Does Anyone Make Money Investing Dharmically?

By Easan Katie

“AUM, AUM, AUM!” YES, WE DO OUR JAPA each morning, but here we are chanting the investment-industry acronym AUM, which stands for Assets Under Management. Ask an investment manager what his AUM is and he will give you a number, not a mantra. Let’s think about AUM for Hindus. To develop personal integrity, we want to integrate our life, to align our daily activities with our ideals. Yes? Shouldn’t we do the same with our investments? More and more investors are saying yes, and are choosing to invest so that their capital promotes goodness in the world.

In the investment world, this trend was first called SRI, socially responsible investing; and some mutual funds are devoted to this idea. SRI is a broad term which includes company ethics, environmental issues and human rights.

History of Ethical Investing

In American colonial times, some religious groups proscribed their endowments from investing in the slave trade (more about investments in the slave trade later in this article). The Quakers refused to invest in the slave trade or alcohol. In 1851, when the American Temperance Society was at its height, there were 8,000 chapters comprised of people who pledged to abstain from distilled alcohol. Civic, business and religious leaders who were members in Hartford, Connecticut, formed the American Temperance Life Insurance Company, which only wrote policies for teetotalers. The company prospered. It insured Abraham Lincoln’s life in 1865. Along the way, the name changed to Phoenix Life and was eventually listed on the NY stock exchange, and I invested. In 2016, Nassau Reinsurance Group offered to buy our shares for a healthy premium, and we sold to them.

In 1921, Pioneer Funds were the first mutual funds to avoid tobacco, gambling and alcohol investments. In the 1960s, they expanded their prohibitions to accommodate the civil rights, environment and anti-war movements. In the 1970s, the concept of socially responsible investment (SRI) expanded to prohibit investment in companies doing business in apartheid South Africa. By 1995, there were almost 60 SRI funds, with total assets of $640 billion.

The nomenclature evolved, too. The term used by institutional investors is now ESG, which stands for “environment, social, governance.” In 2006, this was made formal by the United Nations when it announced the Principles for Responsible Investment (PRI). One can join this organization for a substantial annual fee and debate their six aspirational and voluntary principles.

More specific are the SRI Standards, which provide a detailed template for companies to report their adherence to ESG principles. Not every company that touts itself as ESG compliant really is so, and a low quality of data is being reported even by ESG-focused companies. Consistent standards and reporting methods don’t exist, so it is difficult for investors to compare these funds accurately.

There was a recent tempest in the ESG world. Last summer, mutual-fund behemoth Vanguard confessed that two of their ESG funds had 31 investments in oil, weapons and other non-ESG compliant companies. One analyst dubbed it “greenwashing.” They have since sold those investments and promised not to allow that again. On the other hand, Blackrock Funds have invested billions with meat processors and companies that burn Brazilian forests.

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For more information or questions, please contact Halbert Hargrove at hhteam@halberthargrove.com