The Triple Bottom Line* Simulation®
“Experience Social Investing
…Without Taking Risk”
*Earning Financial, Social and Environmental Dividends
Explanation of Social Dividends
Generally, socially responsible investors seek to own profitable companies that make positive contributions to society. Screening is the practice of including or excluding companies from portfolios based on social and/or environmental criteria. These criteria can range from the diversity of a company’s board of directors, to the impact of company operations on the environment, or to the percentage of company revenues received from weapons contracting, gambling, liquor or tobacco. The qualitative research and evaluation process known as screening generally seeks to first eliminate the worst of the worst (avoidance) and then, from the large universe of possibilities that remains, identify the best companies in various industries classifications. Negative/avoidance screening yields a social dividend of withholding capital from firms with poor social and environmental performance. Positive social screening yields a dividend of supporting companies that are doing better than most on social and environmental matters.
Shareholder advocacy describes the actions many socially aware investors take in their role as responsible owners of corporate America. These efforts include dialoguing with companies on issues of concern, and submitting and voting proxy resolutions. Advocacy efforts are aimed at positively influencing corporate behavior. Social investors generally target the social issues most important to achieving their organization’s mission and often work cooperatively to steer management on a course that it is believed will improve financial performance over time and enhance the well being of all the company’s stakeholders*customers, employees, vendors, and communities, as well as stockholders. Management teams who embrace the stakeholder concept of management are viewed as more enlightened, exhibiting the progressive attitudes of business leaders of the future, and likely to outperform their competitors over time. Shareholder advocacy can lead to better corporate performance on social or environmental issues, an important social dividend.
Social dividends are achieved in this area by doing business with Community Development Financial Institutions (banks, credit unions, venture capital firms and other community-focused entities) for cash equivalent products such as banking accounts and jumbo Certificates of Deposit. The Social Investment Forum, the industry trade group, advocates that social investors target 1% of their investment portfolios to local community initiatives through reputable CDFIs.. Social dividends from community investment include increased affordable housing, job creation and a wider availability of high quality child-care in low-income and under-served communities.
Social Venture Capital
Some of the most powerful solutions to social problems come from start-up companies. Sectors that have seen innovative products include alternative energy, organic food, affordable housing, development banking and electric cars. Institutional investors are increasingly seeking benefits for society as well as venture industry financial returns by investing in these “social ventures.”