Social Investing

INDEPENDENT FINANCIAL SOLUTIONS, LLC

SOCIALLY RESPONSIBLE INVESTING

Socially responsible investing (SRI) is available to clients that want to align their investment portfolio with their personal values. It is for clients that want to use their investments not just to generate financial wealth, but to promote social justice. SRI utilizes one or more of the following approaches: screening, shareholder advocacy, and community investment.

Screening: This means including or excluding stocks or bonds based on social criteria. For instance, many investors exclude companies that sell alcohol, tobacco, weapons, or nuclear energy. Other investors focus on selecting companies with strong environmental, human rights, and animal rights records.

Shareholder Advocacy: This is the process of communicating social concerns to corporate management. It includes informal discussions and the filing of shareholder resolutions aimed at improving corporate behavior. Shareholder advocacy also means voting proxy resolutions and creating public awareness of important issues.

Community Investment: This takes place through community development loan funds, community development banks or credit unions. Community investment is aimed at helping finance low-income and other under-served populations. Interestingly, the default rate of community investments is lower than that of traditional borrowers.

Performance: According to the Social Investment Forum:

	$2.34 trillion was invested with socially responsible criteria at the end of 2001. This accounts for $1 of every $8 invested!
	Nearly two-thirds (63%) of all screened mutual funds tracked by the Social Investment Forum earned one of the two highest rankings for performance by Lipper or Morningstar.
	Of the 16 largest SRI mutual funds, 81% received top performance marks for 2001.
	For the ten year period ending 12/31/01, the Domini 400 Social Index's total annualized return was 13.7% while the S&P 500 rose 12.95% over the same period.

Risks: It is important to be aware of SRI funds' unique characteristics when constructing a portfolio. Some of the more important characteristics include:

	Greater exposure to growth stocks and technology stocks than the typical mutual fund. This poses challenges when trying to diversify a portfolio.
	Higher expense ratios than the typical mutual fund. Historically, funds with lower expense ratios tend to outperform their peers.
	Absence of SRI funds in certain asset classes. For instance, there are no real estate or convertible bond funds that screen for social responsibility.

Does SRI Make a Difference? A partial listing of success stories includes:

	Ending apartheid in South Africa through corporate divestment.
	Restricting marketing of infant formula by pharmaceutical companies in developing countries (poor water conditions and the inability to "go back" to breast feeding increased infant mortality).
	Convincing 100 companies to diversify the makeup of their corporate boards and workforce.
	Convincing GE to accept stricter efficiency standards on washing machines and thereby save consumers: $25 billion, 310 million metric tons of CO2, 11 trillion gallons of water, 4 quadrillion BTUs of energy (equivalent to annual energy use of 21 million households) over the next thirty years.
	Convincing Home Depot to phase out old-growth timber from endangered forests.
	Convincing Starbucks to buy Fair Trade certified coffee from small cooperatives rather than the cartels that control most of the coffee production. As a result, thousands of farming families in poor countries have seen their incomes triple.
	Convincing Baxter International to phase out PVC products which release dioxon one of the most toxic substances on earth.
	Stopping DuPont from strip mining along the Okefenokee National Wildlife Refuge in Southern Georgia.

Financial planning and investment advice can only be rendered after delivery of a Form ADV Part II. Independent Financial Solutions LLC is registered with the State of Utah Securities Division. This web site is not deemed to be a solicitation for advisory services in any state where IFS is not registered or exempt from registration.