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REVIEWED IN "DEALS & DEAL MAKERS" THE WALL STREET JOURNAL 13 MAY 2005
"Profitable Socially Responsible Investing?" makes the case that the way to do right by your conscience and your portfolio is to drop the typical SRI strategy of "negative screening" - Wall Street Journal, May 13, 2005
An invaluable tool for fiduciaries considering SRI, the book advances original research finding competitive financial performance for positive screening. - SocialFunds.com, August 4, 2005
"Profitable Socially Responsible Investing?'' makes a convincing and provocative case for values-based investing, corporate and social change - Kiplinger.com, May 20, 2005
"Lane offers a clear and thoughtful approach to advance socially responsible investing. He makes a convincing case that the strategic use of screens can result in both comparable rates of return and adherence to social and ethical principles. His chapter on proxy voting is a great resource. Even for those of us who have been in the field for years, there is much to learn from Lane's book."
Victor De Luca, President, Jessie Smith Noyes Foundation
"Through a transparent analysis of empirical studies and anecdotal evidence, Marc Lane's book covers the breadth of socially responsible investing in a refreshing and accessible format for institutional investors and 'civilians' alike."
Mindy S. Lubber, President, Ceres
"Doing well and doing good is possible and Marc Lane proves it in Profitable Socially Responsible Investing? An Institutional Investor's Guide. In the wake of ethics and governance scandals, this guide boldly takes socially-responsible investing to a new level. Whether you are new to the subject, an experienced investment manager, or a nonprofit leader, you'll find this guide thought-provoking and practical. A must-read for those interested in values-driven and mission-based investing!"
Stasia Zwisler, President and CEO, The Giving Trust
Read the interview with Marc J. Lane in Advising Boomers, 13th September 2005, here.
This book was written to de-mystify socially responsible investing (SRI).
An increasing number of investors are required by fiduciary obligations to invest in a socially responsible way. How do you do this without having an adverse affect on return, without increasing risk, and how do you ensure that your charter is being fulfilled?
This book reports on the author's original research establishing that (1) when investors shun "sinful" securities, such as the stocks and bonds of tobacco companies or defense contractors, they tend to sacrifice risk-adjusted returns, but (2) when they actively select "virtuous" companies, their portfolios' performance is not likely to be impaired at all.
The book also seeks to reconcile the empirical research of academics who have been most interested in SRI over the years.
Step-by-step, it provides the practical tools to define an individual's or institution's core values in a way that is useful in constructing a portfolio and, ultimately, in effecting change in the boardroom; to draft a mission-based investment policy that satisfies fiduciary obligations; and even to vote proxies most strategically, ensuring that voice is given to values.
Written by an experienced lawyer and advisor to socially responsible investors.
Complete with glossary of terms.
Key terms: Investments; socially responsible investing; fund management; portfolio management; corporate governance; investment policies; fiduciary duties.
Table of Contents
Profitable Socially Responsible Investing?
An Institutional Investor’s Guide
About the author
Acknowledgments
Dedication
Preface
Part I: Fundamentals of Socially Responsible Investing
1 Socially responsible investing
Mutual funds vs. separate accounts
SRI’s 1-2-3 punch
Corporate governance
Probing performance
2 Faith-based investing
Christianity
Judaism
Islam
Collaboration
3 Meeting fiduciary obligations
Charitable trusts
Nonprofit corporations
Employee benefit plans
The investment policy statement
Part II: Screening for Socially Responsible Investing
4 Negative screening
Methodology
Time window
Definition of “industry”
Performance of the excluded industries
Risk and return
Diversification
5 Behavioral screening
Corporate social behavior and “behavioral social screening”
Corporate social behavior and financial performance
The hypothesis
The empirical approach
Research scope
Building the research database
Constructing best-in-class portfolios and screening rigorousness
Measuring financial performance
“Behavioral social screening” portfolios
Adjustments with the Fama–French three-factor model
Conclusions
The social anomaly
6 Positive screening: respect for the environment
Regression studies
Event studies
Portfolio comparisons
Looking ahead: value drivers
7 Positive screening: social justice
The empirical evidence
The IBM paradigm
8 Balancing risks and rewards
Risk vs. reward
Diversification
The benefits of corporate values
Part III: Tools of Socially Responsible Investing
9 Selecting securities
Negative screening
Industry exclusion questionnaire
Positive screening
Behavior screening questionnaire
10 Proxy voting
Corporate governance issues
Respect for the environment
Social justice
Glossary
Selected bibliography
Index
Author Bio
ABOUT THE AUTHOR
Marc J. Lane, J.D., is a graduate of Northwestern University School of Law. He is the President of The Law Offices of Marc J. Lane, a Professional Corporation, and of its financial services affiliates, including Marc J. Lane & Company, an NASD-registered broker-dealer; Marc J. Lane Investment Management, Inc., an SEC-registered investment advisor; and Longmeadow Insurance Services, Inc., a risk management firm.
