What is a Just Return?

The question isn’t, “What is the maximum return?” but “What is the just return?”  It’s time to reflect on what is, for you, a “just return.”  Can you let a larger chunk of your portfolio do more dramatic social change work, without needing it to grow at the same pace as the rest of your portfolio?  This is another variation on the global themes spurred by climate change and resource depletion: how much is enough?

In my “previous life,” working with the United Farmworkers as a young adult, then co-founding a magazine focused on hunger and economic justice, and later being a minister to the homeless, I liked to say that my work was organizing people. When social investing emerged, it seemed a natural extension of this work, and now I see myself as organizing money on behalf of social change.

Yet even within the world of sustainable and socially responsible investing (SRI), there has been a tendency to become trapped in the box of typical investment-think.For so long, we’ve focused on being able to say that screened investments match the returns of unscreened investments. But in focusing so predominantly on this aspect of SRI, we’ve adopted the priorities and goals of mainstream investing.

We can’t let ourselves lose sight of the core purpose of our choice to bring our values to bear in our financial decisions: to foster positive change. Returns matter, of course, but we want to achieve those returns in a way that supports our vision for a healthy, sustainable, equitable world. Put another way: we want to make a living, not a killing.

 

SRI is more than just screened portfolios.  Shareholder activism and community investing are also tools used to bring the full weight of our conscious investments to the challenge of effecting social change.  Based on these three facets of social investing, SRI has been described as a three-legged stool.  All legs must stand together for the stool to be its most effective. In reality, those three legs are more like a trunk, a stick, and a splinter.

The SRI industry has done a good job at developing mutual funds that maximize financial returns, but this emphasis has led the screened investments leg of the SRI stool to become a trunk, vastly outweighing the other legs of shareholder activism and community investing.  Shareholder activism has carved out a strong niche of its own.  Still, compared to screened investing, it is but a stick, rather than a proportionate leg of the SRI stool.

The splinter?  Community investing.  It was considered radical when the SRI world rolled out its “1% for community investing” initiative a decade or so ago. Natural Investments was out on the leading edge in suggesting that 5-10% could make sense for some clients and be more in line with their values.

Screened investing is definitely an improvement over conventional investing, but it’s just a first step.  The actual social change is taking place in community investing.  In the years before there were viable community investment, global microcredit, and local investing opportunities, we mostly relied on tithing and philanthropy to foster social change.  But today, countless loan funds can cycle and recycle your money to groups, individuals, and small companies that are making a real difference in their communities—empowering and lifting people up in ways that philanthropy may not, because loans are a transaction between equals.

If social change is your goal, how do you prioritize that as you build your portfolio?  How much of your money do you want to put into things that more pointedly and directly facilitate social change. Of course, your answer will depend on your personal life planning situation. But many of us have the potential to greatly expand that splinter of community investing to increase our social returns.

Several years ago, David Korten, in an address to SRI advisors, suggested that the question isn’t, “What is the maximum return?” but “What is the just return?”  It’s time to reflect on what is, for you, a “just return.”  Can you let a larger chunk of your portfolio do more dramatic social change work, without needing it to grow at the same pace as the rest of your portfolio?  This is another variation on the global themes spurred by climate change and resource depletion: how much is enough?  What do you really need in order to live a fulfilled life?

With income inequality only increasing, most of us with the luxury of even owning investable assets should be willing to consider having a significant portion of our money out there returning valuable social benefits.  Would 20% be too much? One-third would even the legs of the stool!  Some of our clients are comfortable enough that they don’t need their portfolios to grow much at all, and the bulk of their money can be truly serving.  What is YOUR just return?

This article first appeared in the Winter 2014 edition of the Natural Investing News

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Andy Loving

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