Invest in gold with a clean conscience?

Debate: Avoid bad companies, or try to reform them?

These divergent approaches reflect a longstanding debate within SR investing: Is it better to keep problematic sectors and companies out of a portfolio, or invest with hope of persuading them to do better? Activism has recently been gaining favor: Shareholders last year filed 68 percent more resolutions on social issues (368) than they did in 1999 (219), according to Washington, D.C., research firm RiskMetrics. But gold-mining stocks seem to remain too problematic, too high-priced, or both to inspire SR investment.

Mining companies routinely consult local stakeholders, in part because "your right to expand or operate is affected by your record," according to Carol Raulston, spokeswoman for the National Mining Association, a US-based trade group. She says the industry is nevertheless still grappling with what to do in overseas situations where, for instance, the government issues a mining permit but certain people who live near the site raise objections.

"It all gets wrapped up in what constitutes 'consent,' " Raulston says. "In some cases, it's been very complicated."

By shunning gold-related investments, SR funds have missed out on a bright spot in an otherwise gloomy investment landscape. Before gold prices slid a bit last week, investors seeking refuge from a weakening dollar and a plunging stock market had driven up gold prices by more than 40 percent since September. That has boost the value of gold-related exchange-traded funds and mining companies.

Oxfam's Slack offers no investment advice, but he observes that those who steer clear of gold stocks have no voice within the companies that are having an impact on the lives of vulnerable populations around the world.

Activists easy to ignore

"Because gold is hot commodity right now, and there's a lot of investment in it," Slack says, "it's probably easier [than in the past] for mining companies to ignore people who don't invest."

Individual investors eager to profit from gold with a clean conscience still have a few options. They could piggyback on the efforts of Christian Brothers, which commends Newmont for doing extensive interviews in aggrieved indigenous communities and establishing a multilevel review process. This strategy would entail buying Newmont stock, keeping tabs on the company's progress, and voting shareholder proxies.

"Investors can find the company that's 'best in class,' that's doing the least amount of damage humanly possible, that has the systems in place to protect people's health, and [that has] the least environmental impact possible," says Julie Tanner, corporate advocacy coordinator at Christian Brothers. "The company that's able to do that is going to be the one that's going to thrive."

Another option is to invest in jewelry retailers that have pledged support for The Golden Rules. This voluntary code calls on gold miners to obtain "free, prior, informed consent" from local communities and take steps to protect the environment. Example: Tiffany's, a leader in the No Dirty Gold campaign to clean up mining practices, says the largest portion of its gold comes from a single US mine that "operates in a sustainable and environmentally sound manner."

For investors who want to own the actual metal, however, jewelry is not the way to go: The markup on a gold ring is almost always too hefty to recoup upon resale. Investors can instead buy bullion from a dealer, but it's difficult – if not impossible – for buyers to know where, when, and how their gold was mined, says Peter Schiff, a Darien, Conn., securities dealer and author of "Crash Proof: How to Profit from the Coming Economic Collapse" (Lynn Sonberg Books, 2007).

His recommendation for ethically minded investors: Buy gold coins minted perhaps 50 or more years ago. The metal is just as valuable as any gold mined today, he says, and the premium paid for an aged coin can be recouped (at least in large measure) from another buyer down the line. On the social side, investors may gain peace of mind from the fact that their precious metal isn't a byproduct of projects that displaced communities or fouled ecosystems – at least not recently.

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