Socially Responsible Investing / by Nate Westheimer

Meeting humanity's needs without harming future generations.

SRI, or socially responsible investing, is one of the greyest of grey areas in the capitalist system. Among members of my family, we talk about this a lot, and never really come to consensus regarding how to direct investments for them to be deemed "socially responsible" and "successful." Some of us want to be laser focused on making money, and others want to insure each investment correlates with our values. I had a lot of fun last year asking, "Is Exxon Mobile Evil?"

My Grandfather, from whom I draw much of my inspiration and aspiration, dealt with the SRI dilemma in a rational and simple way: he would say that as capitalist his responsibility was to draw as much wealth/value from the capitalist system -- the Market -- and as a person his responsibility was to fellow people, or Society. Since the market represented the people and their needs, immediate or not, participating fully in the market was only rational. But with accumulated resources from the market, he proposed (and exemplified), my grandfather saw a greater responsibility was to make the People equal and equipped players in the system. The market would follow its people.

Today, do we need a less simple way of dealing with this dilemma of SRI? Surely my grandfather's mantra was not complete (though it was effective, mostly from a philanthropic standpoint). For instance, posed with the question "Would he have invested in Bayer during World War II?" his children and grandchildren all shake our heads and say he certainly would not have. And that's for sure.

Now, I argue that the "Bayer Question" in the SRI debate is unfair, because a totalitarian dictatorship (Hitler's Germany) so greatly perverts what the market deems as "demanded," and that capitalism in our democracy reflects social needs on many orders of magnitude more accurately. However, it does indicate that one's tolerance for "dishonesty" if the capitalistic system can be set at various tolerances, and so we're left considering more complex ways of integrating SRI into our lives and portfolios.

Addressing this in a recent note, my uncle, forever tuned to his clients' financial needs and values, proposed the opening sentence of this post as a way to direct our ethically informed, but capitalistic investments. In this, I think he succeeds where my grandfather's simplistic model of SRI failed, and leaves a model open enough to address the concept of "needs" as liberally as desired.

What do you think?