Smart DirectionsEmmet O’Neal LibraryMountain Brook, AL

Ethical Investing

Disclaimer• Andreas Rauterkus is not a registered

investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Andreas Rauterkus does not purport to tell or suggest which investment securities attendants should buy or sell for themselves. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.

Objectives

• What is ethical investing?– Socially Responsible Investing– Environmental, Social and Governance (ESG) Investing

• Three legs of ethical investing

• Performance

What is Ethical Investing

• Socially Responsible Investment (SRI) is the integration of personal values with monetary investment

Three Legs of SRI• Positive (affirmative) & Negative (avoidance) Social

Screening

• Shareholder Engagement / Proxy Activism

• Community Development Investing / Lending / Micro-Lending

Implementation• Avoidance: choose not to be affiliated with firms

engaging in business activities that conflict with values

• Positive Investment: seek out firms engaged in business practices consistent with social concerns

• Shareholder Advocacy: influence business activities or policies

Trends

SRI Trends

Environmental, Social, and Governance (ESG) Criteria

• Environmental criteria looks at how a company performs as a steward of the natural environment.– energy use, waste, pollution, natural resource conservation

and animal treatment• Social criteria examines how a company manages

relationships with its employees, suppliers, customers and the communities where it operates

• Governance deals with a company’s leadership, executive pay, audits and internal controls, and shareholder rights

ESG Issues Incorporated in Asset Management

• Environmental investment factors are incorporated in the management of 672 investment vehicles with $2.94 trillion in assets under management

• Social criteria, which include Sudan-avoidance policies and community-related investment policies, incorporated in the management of $4.27 trillion across a wide range of 770 investment vehicles

• Governance issues are incorporated by a total of 501 investment vehicles with $3.53 trillion in assets

• Product-specific criteria, such as restrictions on investment in tobacco and alcohol, are included in the management of 445 investment vehicles with $1.76 trillion in assets.

FYI

Performance of SRI Funds

Alternatives?• Invest conventionally

– Afterwards give your outperformance to charities that make a difference.

– • Problem : Some problems cannot be cleaned up,

such as malformed babies or drowning and starving polar bears.

• Problem : Most cleanups cost more than doing it right in the first place. How much outperformance will it take to clean up mess?

Major Players