On Socially Responsible Investing (and Grandma)

Since posting that we were realigning our financial values, I’ve been doing a deep dive into socially responsible investing and I have to say…I am not at all impressed.

For years now, our main investment choice has been the ETF (Exchange Traded Fund). ETFs are similar to mutual funds but with fewer (if any) fees and no loads. Investing in ETFs is easy to learn and I am not going to lie, it has been pretty profitable. The majority of our ETFs are with Vanguard, which I recently found does indeed offer social responsible options. These options (sometimes called ESG funds or Environmental, Social, and Governance funds) exclude companies that:

  • Produce alcohol, tobacco, gambling, and adult entertainment.
  • Produce civilian, controversial, and conventional weapons.
  • Produce nuclear power.
  • Do not meet certain diversity criteria.
  • Have violations of labor rights, human rights, anti-corruption, and environmental standards defined by the UN.
  • Own proved or probable reserves in fossil fuels such as coal, oil, or gas.

On the surface this sounds great, and to most folks interested in simply making better investment choices, I suppose it might be. Excluding companies that support child labor, automatic weapons, and porn is a no-brainer, but personally, that’s not my only criteria for determining a good investment. Forget the exclusions, I want to know what these funds include. Do these companies align with my values?

When I drilled down into Vanguard’s top socially responsible ETFs, I found that the majority held these 10 companies:

  • Apple Inc.
  • Microsoft Corp.
  • Amazon.com Inc.
  • Alphabet Inc. (the parent company of Google)
  • Facebook Inc.
  • Tesla Inc.
  • JPMorgan Chase & Co.
  • Bank of America, Inc.
  • Coca-Cola Co.
  • Procter & Gamble Co.

Call me knit-picky, but when I think of socially responsible companies, I don’t exactly think of Amazon and Coca-Cola. Sure, you can make the argument that these companies are meeting certain sustainability standards (recyclable and compostable packaging, fuel efficient delivery vehicles, etc.) but for me, it goes deeper than just what you see on the surface. Words like childhood obesity, diabetes, the collapse of local economies, unfair labor practices — these are the things I think of when I think of Coke and Amazon, and I certainly don’t want to invest in that!

And what about the other companies on the list? Tesla has had its fair share of bad press lately and the big banks, JPMorgan Chase and Bank of America, despite recently making climate pledges, have long been among the biggest backers of fossil fuel production.

I can’t help but wonder, how does a company make the list of socially responsible investment choices??

On the upside though, we have begun the process of transitioning from a big bank to a local credit union for our regular checking and savings accounts. We chose a credit union because they have an extremely small ecological footprint, since they are operated locally by and for their members. I used the website Green America to find a green credit union in our area. The one we chose offers membership to people living within just a 6-county radius.

I don’t know why we didn’t do this sooner. My grandparents always banked with a credit union and never had an issue. They also never owned a stock and probably would have thought an ETF was a creature from outer space and wonder why on Earth I was spending so much time searching for one! I do remember going to credit union meetings with my grandma. Okay, I mostly remember the snacks and the door prizes 🙂

I never thought much about my grandparent’s finances when I was a kid. It wasn’t that they never spoke about money, or the value of working hard and saving. It was more that they had such a rich life outside of what money could buy that it wasn’t that big of a deal to them, or me. From gardening and canning to quilting and woodworking, their investments were in time, and I was so lucky to receive some those dividends. Which is a long way of saying, maybe my grandparents had the right idea. Maybe the best investments are made at home.

I’m going to put the credit union in the win column, but as far as investments go, maybe the most socially responsible one we can make is the one that has nothing to do with Wall Street.

So, where does this leave us? Honestly, I don’t know. As my mom might say, I need to pray over it a bit more.