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SoJust ProfDev: Socially Responsible Investing

August 11, 2014 the Nonprofit Center, Boston, MA

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Joby Gelbspan

Backgrounds in:

• corporate accountability activism

• history of corporate power & resistance

• financial analysis & investment management.

NOT an investment advisor

Reachable via LinkedIn or www.sojust.org

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Corporations are not Citizens*

* In reality, not legal obfuscation

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How can an investor be “socially responsible?”

Making choices that promote our values

Solidarity

Owning your privilege taking responsibility for financial choices & their effects on the broader society, present and future

Sustaining yourself and to support your priorities and those who depend on you

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Part I: Investment Terms & Concepts

Part II: Political Strategies

Questions & Discussion to 8:30

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Terminology: Types of InstrumentsBonds Stocks

Corporate (or government) debt. A share of ownership of the company.

Lower risk, lower return. Unlimited upside, unlimited downside.

Returns interest and gain or loss on sale. Returns gain or loss on sale, and sometimes dividends.

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Drivers/RisksFixed Income (Bonds)

Yield determined by interest rates and the creditworthiness of the company.

Inverse to interest rate movements.

Equity (Stocks)Corporate performance

Industry and market trends

More volatility, larger potential growth

Yield determined by the profitability of the company.

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Terminology: Types of Investments

Individual securities (stocks or bonds) are sold by shares or dollar amounts.

Mutual Funds are companies that buy portfolios of investments and sell units which represent shares of the entire portfolio.

XYZ Fund My Share of XYZ Fund

Apple - $4M Apple - $400

Johnson & Johnson - $2M Johnson & Johnson - $200

Nestle - $4M Nestle - $400

General Electric - $10M General Electric - $1,000

Total Fund: $20M I have $2,000 in XYZ Fund

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Mutual Funds• Types of Mutual Funds:– Equity: holds stock– Fixed Income: holds bonds or other types of debt– Balanced: holds some blend of the two.

• Funds require less ongoing monitoring, but won’t perform as well as good individual picks.

• ETFs are exchange-traded funds, usually following an index.

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Terminology: Market Capitalization• # Shares Outstanding X Price

• Small Cap: $300M - $2B

• Mid Cap: $2B - $10B

• Large Cap: $10B +

• “Mega Cap” newer, imprecise, > 100B

E.g. Wal-Mart (WMT) market cap > $258B

$469B revenue > the GDP of most countries

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Choosing a mutual fund• Investment objective – e.g. international stock

or exposure to a particular country or industry

• Fees vary widely between funds and make a big difference for your long-term returns

• Actively or passively managed (index funds)

• Tool to diversify your portfolio

• Look for the prospectus and holdings

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Public CompaniesListed on stock exchanges

IPO – initial public offering

Subject to public regulations & disclosure requirements

Dow Jones Industrial Average = 30 corporations, including:3MAmerican ExpressAT&TBank of AmericaBoeingCaterpillarChevronCoca-ColaDupontGeneral Electric

Johnson & JohnsonKraft FoodsMcDonald’sMicrosoftPfizerVerizonWalt DisneyWalmart

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Identifying Public Companies:Start with what you know

Before investing, understand the key factors driving and affecting the business

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Investing for Value

• Long-term investing, buy and hold

• Seek investments where we understand the long-term value and are ready to commit to owning a share for appreciation over years.

• DIVERSIFICATION spreads your exposure to each investment’s individual risks.

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TIME & RISK

Time

Risk Return

• Two ways to make money in the market: time and risk.

• Higher risk = higher return. The price of the investment is more volatile over time.

• As long-term investors, time is on our side. We can afford short-term declines if we can wait for the right time to sell.

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Quick Sense of the Room

Raise your hand for the statement which best describes your investment goals:

• Saving for the long-term (> 5 years)

• Shorter-term goals: may need access to cash in the coming 5 years

• Informing myself for when I have long-term savings

• Organizing investors

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Asset Allocation

Mix of stocks, bonds and funds depends on our two key factors: time & risk

Rule of thumb used to be: age % in fixed income. E.g. at 30 years old, 70% stocks and 30% bonds.

Start conservatively, and spread your risks.

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But these are unusual times…Low interest rates & economic uncertainty

Flat market means some stocks are underpriced

Herd predictions create volatility

Don’t buy and sell trends, invest in businesses

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THE FACTOR OF TIME

Long-term “buy and hold” investments

Over time, you’ll get used to the ups and downs and will get clearer about your goals

Make a couple of good choices, and try to forget about them

The most you should check your investments is about monthly

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Questions at this point?

Do we all feel comfortable with these basics first?

Next up: making politically-informed choices

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Conscious ChoicesIndustry Exclusions– Pharmaceuticals– Prisons– Military Contractors

Corporate Behavior– Environmental responsibility– Policies on gender or racial discrimination– Best in class

Proactive Support– Community lenders, infrastructure– Clean energy– Social ventures, microfinance

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Socially Responsible Investment Companies (SRI’s)

Dramatic growth, wide range of products to suit different investment goals.

Examples:• Domini• Calvert• Green Century• Pax• Parnassus• Walden• Increasingly, 401(k) and other plans offer SRI funds

No longer a fringe movement: Today, approximately $3 trillion of the estimated $25 trillion US investment market complies with some SRI criteria.

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SRI FundsPro’s

Investment Criteria, screens Build progressive capital Proxy voting Shareholder engagement

Con’s

Limited definition of “responsible” Diversifies risk and return Fees

Use these tools when they serve your plan

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Shareholder Resolutions• GMOs

• Fracking

• Board Diversity

• Packaging

• Climate change

• Marketing practices

• E-Waste

• Political interference

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Shareholder/Stakeholder ActivismChanging policies & practices

Raising public visibility

Amplifying activism within the Boardroom

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Researching Corporate Behavior• Corporate Website

• SEC.gov

• Limited only by your search terms!

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Researching Corporate Behavior• Shareholder resolutions: http://www.iccr.org/shareholder/trucost/index.php

http://faireconomy.org/shareholder_activism

http://www.greenamerica.org/socialinvesting/shareholderaction/index.cfm

• OpenSecrets.org– Contributions– Lobbying– Revolving Doors– Congressional Ownership

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Researching Corporate Performance

• Annual Report & Financial Statements

• Investor section of the website

• Yahoo! Finance or other investor coverage

• Consider the industry and the long-term value proposition

• Assess the risks

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Yahoo! Finance (or Google, etc.)

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More Info• Terminology / Glossaries:– www.investopedia.com– www.investorwords.com

• Researching investments or markets– www.yahoo.com/finance or Google– Bloomberg, other news agencies– Commentators and blogse.g. Motley Fool: http://www.fool.com/

• SRI’s– www.ussif.org– http://www.socialfunds.com/

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Thank you for coming!

…and cast your vote for the 2014 Corporate Hall of Shame at www.stopcorporateabuse.org

Refuse to be intimidated

Continue to learn and share

Connecting for Justice Thurs. Sept 11