Tuesday, October 09, 2007

Socially Responsible Investing - It's Hard to Do

Some people think that socially responsible investing means that they should divest themselves of stock in companies whose business activities they disagree with. Don't like smoking? Sell Philip Morris. Wrong. If Philip Morris is making money, somebody else will buy it, happily. You have accomplished nothing.

I'm involved with a small group of very experienced people who are looking to spearhead true "socially responsible investment". Just to clarify things, "investment" means getting a return on your money. "Investment" is not charity, is not a contribution. Our idea is to identify people or organizations that need money to accomplish socially useful goals, and then loan them the money at below-market rate, say 5-6% for an investment that normal banking channels would not touch.

For example, we'd like to find someone who knows how to rehab inner city housing but does not have the capital to buy the home or purchase the materials needed for the rehab. We could provide the capital and assist the person in learning and performing the skills needed to administer the project. When the home is completed and sold, we get our money back and do a loan to cover his/her next project. The hope is that at some point the person has enough personal capital or credit to do the work independent of us. The benefit is that homes get fixed up, someone builds the skills needed to support a family, and some workers in low income areas get jobs. This would be a good "social investment".

The most interesting outcome of our work to date is that it's hard to find people who fit our criteria. The entrepreneurial spirit is a rare commodity, it appears. But we are continuing the search, and perhaps we'll find an immigrant with spunk who will take our money and do something good with it. I'll keep you posted if something good happens.

2 comments:

ThomasLB said...

I wouldn't say divesting yourself of noxious companies accomplishes "nothing." It's your own soul you're responsible for.

As for not being able to find independent entrepreneurs, I'm not really too surprised. Mom-and-Pop stores can't compete with transnational corporations like Wal-Mart; it's not a level playing field. Consequently, I think a lot of people are growing up now not even considering any career options other than taking a position in an established company.

Ron Davison said...

Very cool. I think that government policy should move in this directino more. Good investments that create businesses always have a ripple effect, creating more wealth.

You may want to (perhaps already have) read this:
http://www.theatlantic.com/doc/200710/socially-responsible-investing

The Atlantic continues to be, for me, the sanest voice in the media, easily my favorite magazine.