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Wednesday, January 19, 2022

Can socially responsible investing save the world?

🔴 Rajni Bakshi writes: By making moral choices an important part of fiduciary duty, SRI has proved that it has the potential to reform capitalism from within

Written by Rajni Bakshi |
Updated: December 23, 2021 8:47:34 am
Has SRI made a big enough difference? Or has it been absorbed as a terminology or window-dressing while money-profits still ruthlessly dominate? (Representational)

Within weeks of the disappointing outcomes of the COP 26 gathering in Glasgow, here is a reminder of hope. It comes in the form of a new book by veteran planet and people champion, Amy Domini, sharing reflections on her journey and the difference it has made.

Domini, the “Founding Mom” of socially responsible investing (SRI) in the United States, has played a key role in ensuring that one-third of all investments in that country are now made on the basis of social and environmental standards. So when Domini asserts that together we can each do something relevant to address the world’s multiple crises, she is not romanticising individual action.

The reflections in her new book, Thoughts on People, Planet & Profit, are vital because she shows how institutional structures can be created to defy those who put profits before people.

In the 1970s, when Domini started out as just another stockbroker, the notion of social or environmental criteria influencing investment decisions was unimaginable. In 2020, the Forum for Sustainable and Responsible Investment in the USA estimated that 33 per cent of the total of $51.4 trillion under professional management is now invested using some responsible and impact investing criteria.

How did this change come about? For Domini, the turning point came over three decades ago when she found that work-as-usual required her to recommend a company that was about to get a big military contract. It is time, she decided, not to invest in killing machines. At that time, such thinking was anathema. For a money manager to mix up morality or ethics with profit-making decisions was tantamount to compromising their fiduciary duty.

SRI was able to challenge these assumptions by actually expanding the definition of fiduciary duty. It demonstrated that ignoring environmental and social impact factors was bad risk management. Above all, SRI succeeded in making moral choices significant.

For example, Domini’s funds focused on improving working conditions across the world. They worked with NGOs and investor coalitions to ensure that companies ensured some basic standards of safety, working hours and pay. This is because SRI leaders, like Domini, were appalled to discover that in Latin America alone almost a million people were being used as forced, unpaid labour. As she says: “When Wall Street asks for better behavior, retailers are willing to deliver it.”

According to Domini, one of the earliest social shareholder resolutions was filed in 1969 at The Dow Chemical Company — when investors opposed the company’s production of napalm, the chemical deployed by the US army in Vietnam with horrific consequences. More recently, companies have been mobilised to oppose genocide in Darfur and uncover corporate links to the military regime in Myanmar.

Anyone looking for the working details of SRI will have to seek out Domini’s earlier works among the vast variety of “how-to” literature about this field that has appeared in the last twenty years.

Thoughts is for those who may still doubt that it is possible to sit at the centre table of global finance and also actively care about the well-being of people and the planet. For instance, Domini’s actions as an investor have been driven by her outrage that “agribusiness convinces unhealthily overfed people in America to eat more beef because it is profitable; meanwhile, children in the Southern hemisphere starve from lack of grain — which has been used to feed beef cattle.”

Most people are accustomed to seeing such inter-connections being made by protesting political activists at a picket-line outside a WTO or World Bank meeting. Domini’s achievement lies in building upon such perspectives to create financial instruments through which these ethical concerns moved mountains.

Has SRI made a big enough difference? Or has it been absorbed as a terminology or window-dressing while money-profits still ruthlessly dominate? These are questions on which the jury will be out for a long time. And yet, it is not excessively optimistic to view SRI as the beginning of a potentially powerful movement that could yet reform capitalism from within. The force of the climate crisis has certainly generated a motivational force even more compelling than what turned Domini from being just another stockbroker to a woman with a history-making mission.

This column first appeared in the print edition on December 23, 2021 under the title ‘Profit isn’t enough’. The writer is the founder of Ahimsa Conversations and the author of Bazaars, Conversations and Freedom: for a market culture beyond greed and fear

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