How to invest in foreign firms that do good
Fund companies based overseas are quietly opening their doors to US investors seeking ethical companies.
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To make SRI international investing easier for Americans, Prince Albert of Monaco will launch a product especially for them in September. For a $1,000 minimum contribution, investors will gain a stake in a fund of funds, similar to a three-year-old fund now available only to Europeans. The idea: Find the best fund managers who in turn find profits in industries that inherently generate social benefits, such as natural foods, renewable energy, and water-resource development.Skip to next paragraph
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The fund is in the works for Americans because they have indicated a desire to broaden their influence as environmentally minded investors, says Jerome De Bontin, founder and president of Sustainability Investments LLC, a Northbrook, Ill. firm commissioned to bring Prince Albert's fund to the American market.
"We've received the phone calls" from Americans wanting to invest in the fund for Europeans, known as Monaco Environment Development Durable, Mr. De Bontin says. Those who call increasingly recognize "we're dealing with global issues and global answers. It is not possible to deal with global warming, with rising sea levels, with pollution of the air, and try to focus on a domestic company. You have to deal either with companies that have international reach or you have to deal with companies that deal with technology that can be applied worldwide."
Similar thinking produced Domini's European Social Equity Fund, the newest international SRI fund registered for marketing in the United States. The fund has delivered a 19.5 percent return for the year through April 19.
On a financial level, Europe is rife with opportunities for undervalued companies to take off in an environment that produced $400 billion worth of mergers and acquisitions in the first quarter of this year, says the fund's portfolio manager, Jeffrey MacDonagh. And on a social level, he says Europe's stiff regulations require companies to create environmentally friendly products that stand to benefit the rest of the globe. Example: Sweden-based truck manufacturer Scania invests heavily in research and development to improve fuel efficiency.
"You just don't get that kind of exposure [to environmental technologies] by investing in US stocks," Mr. MacDonagh says. "They're doing things in Europe that are, quite frankly, ahead of where US companies are at in many ways.... The fact that Europe signed on to the Kyoto Protocol has led companies to some very innovative things."
Elsewhere in the world, investors need to explore on a case-by-case basis whether a foreign-based socially responsible fund accepts American investment. Individuals concerned with pollution levels and natural-resource exploitation in Asia, for instance, can explore at least 12 Japan-based mutual funds that carry a strong environmental emphasis. For a taste of the international range, visit www.sustainable-investment.org.
Resourceful investors can find opportunities beyond conventional lists. One approach: Invest directly in foreign companies that trade on the New York Stock Exchange or Nasdaq and win accolades for their ethical policies and practices. Or, if interested in a particular foreign firm that trades on a foreign exchange, do what American opportunists have done since 1927: Sign up for an American Depository Receipt account that allows the owner to purchase shares directly in foreign companies. JP Morgan's ADR Group offers general information about how it works at www.adr.com.