Financial Savvy – ‘doing Well While Doing Good’

In making investment decisions, we often focus attention on the "bottom line," or profit, earned by companies. Recent evidence suggests that businesses who watch the "double bottom line," combining social and financial goals, actually have the potential to outperform in the long run. Although unethical or environmentally irresponsible actions may be more profitable in the short-run, ignoring these factors may result in huge costs down the road.

Socially responsible investing (SRI) involves integrating personal values and societal concerns with investment decisions. In other words, putting your money where your mouth is. As you might suppose, this can’t be a one-size-fits-all. Different investors have different issues and values. Funds may focus their attention on positively screening to identify companies characterized by ethical management, environmental responsibility, community investment, or basic human rights for overseas employees. Others may use a negative screen designed to avoid investing in firms that produce potentially destructive products (alcohol, tobacco, guns). A third category of fund focuses on community investing, providing financing for small businesses and affordable housing in disadvantaged communities in the U.S. as well as in developing economies.

Although SRI isn’t a new idea-the first socially responsible stock fund was created more than thirty years ago-investors seem more interested than ever. According to the Social Investment Forum, which tracks these funds, total SRI dollars grew more than 258 percent to $2.29 trillion in the last decade, representing nearly 13 percent of all professionally-managed funds. Investors are clearly sending the message that they want to see their investments make a difference both here and abroad. I consider this to be one of the most optimistic trends in financial markets today.

In academia, we’re trying to do our part as well. The College of Business at Colorado State University recently approved a new business master’s program in Global Social and Sustainable Enterprise (GSSE) which will train future business leaders to "do well while doing good," employing entrepreneurial approaches to produce a significant impact on global economic, social and environmental problems. The first group of students in that program, which will include a significant on-location project component, will begin their studies in August 2007.

As a part of the GSSE initiative, Hernando de Soto, author of The Mystery of Capital and president of the international think-tank The Institute for Liberty and Democracy, visited the campus of Colorado State University last week. In addition to benefiting from the lecture he gave at the Lory Student Center, in which he shared his wisdom and experience regarding the challenges of globalization, I had the great honor of meeting him personally.

Until recently, I had thought of myself as a very socially responsible person: I recycle. I volunteer.  I don’t discriminate. I invest in an SRI fund. Although all of this helps me sleep at night, I now know that there’s just so much more to being socially responsible.

People in developing economies face challenges that we cannot even imagine: poverty, disease, corruption, inadequate legal systems, and war.  Most Americans cannot even imagine living in these circumstances, but they must deal with it on an everyday basis.

The fact is that all of us can make a difference. Insisting, through our personal investing decisions, that U.S. corporations pay attention to the social, economic, and environmental issues of our time is certainly a start. If your employer’s retirement plan investment menu doesn’t offer an SRI fund alternative, you can invest directly in one of these funds as you would any other. Be sure to investigate the fund’s objectives to be sure they are consistent with your own values and ideals. To learn more, check out the Social Investment Forum at

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Vickie Bajtelsmit, Professor of Finance, Colorado State University College of Business,, (970) 226-1473