Conscious Choice Seattle: Heading in the Wrong Direction

March 2005 | Letters to the Editor

Heading in the Wrong Direction

Paul Hawken’s welcome article on socially responsible (SR) mutual funds (“Is Your Money Where Your Heart Is? The Truth About SRI Mutual Funds,” Evergreen Monthly, Oct. 2004) has stimulated a debate that seems headed in the wrong direction. SR mutual fund defenders respond to Hawken by arguing that the SR investment industry is doing the best it can within the limitations of the existing system. Missing from this discussion is an examination of equity investing as an effective model for promoting socially responsible business.

If we seek to identify a just approach to funding worthy enterprises, we should look to fixed-income investments. Loans, notes and bonds allow investors to know at the outset what return to expect from the investment, while borrowers understand what is required of them to fulfill their obligation. The advantage of debt financing for socially responsible business owners is that they maintain control over organizational values and operational approach. Socially responsible investors could exercise an activist influence by attaching conditions under which the loan is granted. These conditions, or covenants, could stipulate matters central to socially responsible business practice.

Unlike mutual fund investments, few opportunities exist to invest in loans or bonds that support social enterprises. Why? Underwriting loans is more comprehensive and costly than underwriting stock offerings. To cover these greater costs, global finance intermediaries typically engage in very large transactions (in the $1 billion range) that generate the greatest earnings per transaction. Social enterprises requiring financing from tens of thousands to several million dollars are too small to participate.

Investment opportunities in SR fixed-income vehicles are limited currently by the lack of social finance infrastructure to enable investors to rate, transfer and help to keep their investments liquid, which could help to funnel investor dollars to social enterprises too small to participate in the global finance marketplace. Work is already starting to create such structures.

The broad benefits of SR investing will be achieved not by promoting the particular instruments of one aspect of the investment market, but by the broad education of socially responsible investors. The financial marketplace is dense and complex. Truly responsible actions will result when we understand exactly what our money does when it’s not stored in our mattresses. Thanks to Dragonfly Media for creating this forum for education and discussion.

Sincerely,

Rupert Ayton and Stephanie L. Sarver,
Center for the Development of Social Finance, San Mateo, CA

Rupert Ayton and Stephanie L. Sarver are the founders of the Center for the Development of Social Finance (CDSF), a nonprofit organization fiscally sponsored by the Rudolf Steiner Foundation (RSF). Mr. Ayton previously was the chief financial officer of RSF, which also is a supporter of Dragonfly Media. CDSF is working to create the formation of a social finance infrastructure to increase funding to social enterprises.

Better Food for Better Pets

I just wanted to thank you for your informative article in last month’s Whole Health section (“Do You Know What You’re Feeding Your Pet,” EM, Feb. 2005). After reading it I checked the label on my cat’s food and found several of the no-no’s, like chicken meal and beet pulp, listed. What a surprise! Here I thought by purchasing a “natural” brand that is more expensive I was doing my pet a favor.

Again, thank you for your article. I absolutely adore my cat and hate to think my ignorance could hurt her in any way.

In good health,

Rachelle Pakes, Internet

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