Not Reinventing the Wheel on Socially Responsible Investments

On one level, it's great that foundations are joining the corporate responsibility movement through proxy activism, as per the recent Wall Street Journal article by Sally Beatty. Ditto with the concept of shifting endowment assets into "socially responsible" investments. But what chills the blood are signs of consultants and research poised to reinvent the wheel on this issue. The first research reports are circulating in the sector as we speak.

The socially responsible investing movement started in earnest back in 1980, with Amy Domini's Domini Social Investments. The movement has experienced numerous periods in and out of the headlines in the intervening 30 years. Behind the hype, corporations and foundations have spent countless dollars and hours deciding what methodologies should be used to determine socially responsible companies, making shifts in investments, finding out that what they shifted to is worse than what they originally invested in based on new methodologies, revising their investments and finally abandoning the effort or maintaining it only on a very small scale.

A recent Los Angeles Times article takes the Gates Foundation to task for the practices of some of the companies( the stocks of which are held in the managed portfolios of its endowment assets) which the article argues are counter to the Foundation's goals. The Gates Foundation's response is that it maintains its focus on program work and does not dilute its expertise on the investment side. This is consistent with what many of the corporations and foundations that have traveled this road ultimately concluded, a high priced lesson that I hope foundations don't feel compelled to re-learn.

Carla E. Dearing