To an ethical investor, growth doesn't always lead to happiness

Everyone -- from presidents to the common investor - likes growth. But not all growth buys happiness, according to Adam Seitchik, chief investment strategist for Trillium Asset Management, and Karen Shapiro, shareholder advocacy associate with Domini Social Investments. Here are edited excerpts of their conversation with the Monitor's Laurent Belsie:

Is there such a thing as bad growth?

Mr. Seitchik: I think that there is. And the classic example is where the buyer and seller are not the only parties to a transaction, so the price doesn't capture all of the implications of the transaction. It might be something like buying a big SUV. The problem is that the buyer goes and says: "I do care about the environment, but I'm one of 300 million people in this country. And whether I buy this SUV or not is really not going to have an impact on the environment at all." But when everybody does that, all of a sudden we have an environmental problem.

Because?

Seitchik: The incentives are all wrong. We're not capturing in the price of the SUV the cost to the environment of the SUV purchase.

Karen, some fast-growing retailers are doing things you're not thrilled about.

Ms. Shapiro: That's quite true. As we see the growth of big-box stores -- the chains we all know of, such as Target, Costco, Wal-Mart -- we're finding that their growth by and large is occurring in the fastest-growing areas of the country where there's the least amount of land. So there have been instances where there has been taking of land -- so-called eminent domain -- and transferring the property to developers. That has outraged property owners. [Some] towns are starting to fight back by putting limits on the size of stores that can be put in an area.

Why should ethical investors worry about zoning battles?

Shapiro: As investors, we are concerned about the financial and reputational risk of the companies that we invest in. So if a big-box store is going to start encountering problems with placing their stores in an area ... this ends up being litigated, [or at least] slows their whole process down, at a great cost to the company and to its shareholders.

Are companies starting to change their growth strategies?

Shapiro: In [Target's] 2004 sustainability report, they state that they on average are adding 100 new stores a year. And they delineate their decision processes for placement of those stores. So I think more and more companies are becoming cognizant of the concerns from the investment side as well as the public side. [And] a bank in North Carolina -- BB&T -- has recently issued a statement that it will not provide funding of private development of land that was acquired through eminent domain. It's the first bank to do so.

Are there other examples?

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