The concept of socially responsible investing may have reached something of a power peak in the 1980s and early 1990s as divestiture efforts by individual and institutional investors were used to break down apartheid practices in South Africa.
Today, this investment strategy does not often attract a wide level of attention in either the financial or mainstream media nor has it offered the level of monetary muscle for investors to bring down governments or corporations. But that approach to investments has not disappeared.
The US SIF Foundation, a Washington, D.C. organization that promotes sustainable and responsible investment, reported that total assets domiciled in the U.S. and under management that is based on socially responsible investing principles ballooned from $3.74 trillion at the start of 2012 to $6.57 trillion at the start of 2014. That 76 percent spike over two years accounts for more than one out of every six dollars under professional management, according to US SIF.
Within Fairfield County, the pursuit of socially responsible investing has pockets of vibrancy.
“We see a lot of interest,” said Jess Gaspar, head of asset allocation and research at Commonfund, a private, nonprofit asset management firm in Wilton. “But it is a complicated issue. After all, it is easy to say that I don’t want that business in my portfolio.”
Gaspar said that socially responsible investment is not a single pursuit, but actually three different approaches to a similar situation.
“First, there is socially responsible investing, where the client pulls things out of the portfolio. Next, there is mission-related investing — rather than pull things out of the portfolio, the client seeks to put things into the portfolio. And there is an intermediate level called environmental, social, and governance that weighs both values and financial returns. This (latter) is more in keeping with fiduciary responsibility. With this, we can see greatest level of return for the clients, but it can also be hardest to do.”
Another Fairfield company offering socially responsible investment — with a distinctive theological consideration — is Stratford-based Catholic Way Investments.
“I specialize in offering portfolio management for active and practicing Catholics in order for them to invest in a manner that is consistent with the Catholic Church doctrines,” said Frank Metrusky, president of Catholic Way Investments and an investment advisory representative of National Planning Corp. “We are actively committed to faith and finance and we work with clients that do not wish to be profiting from companies involved in abortion, contraceptives or embryonic stem cell research.”
Financial professionals specializing in this investment strategy stress that their work still is aimed at building their clients’ wealth.
“We follow a specific investment methodology in asset class investing,” said Metrusky. “We cannot predict markets on a short-term basis or even an intermediate basis. We look at the financial standpoint investment used to largely fund the overall financial plan of the client. We also take into consideration the clients’ goals and risk tolerance.”
Gaspar observed that since the success of the South African divestiture movement, many companies have become more cognizant of the impact that this brand of investing can have on both their bottom lines and their reputations.
“More companies are actively engaged in local communities and in their public image,” he said. “They tend to be forward-thinking on the impact of their decisions. And some companies that faced trouble in the past made an effort to change their behavior and be responsive to the concerns of investors.”
However, not all financial professionals find socially responsible investing to be a core consideration in their work.
“When clients come to me seeking investment advice, they are not asking questions if I’m investing in companies active in defense, energy drilling or tobacco,” said Michael Parry, president of Liberty Wealth Advisors LLC in Stamford and the Fairfield County chapter of the Financial Planning Association. “For the most part of my experience, it has only come up a couple of times.”
“I’ve never had anyone bring it up,” said Pasquale “P.J.” Sacchetta, president of CFIG Wealth Management LLC in Stamford and the Fairfield-Westchester chapter of the Society of Financial Service Professionals. “In fact, I bring it up more than my clients or prospective clients do.”
Sacchetta added that in an economy where mergers and acquisitions have become a ubiquitous activity, those attempting to pursue socially responsible investing can easily get flummoxed.
“Companies are bought by other companies. Cultures are merged. How do we know what culture will win out?”
“Socially responsible investment basically sounds good. It is a good idea in and of itself and it is a good goal,” Sacchetta said. “From an investment standpoint, perhaps you can do what Warren Buffett does: take the profits of your investing and be socially responsible with those profits.”
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