Is Socially Responsible Investing For “Suckers”?
“The basic idea is to throw money away,” declares The Wall Street Journal today in reference to socially responsible investing (SRI). In their article titled “Stocks Weren’t Made For Social Climbing” author Andy Kessler and WSJ make the misguided assertion that anyone who invests with an eye toward corporate responsibility and making the world a better place is a “sucker”. In Kessler’s words,
“Wall Street considers it a truism that money sloshes around the globe seeking the highest return. But there are countless investors, believe it or not, who are willing to accept lower returns. P.T. Barnum supposedly said there’s a sucker born every minute. Many of them go into so-called socially responsible investing…In reality there is no trade-off of Vice vs. Nice. There are only returns.”
I am more than a little surprised at the ignorance of this article, but I suppose it is an opinion piece after all, and hey, everyone is entitled to an opinion…even me! So, here is my opinion then.
Socially Responsible Investing Performance Studies
While Kessler has an entertaining writing style and definitely knows how to turn a phrase, his entire premise is flawed. He makes the rather uninformed statement that responsible investing requires one to sacrifice performance, but he gives no basis for this conclusion.
The facts are that research done over the past several years by the likes of Oxford University, Wharton University, Biola University and others show that responsible investing did not require a sacrifice of performance in their studies. In fact, some of these studies show that there was actually a slight improvement in performance for responsible investors compared to non-responsible investments.
According to Oxford University’s study with Arabesque Partners, “80 percent of the reviewed studies demonstrate that prudent sustainability practices have a positive influence on investment performance.”
Socially Responsible Investing For More Than Returns
That aside, Kessler has also made himself out to be a hypocrite or a criminal. He proudly asserts that returns are the only thing that matter when selecting an investment, that “there are only returns.” He most certainly doesn’t believe that…unless he is investing in illegal prostitution rings, arms dealers and drug cartels. They make a ton of money, but obviously (I hope) he would never consider investing in such a thing as it is 1) illegal and 2) completely immoral.
So, returns are not the only thing that matter. The law matters, too. And for Christians, God’s law matters even more than the law of man, so how could we possibly invest in companies that are in direct violation of God’s law, even if they did offer tantalizing promises of high returns? “Better is a little with righteousness than great gains with injustice.” (Proverbs 16:8)
Wall Street would goad us to give in to greed and chase high returns above all else. Sadly, there are many who fall prey to that siren’s call. “But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction.” (1 Timothy 6:9)
As for me, there is no return high enough to entice me to invest in immoral industries like abortion, pornography and human trafficking. Wall Street can keep their profits-at-any-cost approach to investing; I will keep my integrity. And if Oxford University is right, I may end up keeping more money in the long run anyway.
How about you?
PS – You can read the entire Wall Street Journal article here. But your IQ may drop after doing so. Just saying.