Amy Domini on Socially Responsible Investing
A conversation with Amy Domini, one of the architects of the socially responsible investing movement. By Frank Lampe.
A conversation with Amy Domini, one of the architects of the socially responsible investing movement. By Frank Lampe.
“It’s not the money that we’re interested in but the things the money can buy us, like cleaner air and a better quality of life.” So says Amy Domini, founder and managing principal of Domini Social Investments LLC, and one of the pioneers of the socially responsible investing movement in the U.S. With more than $1.7 billion in assets, her company manages a group of three no-load mutual funds, including what the company says is the oldest socially and environmentally screened index fund in the U.S., started in 1990. Domini was also the first investment firm to provide public access to its proxy voting decisions, in 1999. This year, the company filed or cofiled 16 shareholder resolutions on a range of social and environmental issues.
The author of Socially Responsible Investing: Making a Difference and Making Money (Dearborn Financial Publishing, 2001), Domini was recently honored with the 2001 Natural Business Leadership in Business Award, presented to her at the Fifth Annual Natural Business Market Trends Conference in June.
LOHAS Journal: What is the socially responsible investing movement trying to accomplish?
Amy Domini: We in the social investment industry see ourselves as part of an effort to make possible a world of dignity and environmental sustainability. That means that we feel we’re uniquely capable of using the financial services industry to do that. At the end of the day, it’s shareholders who dictate corporate policy or behavior, or at least it’s been their inaction that has set corporate policy in the past.
We attempt to bring to the market a more holistic definition of making money. We screen portfolios for social and environmental action. The problem is that the global economy has no global government. The global fabric is money, yet you don’t have any government capable of getting global data on corporate behavior. And foundations aren’t doing this either.
We have direct conversations with the companies and focus on emerging issues. Right now, sweatshop and environmental issues and issues surrounding human rights are most important to shareholders. The dialogue needs to be about how we differentiate between companies and how we create capital and not contribute to these problems.
Another element is support for community economic development through financial institutions. At Domini, we do it through a money-market fund that we offer with ShoreBank.
LJ: How does the consumer play into the equation?
Domini: Consumption has been the greatest social-change force on the planet. It hasn’t necessarily been a positive one, but it has driven the world we live in.
There is something about consumption that redefines a person. It can be deliberate but sometimes not. I believe that when someone becomes a social investor they make a decision to get what we call “relentless information” about the investments that they’re making.
LJ: Where within the LOHAS market are you seeing growth?
Domini: We’re going through an economic dislocation—a reshaping of the rules governing the economy -- as we’ve become ever more dependent on a global economy as well as on consumer spending, which now accounts for approximately 68 percent of the total economy. But government, business and consumers will spend more money only if it’s in their best interest. And right now, the only big spending business will do is technology spending. They’re not spending on new factories or labor.
The alternatives to oil, gas, and nuclear power are the beneficiaries of higher oil prices. For industry, the focus turns to holding the cost structure down and finding alternatives -- it’s an opportunity and a benefit to social investors.
Additionally, when you go through an economic dislocation, the only industries that do well are the ones that don’t have government regulations burdening their growth. Right now, technology is one area that is benefiting from that.
What I call the organic industry is a beneficiary of two separate trends. One is a trend I deplore: the wealth and income gap. There is a socio-economic component to purchasing Odwalla, for example. It’s not a ghetto drink. It’s a beneficiary from a long-term societal trend that isn’t going away in a hurry. This provides social investors with an opportunity.
The other component can be traced to a holistic understanding of the role that such products will play based on the potential for changing dynamics. There’s a financial implication that’s tied to a long-term trend; these companies are building an infrastructure that isn’t going to go away.
LJ: Why don’t many of the public companies in the LOHAS sector show up in your fund index?
Domini: We really prefer a $100 million market-cap company, and we definitely want to see earnings.
LJ: How do you bring companies into the socially responsible fold?