Mr. Lane pioneered Advocacy InvestingSM, a proprietary approach to values-based investing in which both equities and fixed-income securities are selected by exacting financial and governance standards, as well as criteria reflective of each investor’s unique social and environmental concerns.
Marc Lane, a Master Registered Financial Planner and a Registered Financial Consultant, is an Adjunct Professor of Law at Northwestern University School of Law and an Adjunct Professor of Business at the University of Illinois. This is his 32nd book.
For more details, go to www.marcjlane.com
reviews
Review from "Advancing Philanthropy - Ideas & Strategies from the Association of Fundraising Professionals" magazine, September/October, 2005
Is socially responsible investing (SRI) the best approach for a sound bottom line? It depends, according to Marc J. Lane, president of Marc J. Lane Investment Management Inc, in Chicago (www.advocacyinvesting.com), as well as an adjunct professor of law at Northwestern University School of Law, an adjunct professor of business at the University of Illinois and the author of 32 books. In his new book Profitable Socially Responsible Investing? he argues that the way to do right by your organization's mission and its return on investment (ROI) is to change your SRI strategy.
Typically, socially responsible investors practice “negative screening” – eliminating those companies whose products they find objectionable, such as arms, tobacco or liquor. Lane, however, explains that avoiding cigarettes and booze altogether does not necessarily guarantee a healthy portfolio.
“We discovered that you end up with a less-diversified portfolio,” he explains. “Values-based investing is a neglected opportunity for nonprofits, especially if they have endowments.”
Lane’s method, Advocacy InvestingTM or mission-based investing, involves matching an investor’s values with companies that have similar operational values. For example, an environmental nonprofit with an endowment to invest would want to buy stock in a company with excellent environmental practices. Suppose that company produces bullets or beer? Lane does not see a problem in that case.
“A careful examination of management’s behaviour will empower the investor, more effectively than negative screening could ever have done, to deploy their investment capital in a way that gives voice to their principles,” he writes.
Also, donors often want to know how the passive assets of the charity are driving mission. “They want to see those dollars put to work in a way that reflects their own values,” Lanes says. “With Advocacy InvestingTM, the nonprofit can tell that story.”
How do you find out about companies that may share your organization’s values? Check annual reports, SEC reports, etc. At the same time, seek the counsel of a professional advisor who can assist your board in adapting an investment policy to targeted screening, he advises.
“Advocacy InvestingTM is not a static process,” Lane explains. “Your organization collaborates with like-minded institutions. It establishes objectives in its investment policy statement and then implements them. The charities that don’t do this will be left behind. It’s an attractive and effective way to drive mission – at no cost.”
"Profitable Socially Responsible Investing?'' makes a convincing and provocative case for values-based investing, corporate and social change - Kiplinger.com, May 20, 2005
"Profitable Socially Responsible Investing?" makes the case that the way to do right by your conscience and your portfolio is to drop the typical SRI strategy of "negative screening" - Wall Street Journal, May 13, 2005
An invaluable tool for fiduciaries considering SRI, the book advances original research finding competitive financial performance for positive screening. - SocialFunds.com, August 4, 2005
“Lane offers a clear and thoughtful approach to advance socially responsible investing. He makes a convincing case that the strategic use of screens can result in both comparable rates of return and adherence to social and ethical principles. His chapter on proxy voting is a great resource. Even for those of us who have been in the field for years, there is much to learn from Lane’s book.”
Victor De Luca, President, Jessie Smith Noyes Foundation
"Through a transparent analysis of empirical studies and anecdotal evidence, Marc Lane's book covers the breadth of socially responsible investing in a refreshing and accessible format for institutional investors and 'civilians' alike."
Mindy S. Lubber, President, Ceres
"Doing well and doing good is possible and Marc Lane proves it in Profitable Socially Responsible Investing? An Institutional Investor’s Guide. In the wake of ethics and governance scandals, this guide boldly takes socially-responsible investing to a new level. Whether you are new to the subject, an experienced investment manager, or a nonprofit leader, you’ll find this guide thought-provoking and practical. A must-read for those interested in values-driven and mission-based investing!"
Stasia Zwisler, President and CEO, The Giving Trust
Sin, Revisited
13 May 2005, The Wall Street Journal
Many people make the case for socially responsible investing. They are keen on being green -- and they put a lot of green where their mouths are, more than $2 trillion. SRI typically holds that avoiding so-called sin stocks isn't only the right thing to do, it is also a good way to make money. It is true. Except sometimes it isn't.
Now comes a new book by Chicago-based investment adviser Marc J. Lane that offers a variation on the theme. "Profitable Socially Responsible Investing?" makes the case that the way to do right by your conscience and your portfolio is to drop the typical SRI strategy of "negative screening," which Mr. Lane argues is a path to risky, less-diversified portfolios. More to the point, going out of your way to avoid beer and smokes doesn't mean you will always prosper, at least not financially.
Mr. Lane's way is to match the specific values of an investor with companies that have similar operational values. For example, a food bank with an endowment to invest would want to buy the stocks of a company with a good human-rights record. Should that company happen to produce, say, liquor? No problem, under Mr. Lane's method.
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