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Saving the World, One Investment at a Time

Mar 10th 11
By Mark Thompson and Trevor Fried

It’s no secret that yacht crew have expendable income. Once they’ve bought all of the latest and greatest tech gadgets and are kitted out in the finest of fashions, what’s left to do with their hard-earned cash? After considering buying property or even starting a shore-side business, some crew turn to investments in order to make their money go further. While investing is a great way to diversify income and ensure that you have something left over when you step off the big white boats, crew can take investing to the next level by investing in something they care about and socially responsible investing may be just the ticket.


Many investors, including crew, have strong opinions that don’t involve their views on interest rates and stock prices; these might include support for a cleaner environment or concern for the poor and the disadvantaged – just to mention a few well-known causes.


Increasingly, these investors want their holdings to reflect their social, ethical or religious values. They wish to avoid companies that profit from activities they oppose and support companies that behave in ways they consider appropriate. At the same time, however, investors still want or need to earn a reasonable return on their portfolios.


Socially responsible investing (SRI) seeks to reconcile these two objectives by helping investors create diversified portfolios designed to deliver an acceptable level of performance, while at the same time excluding companies that don’t meet their ethical standards. SRI investing recognizes that corporate responsibility and societal concerns are an important part of many investment decisions – particularly with the world’s increased focus on sustainability and climate change. 


Why has socially responsible investing gained in popularity? One of the reasons may be that investors asked themselves this question: while my number one investment goal will always be to create a properly diversified portfolio based on my personal risk tolerance levels, how can I do a bit of good for the environment, for the world or to improve the condition of mankind? 


A second reason for SRI’s popularity is that some of the most prominent institutional investors have increasingly added a social focus to their investment decisions. These institutions, many with significant assets and often with great public, political and media clout, often carry both a big stick and use a loud voice. Some have become well-known advocates for social issues and this is often carried out through their investments in socially responsible projects. An example is found in the California Public Employees’ Retirement System (CalPERS), one of the world’s largest public pension funds. CalPers recently announced support for the United Nation’s Principles for Responsible Investment, a menu of possible global actions on environmental, social and corporate issues.


A third reason for increased interest in SRI is the simple fact that now it’s much easier to access professionally managed SRI vehicles. Many investment firms have created specific investment processes that exclude companies that, in the investor’s view, focus on non-socially responsible or acceptable activities. Once these decisions have been made, the manager constructs a diversified portfolio within the desired constraints. The goal is to deliver performance consistent with the investor’s return objectives and tolerance for risk.


Mark Thompson and Trevor Fried are Financial Advisors at Morgan Stanley Smith Barney located in Fort Lauderdale, Florida, and may be reached at (954) 762 3000 or Morgan Stanley Smith Barney LLC and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.   Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.  © 2011 Morgan Stanley Smith Barney LLC.  Member SIPC.

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