Many stock investors follow their consciences

July 14, 1991|By Alyssa Gabbay | Alyssa Gabbay,Special to The Sun

When Dan Morhaim of Owings Mills wants to invest money in stocks, he doesn't look solely at a company's profitability. He also examines its record on the environment and on fair treatment of women and minorities.

If a corporation shows up poorly in those areas, Dr. Morhaim, a emergency medicine physician at Franklin Square Hospital, puts his money elsewhere.

Dr. Morhaim, 42, is one of a growing number of people who try t measure a company's conscience before investing. Either by refusing to support companies that are engaged in practices they don't approve of, or by steering their money toward mutual funds or companies that have been screened for social issues, these investors try to align their investments with their values.

With approximately $550 billion invested in socially screene securities, such investing, which first came into vogue during the Vietnam War, is now making its way into the mainstream.

"People are becoming more conscious of all the actions they ca take as individuals" to effect change, said Sacha Millstone, a vice president of Ferris, Baker Watts Inc., an investment firm with offices in Baltimore and Washington. Ms. Millstone has specialized in socially responsible investing since 1984. "This is just another way they can make a statement as an individual."

These days, the environment tops the list of issues that concern most social investors. Following close behind are dealings with South Africa, armaments manufacturing, employment of women and minorities and involvement in the nuclear power industry, Ms. Millstone said.

Some investors also screen companies for product quality consumer relations, corporate citizenship and employee relations.

Surprisingly, socially screened investments often perform as wel or better than unscreened investments, some experts claim.

For example, the Domini Social Index 400, a measure of the aggregate performance of 400 stocks whose companies have been deemed socially responsible, has matched strides with the Standard & Poor's 500 since the index was founded last year.

Some mutual funds have done equally well. Last year, the singl best-producing balanced mutual fund in the nation was the Pax World Fund, according to John Schultz, president of the Social Investment Forum. The fund screens out companies that are engaged in armaments manufacturing, as well as the tobacco, alcoholic beverage and gambling industries.

"In the long run, social investors are better rewarded," sai Ritchie Lowry, author of "GOOD MONEY: A Guide to Profitable Social Investing in the '90s" (W. W. Norton & Co. Inc., 1991) and editor of GOOD MONEY newsletter. "You're buying into companies that treat their employees well, provide good, valuable services and don't pollute the environment. As a result they have productive employees and happy customers, and they aren't sued by counties and states."

But Stephen Siegel, an independent certified financial planne who helps people invest their funds in a socially responsible manner, said socially concerned investors may initially have to relinquish some rate of return.

"Generally, companies that [these investors] invest in are mor long-term oriented," said Mr. Siegel, whose office is in Pikesville. "They may not produce that hot quarter that will make everyone rush out and buy the stock. But over a period of time, they will probably progress."

The first step in becoming a socially responsible investor is picking your ethical priorities, Mr. Siegel said. Decide which issues are of the highest importance to you, whether it's the environment, treatment of minorities and women or dealings with South Africa.

Next, determine your financial goals, deciding whether security, high income or the ability to make large capital gains is your top priority. Your decision will affect the type of investment you seek.

Your next step depends on how involved you want to be in the investing process.

Do you have the time and inclination to search out investments that will meet your ethical and financial goals? If not, you'll want to consult a financial adviser who has some experience and know-how in socially responsible investing. A directory of such advisers is available for a fee from the Social Investment Forum in Minneapolis, Minn., at (612) 333-8338.

If you already have an adviser, ask the adviser to look over your portfolio to determine how well it conforms to your ethical priorities. The adviser can help you withdraw your money from objectionable investments and redirect it to more acceptable ones.

If you're prepared to go it alone, there are plenty of resource available to help you in your quest. The Social Investment Forum NTC can provide you with a free list of socially responsible mutual funds. You can then request a prospectus. Books such as "Socially Responsible Investing: How To Invest With Your Conscience by Alan J. Miller" (Simon & Schuster, 1991) and Mr. Lowry's "GOOD MONEY: A Guide to Profitable Social Investing in the '90s" also provide information on funds.

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