Domini: When you’re doing the research, you either touch some issue that the executives in a corporation relate to, or they think it’s the stupidest idea that they’ve ever heard of. Sometimes it’s a matter of a company having a business approach to a social issue. Of course, the greatest personal experience is when they’ve been sued about it. Sometimes it takes sensitivity to an issue before a company will address an issue and change.
LJ: The release of proxy voting information is a hot issue right now. Will this continue?
Domini: Absolutely. For the most part, the funds have been asleep at the switch. It is not the fund’s money; it’s the shareholders’ money. Of course, a fund that votes against environmental issues wouldn’t want it publicized -- they just don’t want to get into the conversation.
LJ: What’s the next frontier for socially responsible investing?
Domini: In the U. S., we talk about being socially responsible. In Europe, they talk about sustainability, which is the next generation in some ways. We still have a history here of not owning stocks from companies selling alcohol, weapons, or tobacco, or that are involved in gambling. In France, they hear “no alcohol, no tobacco, no weapons, no nuclear power” and they think you’re nuts. And yet, when you look at their fund managers, they don’t buy tobacco, weapons or nuclear power. They don’t think of themselves as avoiding anything; they’re thinking of models of sustainable practices.
In terms of awareness, we still find in our own survey that only about 24 percent of the American public has ever heard of socially responsible funds.
My view of society is that we’re splintering far beyond traditional age, demographic or ethnic groupings. Society has become a plenitude of voices -- and it’s not their values systems that bind these new groups together. It’s their consumption patterns that drive them together. So the question is: How can we use consumption as a change vehicle through investments?
LJ: Has it been challenging for you being a woman in a traditionally male dominated business?
Domini: I really have had a very comfortable time for the last 15 years. The period before was less so. Within the financial services industry, the wonderful thing is that at the end of the day there are only two things that count: having the stocks go up and hanging onto clients. So long as that’s the case, nobody can knock you.
----------------
Frank Lampe is editorial director of LOHAS Journal, a GreenBiz News Affiliate. This piece is copyright 2001 LOHAS Journal, all rights reserved, and originally appeared in the magazine's July/August 2001 edition.
“It’s not the money that we’re interested in but the things the money can buy us, like cleaner air and a better quality of life.” So says Amy Domini, founder and managing principal of Domini Social Investments LLC, and one of the pioneers of the socially responsible investing movement in the U.S. With more than $1.7 billion in assets, her company manages a group of three no-load mutual funds, including what the company says is the oldest socially and environmentally screened index fund in the U.S., started in 1990. Domini was also the first investment firm to provide public access to its proxy voting decisions, in 1999. This year, the company filed or cofiled 16 shareholder resolutions on a range of social and environmental issues.
The author of Socially Responsible Investing: Making a Difference and Making Money (Dearborn Financial Publishing, 2001), Domini was recently honored with the 2001 Natural Business Leadership in Business Award, presented to her at the Fifth Annual Natural Business Market Trends Conference in June.
LOHAS Journal: What is the socially responsible investing movement trying to accomplish?
Amy Domini: We in the social investment industry see ourselves as part of an effort to make possible a world of dignity and environmental sustainability. That means that we feel we’re uniquely capable of using the financial services industry to do that. At the end of the day, it’s shareholders who dictate corporate policy or behavior, or at least it’s been their inaction that has set corporate policy in the past.
We attempt to bring to the market a more holistic definition of making money. We screen portfolios for social and environmental action. The problem is that the global economy has no global government. The global fabric is money, yet you don’t have any government capable of getting global data on corporate behavior. And foundations aren’t doing this either.
We have direct conversations with the companies and focus on emerging issues. Right now, sweatshop and environmental issues and issues surrounding human rights are most important to shareholders. The dialogue needs to be about how we differentiate between companies and how we create capital and not contribute to these problems.
Another element is support for community economic development through financial institutions. At Domini, we do it through a money-market fund that we offer with ShoreBank.
LJ: How does the consumer play into the equation?
