Investing for Change: Profit from Responsible Investment (Hardcover)

~ (Author), Vinay B. Nair (Author)
Key Phrases: social index, blue investors, red investors, United States, Express Your Values, Achieve Change (more...)

Editorial Reviews

Amazon.com Review

Asset managers Augustin Landier and Vinay B. Nair explain how to make your investments reflect your values--without sacrificing returns in the process. Their well-researched book offers portraits of typical values investors, presents statistics that convince the skeptical, and makes a convincing argument for adding socially responsible investments to your portfolio.

Questions for Co-Authors Augustin Landier and Vinay B. Nair

Amazon.com: In your book, you identify three types of values investors: blue, yellow and red. Can you describe them?

Landier & Nair: In Investing for Change, we divide investors into three stylized color categories based on their motives. (In reality, all investors are a mixture of these categories with regard to specific values and causes.) These categories are structured according to two key questions: What are your beliefs, and how much are you willing to pay for them?

YELLOW investors feel morally obliged to avoid companies that are incompatible with some of their values. They consider that doing otherwise would be immoral.
RED investors are at the other end of the SRI spectrum, as they are not motivated by moral concerns. Instead, they will not tolerate investment strategies that negatively impact performance in any way.
BLUE investors are pragmatic. They are only interested in being responsible investors if they are convinced that it can change the world in the direction of their values and that the financial cost is small.

Amazon.com: You estimate that Socially Responsible Investments (SRI) will outperform the benchmark indices in the long term. Does the recent turbulence that we've seen in the markets change that prediction?

Landier & Nair: There are two conflicting forces. On the one hand, as many investors have lost a lot in recent months, being socially responsible might seem to them as a sort of "unnecessary luxury" and this might delay the growth of responsible investing. On the other hand, there is a real demand to find a new meaning in financial markets, something beyond greed, and this might give traction to the idea that markets can be used to express values. Moreover, we are entering a period of regulation tightening, which is favorable to the more responsible companies. These last two forces make the current period favorable to the growth of SRI and therefore also to its returns.

Amazon.com: Which comes first, the chicken or the egg? Does corporate responsibility create wealth or do companies adopt socially responsible practices because they can afford to do so?

Landier & Nair: We explain in Investing for Change that increasing profits is not the only reason for companies to listen to the demands of responsible investors. In fact, being responsible sometimes does actually reduce profits. But it doesn't mean companies have to be altruistic to be responsible: responsibility can indeed create shareholder value indirectly by securing a strong base of loyal investors, which has a stabilizing impact on stock-prices and can allow companies to take a long-term view, to invest on more ambitious projects.

Amazon.com: Some investors may drop "sin industries" from their portfolios. Will strict values investors change the way that industries do business?

Landier & Nair: No. The fact that they are banned from responsible portfolios will not convince tobacco companies or casinos to become green energy companies! These companies cannot reasonably be expected to change industry. So, banning whole industries will not induce improvements in the way these industries are operated. If your goal is to promote change within these industries, as an investor, one way to do it is to include companies that do make an effort to reduce the damage they do and exclude those who don't. From a financial perspective, it turns out that including some companies from all industries (as opposed to excluding whole industries) has a positive impact on returns. That means that this inclusive approach is particularly suited for "Blue" investors, as it favors change while protecting financial returns.

Amazon.com: More women are adopting SRI's than men. What accounts for this difference?

Landier & Nair: There is evidence in the social psychology and economics literature that women are more prone to altruistic concerns. For example, it has been shown that when women are the recipients of public subsidies, they tend to spend it more on children's health and education than men.

Amazon.com: You write that "the future of the SRI movement hinges on the desire of the wealthiest individuals of the planet to use their investments to improve the world." How can those of us with more modest incomes affect change?

