra burden on industry leaders, holding them to a higher standard than peers in their fields, and making examples out of notable baddies with name recognition (e.g. singling out Nike instead of Reebok or Timberland, even though the three companies often source their shoes from the same factories).

He writes:

(M)y problem is that socially responsible investing oversimplifies the world, and in so doing distorts reality. It allows investors to believe that their money is only being invested in “good companies,” and they take foolish comfort in that belief. Rare is the company, after all, that is either all good or all bad. To put it another way, socially responsible investing creates the illusion that the world is black and white, when its real color is gray.

Nocera's points are valid. At the same time, as both an employee of a company that seeks to practice socially responsible investing (a community loan fund) and as an individual investor concerned about putting my money to work in companies that pay attention to social and environmental bottom lines as well as financial ones, I'm grateful to have more responsible investment options and the ability to screen out some of the really bad guys.

Socially responsible investing has been around for a while. In recent years, it's gained money and clout as investors have started to realize that where we invest our money has real consequences on companies' business practices and on the world in which we live. Here's hoping that criticism from folks like Nocera doesn't persuade anyone to throw the baby out with the bathwater. That would be a terrible waste.

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Posted by Jess Brooks at April 10, 2007 8:45 AM

We are in a hurry. The hurry is: we humans are in the process of destroying our planet. Global warming is the single most significant environmental crisis the world community has ever seen. The 2007 G8 Summit in Germany will focus on the reversal of global warming. President Bush, of course opposes this proposal. Like his strategy in the Middle East, he has a better idea, and he wants to convince the world of something they already know is untrue. This time it’s not that there are weapons of mass destruction in Iraq, but that global warming is not that dire an issue.

Our Nero-like President fiddles, but we cannot allow our Rome to go up in flames. This isn’t a city’s destruction we speak of. It is the end of all of us, of history, of every thought and feeling humankind ever produced. Our present federal government is not going to do anything about this crisis.

Our company, Connecticut Real Estate and Construction wishes to do something about it, because Connecticut needs workforce housing in significant number for very important reasons. Suburban sprawl is killing the environment. When we continually clear off two acres and more per household to put up large houses, we cut down trees which produce oxygen, we deplete the filtering system for our water, and we make houses which leave a carbon footprint which further opens a hole in the ozone. If we instead build multiple units together and build them with solar photovoltaic cell panels and with geothermal heating and cooling, we leave virtually no carbon footprint, we leave sufficient greenery to filter water run-off, and we provide our workforce with housing that allows them to stay in the state and not flee to the South and Southwest as has been the recent trend. As a result, those businesses (and their tax revenues) which require those workers need not flee with the workforce, a trend we have seen throughout the Northeast region of the country.

Additionally, we will build elderly housing. The Boomer Generation is aging. They are retiring at record rates and require specific housing that does not exist in sufficient number. We will build it. We will build commercial buildings and office space to go along with the elderly and workforce housing. We need cooperation from local governments to achieve our goals, and we need that cooperation quickly. As we move forward, we will build with town tax rolls in mind. We are aware that the workforce housing will require significant services and expenses, most notably educational expenses. This is why mixing the elderly housing with the workforce balances the ledger, for the elderly pay taxes without sending children to schools. Further, the commercial and office buildings will bring in significant tax revenues without pulling out revenues from the local municipality. This formula is referred to as “Smart Growth” and is to be part of our plans.

While proposing “caution” and “care” is never foolhardy advice, studies on these issues have already been done and “smart growth” is necessary throughout the state. We cannot wait. The cost is too dear for all of us to sit idly by and fiddle away time as the planet goes up in flames.

Sincerely,

Miles J. Shapiro, Partner
Connecticut Real Estate and Construction
VP Marketing and Commercial Real Estate
www.connecticutrealestateandconstruction.com

Posted by: Miles Shapiro at June 6, 2007 1:12 PM