Organizations often place a list of types of companies they won’t invest in somewhere in their Investment Policy Statement. This is sometimes called the “embarrassment list.” In other words, it is the list of companies and/or company types that we would be embarrassed by if our constituency / the general public / key donor-contributors / competitors found out we are invested in.
As we have previously mentioned, it’s important to have a good handle on what that list is, and to review it regularly, comparing it to the funds in which we are invested. Nevertheless, it is possible for socially, civic, or values-minded organizations to take these investment screens one step further than mere avoidance of embarrassment (as important as that is).
Instead of merely avoiding unwanted bad press, how about considering which companies, and which kinds of companies genuinely promote your organization’s values? Whether your organization is a for-profit business with reserves to invest, or a non-profit or religious organization, you can use your funds to promote your values.
Granted, the more specific you become in your investments the more actively you have to manage your funds. And granted, the more you invest in specific companies the more your diversification risk grows. Nevertheless, it is possible to invest actively without becoming over-invested in one company, or driving investing costs through the roof by fiddling with your portfolio on a daily basis.
Values investing can go beyond embarrassment avoidance – but should still be investing. It is still important to screen funds based upon their financial performance first, before applying social screens – both pro and con. This is because, in the end, your organization’s board is still responsible for the financial health of your organization, no matter the other causes you are trying to promote. A company with great values but a terrible business plan is still an investment too risky to take in most cases.
When you seek out investment in companies that share your values, you have the opportunity to promote your values beyond your immediate sphere of influence: you provide ownership and additional funding to the types of values and business practices you desire to promote.
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