In 2005, how to align your money with your values

Hydrogen cars will become viable investments. Some ethical investing is elitist. Parts of the corporate-reform movement are dead. Those are a few of the strong positions taken by the Monitor's second annual ethical-investing panel. The panel, looking ahead to 2005, was cautious about the overall market. But some areas, such as environmentally friendly stocks, hold promise.

Ethical investing is not just about profit, it's about changing the world. One panelist introduced a new avenue for doing that: venture philanthropy, which brings business discipline to the nonprofit world. The panelists - (top to bottom) Anita Green, vice president of social research at Pax World Funds; Charles Harper, executive director of the John Templeton Foundation, and Jack Robinson, president of Winslow Management - talked with a Monitor editor and writer Jan. 18. Here's some of what they shared:

Jack Robinson: I think there are two broad categories: One is the overall investment climate, which is going to be relatively difficult in the face of rising interest rates, rising inflation, and other issues we are dealing with, such as terrorism and higher oil prices. But against ... that backdrop in terms of ethical investing - and keep in mind that our primary focus is on the environmental side of things - we, frankly, feel there are more opportunities today than there ever have been in the 12 to 14 years that we've been at this. That has to do with lots of new opportunities in various "green" investment areas that are being pursued by relatively new start-up companies and also companies that are relatively young in the scheme of things.

Anita Green: One of the things that [investors] may see are changes in their portfolios due to increased defense spending. More companies are showing up as having weapons contracts. The tech sector is especially vulnerable to this. But it may not be that they are actually engaged in weapons; it may be simply that the Department of Defense is buying the same technology that you or I can buy off the shelf. In the area of environment, this is a good news/bad news [scenario] for investors. Companies are now being asked and they are starting to evaluate their risk - their financial risk - with regard to climate change. The insurance companies are also issuing some statements on this, and investors are engaging companies in dialogue around this issue. The bad news is that under this administration, what we've seen in the first four years is a rollback on environmental regulation. And there's no reason to think that that won't continue.

Charles Harper: It's part of a movement to encourage people in philanthropy to think like businesspeople about what is innovation, what is efficiency, what is yield on philanthropic investment ... as opposed to the old check-writing philanthropy. A venture capitalist looks for a better idea. So venture philanthropy is looking for new ideas, innovations, and a way to bring philanthropic capital to bear to change the world.

Robinson: You're absolutely right. One of our clients, four or five years ago, [asked]: "Why don't you go long on greens [environmentally friendly companies] and short the dirties [egregious polluters]?" So we created a hedge fund about three years ago to start testing this basic concept. It's taken us three years of some significant mistakes, but some wonderful wins, and we really feel that this is a product that makes a lot of sense. Now, it's not a registered product, so it's not something that we can sell actively, particularly to sophisticated investors, but it was a product that was developed with one of our biggest clients in mind.

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