Explore Investing with a Social Conscience

Physician's Money DigestApril 2006
Volume 13
Issue 4

Mercer Investment Consulting recently conducteda survey of more than 190 investmentfirms around the world. Within 10years, 73% of investment managers believe thatincorporating social and environmental indicatorswill become a mainstream investing philosophy. Dueto sky-high energy costs and shareholders, whodemand better governance practices from corporations,socially responsible investing (SRI) is finallygarnering the mainstream attention it deserves after 3decades of evolution.

Value-based Investing

SRI strategies bring transparency, value, and efficiencyto a rapidly changing business world. Theworld's largest manufacturer of health care productsrecently laid out a plan to greatly reduce its toxicemissions worldwide, while a giant in the insurancebusiness discovered that supporting local farmer'smarkets can keep patients healthy while strengtheningcommunities. Community and sustainability initiativesare becoming more common in corporateAmerica, where innovative management practicesare evolving with an eye toward improving communities,the environment, and the bottom line.

For physicians, SRI offers a way to align disciplinedfinancial objectives with their strong values.The most common misconception of SRI is thatinvestors must take a cut in returns to invest withyour conscience. In fact, a growing body of evidencesuggests that applying qualitative screens—one ofSRI's fundamental strategies—can lead to premiumreturns. The Domini 400 Social Index, which is oftenused as a benchmark for SRI, has demonstrated SRI'scompetitiveness by outpacing the S&P 500 on asince-inception basis for the majority of its 15-yearexistence, according to SocialFunds.com.

Affecting Change

The growing popularity of SRI is forcing businessleaders to take a fresh look at how they run theiroperations. Major corporations are increasingly concernedwith the financial risks associated with globalclimate change, and several large cap firms are adoptingcompany-wide energy efficiency programs thatfar surpass government regulations. Even institutionalinvestors, such as the California Public Employees'Retirement System—the largest state pension fund inthe United States—are taking advantage of SRIstrategies. Screening companies with poor trackrecords on social and environmental issues can eliminatecompanies with weaker management teamsfrom your portfolio, which leads to competitivereturns, better business practices, healthier communities,and more efficient markets.

With a little effort and determination, physicianscan discover how to use SRI to vote with their investmentdollars and affect positive change in society.One common way to employ SRI is to buy into oneof the many socially and environmentally themedmutual funds. Additionally, physician-investors canseek out a range of products such as renewable energy-specific exchange-traded funds, community investingnotes, and separately managed accounts.

A growing network of investment professionalscan help you to explore the available products andconstruct a diversified SRI portfolio. For physiciansinterested in financial performance with purpose,exploring SRI today can help to put youahead of the investment curve.

Tom Van Dyck, CIMA®, is a financial advisor and a senior vice

president—investments for Philanthropic and Social Investment

Consulting with Piper Jaffray, San Francisco, Calif. He welcomes

questions or comments at 415-984-3600. Piper Jaffray is an

independent, client-focused securities firm that provides customized

advice and a full range of investment products and services to individuals,

institutions, and businesses, with offices in 18 Midwest, Mountain, and West

Coast states. For more information, visit www.piperguides.com/psi_consulting.

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