|
Clear Thoughts
Socially Responsible Investing
Originally Published Friday, February 25, 2005
| Many investors feel a social responsibility to invest in companies they feel follow their same values and beliefs. Most mutual funds, pension funds and 401(k) plans do not give individuals the ability to practice socially responsible investing. At Clear, we believe that it is the investor?s right to decide what companies are socially responsible. We give all of our investors the opportunity to make this decision for themselves. |
In the movie "Wall Street" the fictitious Gordon Gecko tells a group of shareholders of a company that he had taken over that "Greed is Good". He goes on to say that greed is the American way. It makes businesses accountable and act in the best interest of its shareholders. Is this really true? Is the American way to focus only on the bottom line? We think that not everyone feels this way.
Just as the recent financial scandals taught us that greed in not necessarily always good when running businesses, greed should not be the only criteria investors consider when investing in these businesses. Many shareholders feel they have a social responsibility of investing in companies that they believe in and follow the values they have. What socially responsible investing is will take on different meanings depending upon the investor. Unfortunately, much our investing through mutual funds, pension funds or 401(k) plans prevents us from being socially responsible investors.
Employers selecting funds for their 401(k) plans are typically looking out for the best interests for their employee populations. Pension fund managers have the same basic goal. Between these two retirement-focused groups, much of the overall wealth and total invested dollars in the market are spoken for. Both have a fiduciary obligation to their employee populations and many therefore do not consider their considerable influence when making asset class decisions, manager selection or to which companies their assets will be invested.
Many, perhaps most, 401(k) plans, have only two basic options: company stock or a variety of mutual funds. This does not offer much customization, and selecting a socially-responsible fund, or at least one labeled as such, may not offer enough diversification to employees.
Pension funds most frequently invest much of their employee assets with separate account managers who then invest directly into a portfolio of individual securities. This means that each asset class, Large, Mid and Small Cap Growth and Value equity accounts are managed based on the chosen manager's strategy, and on an individualized basis for that pension fund.
This presents the opportunity to exclude stocks of companies deemed not socially responsible. There are some large pension fund managers who end up with large stakes in firms and try to "clean up" the firm through board participation, public relations and private pressure.
As an individual investor, given the same opportunity, how can you define socially responsible investing for yourself?
And for that matter, what is "social irresponsibility?" We suspect it could range from firms donating money to questionable political organizations, doing animal testing, promoting products or services that go against your personal moral principals or extracting natural resources in an irresponsible way. But the definition of social responsibility or irresponsibility inevitably comes down to an intensely personal choice. We believe that socially responsible investing is in the eye of the beholder.
Clear Asset Management has chosen the separate account format for many reasons, including transparency and direct stock ownership, which adds the ability for each investor to chose our portfolios "as is" or by adding their own restrictions based on any reason.
Clear allows exclusions based on:
Social Issue Exclusions
Alcohol
Firearms
Gambling
Military Weapons
Nuclear Power
Tobacco
Sector Exclusions
Consumer Staples
Consumer Discretionary
Retail/Wholesale Medical Auto/Tires/Trucks
Basic Materials
Industrial Products
Construction
Multi-Sector Conglomerates
Computer/Technology
Aerospace
Oil/Energy
Finance
Utilities
Transportation
Business Services
Clear also allows exclusion based on individual tickers so our investors can look at each company and decide for themselves if they want to exclude or accept the possibility of he firm being added to their portfolio.
Our philosophy is that it is all about free choice for each individual. As investors with Clear, the choice is clearly yours. We think this is the American way.
|
|
|
|
 |
|
