SRI included in the Stock Market Game

Via The Street: The Stock Market Game, a teaching tool from the Foundation for Investor Education that helps students learn about long-term saving and investing, has incorporated SRI into its educational programs.

"How do your Stock Market Game students find more information about companies that adhere to green or socially responsible standards? TheStreet.com's article 'How to Strike Green Gold' is a good start, as it reminds students that they must first analyze the stock market side, but also the company's business practices to determine whether they mirror one's interests."

Mennonite Mutual reaches out to Friends

Mennonite Mutual Aid, whose SRI mutual funds I mentioned earlier, are now working with a number local Quakers in Richmond to offer health savings accounts tied to MMA's SRI funds. This is an interesting development in that it combines elements of two movements focused on consumer empowerment - socially responsible investing and consumer-driven health care.

According to MMA, the company "does not duplicate programs offered by Friends." Instead, they are hoping to enter "a partnership that will help all Friends move forward on their holistic stewardship journeys."

Quaker Quotes IV

"Quakers in three hundred years have already led three immensely important moral crusades with some success [refusing tithes, abolition of slavery and conscientious objection in WWI]. There were individuals who led the way, but these would not have got very far without corporate support. Could we attempt something as significant again?"

- David Maxwell. "Our Queries and Our Conduct: past, present and future," The Woodbrooke Journal, 2001.

Voting in the marketplace

Yesterday I spoke about how prices emerge and how local purchases relay information back to the global marketplace. From there, it shouldn't be too great a leap to think about how specific purchases - or the lack thereof - send signals to producers. This gets back to my original post about M&Ms.

If our spending decisions impact how the market functions, then it might be helpful to think of monetary choice as a form of voting. Now, it’s important to recognize the limitations of voting. Just as your single vote will not determine the outcome of the Presidential election this November, your purchase of a particular brand of celery will not determine the future course of the agricultural sector. But we still greatly value the ability to vote, and see the act as participating in something larger than ourselves in important ways.

Plus, just as there are ways to maximize the impact of one’s vote, there are ways to maximize the impact of your spending decisions. First, boycotts and similar tools have taught us that collective choice has a greater impact than acting alone – even in a global marketplace.

Second, and perhaps more importantly, we vote in the market far more often than in the political realm. Think about how many times you’ve voted for candidates or ballot measures in the last year versus how many times you’ve bought gasoline, for example. Every transaction sends a message. And in the case of investing, voting is almost constant rather than a single transaction.

More about M&Ms

In an earlier post, I wrote about the growth in variety of M&Ms as an indication of the importance of the consumer in a global marketplace. It might be worth following up on this idea a bit more.

When you buy a bag of Almond M&Ms, for instance, you are making a decision that your dollar is less desirable to you than that candy you happen to be purchasing. Similarly, the grocer would prefer your dollar to yet another bag of chocolate covered nuts.

This is in part an illustration of how value works. Rather than being something intrinsic to a product on the marketplace, it instead arises from the process of buyers and sellers reaching mutually beneficial agreements to trade something they desire less for something they desire more.

A product will only succeed if people like you and me decide that it is worth trading some of our limited funds for it. And how much any product is worth is in part dependent on what I and others are willing to sacrifice out of our wallets.

But these decisions are now taking place in a much larger context than simply at your local grocer's. What you can buy at Kroger or Speedway with that one dollar depends in part on transactions taking place elsewhere in your town, but also in New York, Tokyo, and all around the world. There is a tremendous interconnectedness to any exchange in our current economy.

Once you understand that you are impacted by the choices of others, you can begin to recognize that your choices similarly have repercussions that extend beyond yourself. You are relaying local, personal information back to that global economy. And, you are doing so in a far more important way than merely stating an opinion or a preference – you are putting your money where your mouth is.

In tomorrow's post, I will discuss how such revealed preferences can be seen as a form of voting. If it isn't clear how SRI fits in to this yet, hopefully it will be soon.

SRI no longer exclusively left-leaning

Socially responsible investing is, as mentioned earlier, an incredibly broad term. For years, the label could have meant something to do with opposition to war, divestment from "sin" products such as tobacco, alcohol or gambling, or addressing environmental concerns. As broad as such interests have been, though, they seem to only be expanding of late.

The past success of SRI advocates concerned primarily with arguably more politically left-leaning concerns such as global warming, health, labor and human rights issues has caught the attention of those on the right. Similar methods are now being employed by those concerned with abortion, pornography, and other moral issues - as this post on faith-based funds indicates. Another product of this shift is the development of "terror-free" funds that seek to avoid investment in "terror-sponsoring states such as Iran, Syria, Sudan or North Korea." A new site, the Terror-Free Calculator, is being promoted by controversial conservative talk show host Michael Savage, for instance.

There is even at least one fund, The Free Enterprise Action Fund, that is "dedicated to providing both financial and pro-free enterprise ideological returns to investors." It does this by using the tools of SRI - divestment and shareholder activism - specifically to "defend free enterprise from the Left’s use of capitalism against capitalism."

None of this should be all that surprising - in a free market, entrepreneurs will seek to not only develop new products but adapt successful products for new markets. That being said, it is all the more important to pay attention to how a firm defines social responsibility and whether your values align with that definition.

What is SRI? - Part IV: Community development

Community development generally involves investments in projects that are deemed of social worth to the community but may be considered too risky by traditional lenders – mortgages for low-income families, for example, or housing projects, etc.

The pooling of funds to lend out for such efforts can be done at the level of institutional investors, or by banks and credit unions established with the specific goal of supporting such projects. By placing your funds in a bank such as this instead of a traditional bank, you may sacrifice some return in exchange for the knowledge that your funds are spurring the kind of development you see as most valuable.

Examples of such institutions include ShoreBank and Self-Help.