Domini: Consumption has been the greatest social-change force on the planet. It hasn’t necessarily been a positive one, but it has driven the world we live in.
There is something about consumption that redefines a person. It can be deliberate but sometimes not. I believe that when someone becomes a social investor they make a decision to get what we call “relentless information” about the investments that they’re making.
LJ: Where within the LOHAS market are you seeing growth?
Domini: We’re going through an economic dislocation—a reshaping of the rules governing the economy -- as we’ve become ever more dependent on a global economy as well as on consumer spending, which now accounts for approximately 68 percent of the total economy. But government, business and consumers will spend more money only if it’s in their best interest. And right now, the only big spending business will do is technology spending. They’re not spending on new factories or labor.
The alternatives to oil, gas, and nuclear power are the beneficiaries of higher oil prices. For industry, the focus turns to holding the cost structure down and finding alternatives -- it’s an opportunity and a benefit to social investors.
Additionally, when you go through an economic dislocation, the only industries that do well are the ones that don’t have government regulations burdening their growth. Right now, technology is one area that is benefiting from that.
What I call the organic industry is a beneficiary of two separate trends. One is a trend I deplore: the wealth and income gap. There is a socio-economic component to purchasing Odwalla, for example. It’s not a ghetto drink. It’s a beneficiary from a long-term societal trend that isn’t going away in a hurry. This provides social investors with an opportunity.
The other component can be traced to a holistic understanding of the role that such products will play based on the potential for changing dynamics. There’s a financial implication that’s tied to a long-term trend; these companies are building an infrastructure that isn’t going to go away.
LJ: Why don’t many of the public companies in the LOHAS sector show up in your fund index?
Domini: We really prefer a $100 million market-cap company, and we definitely want to see earnings.
LJ: How do you bring companies into the socially responsible fold?
Domini: When you’re doing the research, you either touch some issue that the executives in a corporation relate to, or they think it’s the stupidest idea that they’ve ever heard of. Sometimes it’s a matter of a company having a business approach to a social issue. Of course, the greatest personal experience is when they’ve been sued about it. Sometimes it takes sensitivity to an issue before a company will address an issue and change.
LJ: The release of proxy voting information is a hot issue right now. Will this continue?
Domini: Absolutely. For the most part, the funds have been asleep at the switch. It is not the fund’s money; it’s the shareholders’ money. Of course, a fund that votes against environmental issues wouldn’t want it publicized -- they just don’t want to get into the conversation.
LJ: What’s the next frontier for socially responsible investing?
Domini: In the U. S., we talk about being socially responsible. In Europe, they talk about sustainability, which is the next generation in some ways. We still have a history here of not owning stocks from companies selling alcohol, weapons, or tobacco, or that are involved in gambling. In France, they hear “no alcohol, no tobacco, no weapons, no nuclear power” and they think you’re nuts. And yet, when you look at their fund managers, they don’t buy tobacco, weapons or nuclear power. They don’t think of themselves as avoiding anything; they’re thinking of models of sustainable practices.
In terms of awareness, we still find in our own survey that only about 24 percent of the American public has ever heard of socially responsible funds.
My view of society is that we’re splintering far beyond traditional age, demographic or ethnic groupings. Society has become a plenitude of voices -- and it’s not their values systems that bind these new groups together. It’s their consumption patterns that drive them together. So the question is: How can we use consumption as a change vehicle through investments?
LJ: Has it been challenging for you being a woman in a traditionally male dominated business?
Domini: I really have had a very comfortable time for the last 15 years. The period before was less so. Within the financial services industry, the wonderful thing is that at the end of the day there are only two things that count: having the stocks go up and hanging onto clients. So long as that’s the case, nobody can knock you.
----------------
Frank Lampe is editorial director of LOHAS Journal, a GreenBiz News Affiliate. This piece is copyright 2001 LOHAS Journal, all rights reserved, and originally appeared in the magazine's July/August 2001 edition.
