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Responsible Investing

Socially responsible investing can also be responsible investing. Though an investor with a conscience may occasionally have to sacrifice portfolio performance, there are always alternatives.

By Ann Coleman (TMF AnnC)
August 22, 2000

This classic Foolish Four ran September 30, 1999.

I'm a science groupie. Given a chance to meet Mel Gibson or Steven Hawking, I'd be in the short line.

I consider scientists, in general, to be superior human beings and the hope of the planet. I don't buy into the whole idea of scientists as the types who put their lukewarm coffee cups in the freezer and wait for it to go "ding" when the time's up. (OK, I've done that, but I'm not a scientist.) No, I think that as a group, they are pretty competent people.

So, the other day I was surfing the Web and came across this page of quotes from scientists. Naturally, I had to check it out. Near the end I read:

"When I received the Nobel Prize, the only big lump sum of money I have ever seen, I had to do something with it. The easiest way to drop this hot potato was to invest it, to buy shares. I knew World War II was coming and I was afraid that if I had shares which rise in case of war, I would wish for war. So I asked my agent to buy shares which go down in the event of war. This he did. I lost my money and saved my soul."

Albert Szent-Györgyi, The Crazy Ape, Grosset and Dunlap, New York, 1971, p 72.

This guy won a Nobel Prize?!?

OK, he must have been fairly brilliant. But that kind of thinking is what gives scientists that ditzy, not-of-this-world reputation. What is appalling to me isn't that Dr. Szent-Györgyi was a bad investor, or that he wanted to invest in a way that today is called "socially responsible." I admire that. What bothers me is that he isn't thinking scientifically.

Scientific thinking is not about up or down, black and white, choice A or choice B and nothing in between. It is the antithesis of that. Scientists look for alternatives, syntheses, ways to get around a difficulty. Surely there was a choice C.

Many people are interested in socially responsible investing and I applaud that. I remember when the theory was that socially responsible corporations would actually outperform their less enlightened competition. Alas, that doesn't seem to be the general case, although some have certainly prospered.

These days most socially responsible investors concentrate on getting the best returns they can within the framework of their beliefs. They accept that they may not do as well as investors who suffer no such pangs of conscience and feel that underperformance is a price they are willing to pay. Perhaps if we all operated in that way, the world would be a better place, but I wouldn't hold my breath.

Now if it were me, I could have prevented all of that mid-century unpleasantness simply by investing in shares that go up in the event of war. Peace would have broken out immediately. Note to the literal-minded: I'm kidding, although sometimes it does seem to work that way. Selecting individual stocks is not something at which I have ever demonstrated any particular skill. This is why I invest in mechanical stocks strategies like the Foolish Four.

Fool on and prosper!

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