Landier & Nair: Well, the accumulation of a lot of individual initiatives can create a powerful force, that's the very idea of democracy. This requires however that responsible investors pick causes that are common to a world-wide majority of investors. As a "modest" individual, you can probably not promote your own unique personal causes but you can definitely join forces with others. So it's all about finding this global common-ground on which a large majority of investors agree and pick mutual funds or indices that are coherent with these values. We find in our research that the protection of the environment, the treatment of employees and the safety of products are the three topics on which such global consensus does currently exist. Another way to help is to spread the word: there are strong peer-effects in the way individual invest their savings.

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From Publishers Weekly

Academics turned portfolio managers, Landier and Nair offer up evidence for socially responsible investing's potential for financial gain and real social change, highlighting how returns, risks and goals differ in ethical investing. The book traces the evolution of socially responsible investing (SRI) from its 18th-century Quaker roots to the first socially responsible mutual fund, 37-year-old Pax World, and finally to more recent responsibility indices and the increasing availability of corporate sustainability reports. The authors wisely credit the growing influence of the corporate governance movement, the increasing number of socially responsible mutual funds, large public pension funds' interest in responsibility issues, and the dynamic regulatory landscape for pushing change on environmental, human rights and other social fronts, making an ethical investment approach a viable option. The authors assess the research on stock returns in ethical investing and the trade-offs for one's principles, projecting that a more balanced socially responsible investment portfolio can grow close to industry averages on the S&P 500, for example, and better than benchmark portfolios. While the fictitious investors in the book grate, its appeal to invest in who you are is genuinely persuasive. (Dec.)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

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Product Details

• Hardcover: 192 pages
• Publisher: Oxford University Press, USA; 1 edition (November 26, 2008)
• Language: English
• ISBN-10: 0195370147
• ISBN-13: 978-0195370140
• Product Dimensions: 8.3 x 5.5 x 0.8 inches
• Shipping Weight: 15.2 ounces (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (42 customer reviews)
• Amazon.com Sales Rank: #196,800 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

4 of 4 people found the following review helpful:

3.0 out of 5 stars You can make a difference, January 13, 2009

By	M. Stewart (Texas, USA) - See all my reviews (REAL NAME)

(What's this?)

This book has some good qualities but some annoying issues. It makes some excellent points about how individual investors can make a difference for the better through Socially Responsible Investment (SRI). The book is well researched and does a great job at bringing together a wide variety of source data, and analyzes that data in order to show the benefits, both moral and financial, of SRI. It has a good set of end notes, and a very good quality index. An appendix lists SRI mutual funds. There are frequent side-bars to give examples of certain points or define a term.

The authors group potential investors into three color-coded groups (to help avoid confusion in the closing chapters as the strategies are compared): Yellow, blue, and red. The yellow group want to avoid investing in certain industries or companies, regardless of the potential loss in portfolio returns, the blue group will tolerate "not terrible" companies but avoid "terrible" companies. An example would be the blue investor might consider a company that produces alcoholic beverages if it did not target young drinkers, where the yellow group would not consider any alcoholic beverage company, if that was a value they held. The red investor would be one who only would buy a company with good values if it had superior returns over another similar company with so-so values.

One of the things I found interesting was the positive impact of shareholder resolutions, even when the resolutions do not pass. A large institutional investor was able to influence a company 95% of the time even though only one of its resolutions passed. They make a good case that SRI is building enough momentum to truly make a difference.

Now some quibbles. Even though I have a degree in finance, it took me quite a while to wade through the book. It seems to be marketed to a wide range of investors, but some of the material will scare off a lot of people, which is a shame, as a lot of the techniques described are easy to do. There is a lot of repetition, and they always mention the authors and the firm or university of studies they mention in the text, even though that is in the end notes, making the text awkward. And one idea they don't even mention, is for investors to review the prospectus information for their current holdings to look for problem areas.

2 of 2 people found the following review helpful:

5.0 out of 5 stars Kudos for the great job, February 17, 2009

By	Kanishk Rastogi "the reviewer" (Albany, NY United States) - See all my reviews (REAL NAME)

(What's this?)

