Ethical Investments gain strength
Ethical Investments gain strength

Profit from Virtue in money

Author: P. John Flynn | Source:

Ethical Investments gain strength 
Ethical Investments gain strength 
Profit from Virtue 
ROME, Friday, 25 May 2007 ( Investors are increasingly looking for ways to link their money to ethical principles. In a report on April 30 on this trend, the Financial Times cited data that estimated the amount placed on religious funds--usually invested by churches--at about 17 billion dollars. 
A larger category is that of socially responsible funds, whose assets have risen from 639 billion dollars in 1995 to 2,290,000 billion dollars in 2005. They are oriented according to broader ethical principles, not necessarily related to a specific religion. 
George Rue, investment director of the New Covenant Trust Company, linked to the Presbyterian Foundation, stated to the Financial Times that "some people may say it's a whim, but I believe in this information age, people — especially the younger ones – they take up more of the world and not only focus on getting the biggest benefits per dollar». 
Among the best-known names are the funds of the mutual Ave Maria, with 525 million dollars invested in them. Monies in these funds are not invested in companies that violate the moral principles of the Catholic Church. 
Another example quoted by the Financial Times is the mutual Timothy Plan funds that are aimed at investors from the evangelical Christian community. The 12 funds have a current value of 540 million dollars. 
According to an article published in the Christian Science Monitor on April 23, the groups involved in family and moral issues are becoming more aware of the opportunities that are opened with the pressure on companies through the investments of their members. 
The article cited groups such as Women of Faith, a group of Christian women based in Texas. In the events organized for this summer, some of them are planning to raise the issue of ethical investment. The American Family Association, reported the Christian Science Monitor, will also launch this summer an initiative, aimed at encouraging its 2.8 million members to avoid investing in companies that support practices against the family. 
There are also investment funds for Muslims, explained the New York Times in its April 8 article on religious-inspired investment. The Amana fund, for example, selects investments according to the principles of Shariah, or Islamic law. It began operating in 1986, and another similar fund was founded in 1994. 
Foundations under pressure 
The major concern for ethical principles in investment has put the focus on philanthropic foundations. In January, the Los Angeles Times published a series of articles examining some of the investments of the Bill and Melinda Gates Foundation. 
"In a contradiction between their donations and their business, the Times research has found that the foundation collects every year large financial benefits of investments that contravene their good works," began the first article in the series on January 7. 
One of the inconsistencies cited by the Los Angeles Times had to do with the foundation's efforts to protect health in Africa and its investments in the oil industry. Oil companies operating in Africa said the article, solved at higher levels than permitted in the West, thereby damaging the health of the population. 
The Los Angeles Times estimated that about 8.7 billion dollars of the foundation's assets have been in companies that go against their charitable goals or philosophy. 
According to the information currently on its website, the Bill and Melinda Gates Foundation has 33 billion dollars of the endowment. Also, the renowned investor Warren Buffett has pledged to donate about 31 billion dollars of his fortune to the Gates Foundation. 
Despite the adverse publicity that followed the Los Angeles Times published a series of articles, Bill Gates stated that the foundation's investment standards would not be changed, the Financial Times reported on January 13. 
Buffett, for his part, has also been in the sights for his investments. At the last annual meeting of its Investment fund, Berkshire Hathaway Inc., the proposal that asked the company to sell its 3.3 billion of action dollars of Petro China Co., a subsidiary company of another Chinese government firm that has the more important role of the oil industry in Sudan, was rejected by the shareholders, reported on May 6 the Los Angeles Times.
The proponents of the proposal argued that oil investments give economic support to the Sudanese government, which has received strong critics for its human rights abuses committed in the Darfur region. 
"It's ridiculous for people to say that a big oil company is more 'pure' than another," Buffett said in the Los Angeles Times on May 7. 
Sinful Participations 
An issue raised on ethical investments has to do with financial benefits. A recent study found that "sinful participations" give investors better benefits. A press release published on April 10 by the Sauder Business School at the University of British Columbia, Canada, established that some investors pay a financial price for not supporting the actions linked to human vices. 
The study, "The Price of Sin: The Effects of Social Norms on Markets" (The Cost of Sinning: The Effects of Social Norms on Markets) was carried out by Marcin Kacperczyk of the University of British Columbia and Harrison Hong of Princeton University. 
"Although sinful participation is not necessarily good for the soul, they give greater benefits," said Kacperczyk. However, institutions such as retirement funds, universities, and religious organizations are less likely to support sinful participation because of their exposure to public opinion. 
In an article on March 26, the Christian Science Monitor considered the issue of benefits in ethical investments. The article cited a study by Morningstar, an investment research group, which found that investors in socially responsible funds tend to suffer more than others when markets plummet. Moreover, when the value of stocks increases, ethical funds do not benefit as much as other funds. 
The Wall Street Journal was a little more optimistic in an article on March 20. Examining the category of so-called religious funds, he concluded that his results are improving. The article also admitted that if you deeply feel your faith, the products offered by these funds may be a good idea. 
Also, some of these funds have fairly strong benefits, as reported by the Associated Press on January 2. The Islamic Amana Trust Income Fund has had a profit of about 19.3% in 2006, while the Ave Maria Catholic Values Fund achieved a profit of about 14.2% in the same period. 
They were beaten, however, by a "vice fund" that invests in alcohol, tobacco, weapons, and gambling. According to the Associated Press, the Vice Fund showed a profit of about 23.2% last year. 
Gray Curtains 
Deciding what an ethical investment is not always an option between black and white, as explained by a New York Times article on April 7. An example quoted in the article was oil companies. Exxon Mobil has been criticized for its combative role in the case of climate change. In contrast, BP has been considered a friendly company with the environment, and acceptable to ethical investors. 
Despite such opinions, the explosion that took place at a BP refinery in Texas in 2005 led to the conclusion that the company had a poor security record. Exxon Mobile, on the other hand, is safer and has not had a severe oil spill since 1989. 
The New York Times article also questioned the ability of some groups to classify which funds are trustworthy how to say whether or not an enterprise is ethical, to assess the situation of large companies operating in many countries. 
It is necessary to proclaim the Gospel in the complex current worlds, including that of business and economy, observes the Compendium of the Social Doctrine of the Church (No. 70). A task that some investors are carrying out with their decisions on where to put the money. Although not without difficulties, it promises to be a trend that will continue to gain strength.

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