Remarkable & very thoughtful text on SRI, the very different topic in investment. In today's scenario, when everyone is talking about depression, saving the money, and even some opportunists are actually investing for long-term gain, these authors have come up with a book on Socially Responsible Investment.

I liked the author's approach in writing for SRI by questioning profits vs. values and encouraging people to invest in what reflects their values. They have also predicted that SRIs will be profitable in long term.

The book is very nicely written and the charts and graphics are well-designed to convey the meaning of accompanying text. Reader must be prepared to understand the analysis, inferences etc. and must have a little bit of knowledge of the terminology used in this area. That will greatly augment your understanding of the author's points.

Overall, a recommended read for Socially Responsible Individuals!

2 of 2 people found the following review helpful:

4.0 out of 5 stars Can Investors Really Make a Difference?, January 9, 2009

By	Bryan Carey "Bryan Carey" (Houston, TX) - See all my reviews (TOP 500 REVIEWER)    (REAL NAME)

(What's this?)

Investing for Change introduces the idea of the socially responsible investor, discusses what values matter to different people, and talks about the different ways to seek the necessarily information needed to make a socially responsible investment decision. Most people are already aware of socially responsible investing and what it entails, but Investing for Change still includes some background information, just to make sure everyone is on the same page. It then proceeds to answer some common questions about socially responsible investing and it helps investors realize how much of an impact they will have if they attempt to limit their investing only to companies that coincide with a set of defined personal values.

Socially responsible investing isn't a new concept, but it is a practice that is slowly gaining popularity in the United States and the world. Most people have heard about the socially responsible investing concept, but they have many pressing questions about making these types of investments. The common questions related to this type of investment are financial performance and making a significant difference. Because these questions are so common and so important, Investing for Change spends a good deal of time talking about these two important concerns and based on official research, what it has discovered is mostly good news: That companies engaging in socially responsible investing do perform pretty well and, depending on the importance of these social issues in the future, there is a very good chance that enough future investors will be attracted to the cause that it will lead to better than average returns over the next few decades. The performances so far haven't been incredible, and in some cases they lag slightly behind the overall market. But the trend toward socially responsible investing is strong and there is a good chance these companies will perform equal to or better than the overall market in the near future.

The next important question mentioned above is whether or not socially responsible investing makes a noticeable difference. Some people engage in this type of investing solely for reasons of morality and don't necessarily care if it makes a difference. But others want to know that their efforts are not in vain and as far as making a significant difference goes, the results seem to be mixed at the time. Presently, there are not a large enough number of concerned investors to have a huge impact. But through common stock voting, proxy measures, and other means, a small investor can make a difference- a difference that is disproportionately larger to his/her dollar investment value. Studies show that corporate governing bodies do pay attention to these shareholder concerns. They may not implement every change, but they do pay attention to social concerns at a greater level than they did in the past.

Another important question many potential investors often have relates to the necessary research needed to determine which companies are responsible and which are not. Fortunately, there is a place to find these answers- a company known as KLD Research and Analytics. This independent agency provides information on different corporations based on various social governance factors. I knew there was an independent agency that performed this service, but I did not know it was KLD Research and Analytics until I read about it in this bool. This company can come in very handy to someone who wants to invest more responsibly. KLD Research and Analytics does the dirty work for you, allowing investors to quickly see what companies make the socially responsible grade and which ones do not.

Socially responsible investing is gaining a foothold among more and more investors and Investing for Change is a thoughtful book that explains the idea of values investing and answers some of the important questions that socially responsible investors have about investing based on values. This book is academic in nature, with plenty of statistics, facts, figures, and graphics, but also very readable to the average person. It is printed on high quality, glossy paper with colors that help make the graphs and other details easy to read and interpret. It is a nice investment book that could stand to be a little longer, but still has much useful information to offer the individual investor who wants to invest money in a more responsible way.