Socially Responsible Investing - SoJust ProfDev August 2014

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Slides for Joby Gelbspan's professional development training on Socially Responsible Investing (SRI).

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Socially Responsible Investing - SoJust ProfDev August 2014

  1. 1. 1 August 11, 2014 the Nonprofit Center, Boston, MA
  2. 2. Joby Gelbspan 2 Backgrounds in: • corporate accountability activism • history of corporate power & resistance • financial analysis & investment management. NOT an investment advisor Reachable via LinkedIn or www.sojust.org
  3. 3. Corporations are not Citizens* * In reality, not legal obfuscation 3
  4. 4. How can an investor be “socially responsible?” Making choices that promote our values Solidarity Owning your privilege taking responsibility for financial choices & their effects on the broader society, present and future Sustaining yourself and to support your priorities and those who depend on you 4
  5. 5. Part I: Investment Terms & Concepts Part II: Political Strategies Questions & Discussion to 8:30 5
  6. 6. Terminology: Types of Instruments Bonds Stocks Corporate (or government) debt. A share of ownership of the company. Lower risk, lower return. Unlimited upside, unlimited downside. Returns interest and gain or loss on sale. Returns gain or loss on sale, and sometimes dividends. 6
  7. 7. Drivers/Risks 7 Fixed Income (Bonds) Yield determined by interest rates and the creditworthiness of the company. Inverse to interest rate movements. Equity (Stocks) Corporate performance Industry and market trends More volatility, larger potential growth Yield determined by the profitability of the company.
  8. 8. Terminology: Types of Investments Individual securities (stocks or bonds) are sold by shares or dollar amounts. Mutual Funds are companies that buy portfolios of investments and sell units which represent shares of the entire portfolio. 8 XYZ Fund My Share of XYZ Fund Apple - $4M Apple - $400 Johnson & Johnson - $2M Johnson & Johnson - $200 Nestle - $4M Nestle - $400 General Electric - $10M General Electric - $1,000 Total Fund: $20M I have $2,000 in XYZ Fund
  9. 9. Mutual Funds • Types of Mutual Funds: – Equity: holds stock – Fixed Income: holds bonds or other types of debt – Balanced: holds some blend of the two. • Funds require less ongoing monitoring, but won’t perform as well as good individual picks. • ETFs are exchange-traded funds, usually following an index. 9
  10. 10. Terminology: Market Capitalization • # Shares Outstanding X Price • Small Cap: $300M - $2B • Mid Cap: $2B - $10B • Large Cap: $10B + • “Mega Cap” newer, imprecise, > 100B E.g. Wal-Mart (WMT) market cap > $258B $469B revenue > the GDP of most countries 10
  11. 11. Choosing a mutual fund • Investment objective – e.g. international stock or exposure to a particular country or industry • Fees vary widely between funds and make a big difference for your long-term returns • Actively or passively managed (index funds) • Tool to diversify your portfolio • Look for the prospectus and holdings 11
  12. 12. Public Companies Listed on stock exchanges IPO – initial public offering Subject to public regulations & disclosure requirements Dow Jones Industrial Average = 30 corporations, including: 12 3M American Express AT&T Bank of America Boeing Caterpillar Chevron Coca-Cola Dupont General Electric Johnson & Johnson Kraft Foods McDonald’s Microsoft Pfizer Verizon Walt Disney Walmart
  13. 13. Identifying Public Companies: Start with what you know Before investing, understand the key factors driving and affecting the business 13
  14. 14. Investing for Value • Long-term investing, buy and hold • Seek investments where we understand the long-term value and are ready to commit to owning a share for appreciation over years. • DIVERSIFICATION spreads your exposure to each investment’s individual risks. 14
  15. 15. 15 Time Risk • Two ways to make money in the market: time and risk. • Higher risk = higher return. The price of the investment is more volatile over time. • As long-term investors, time is on our side. We can afford short-term declines if we can wait for the right time to sell.
  16. 16. Quick Sense of the Room Raise your hand for the statement which best describes your investment goals: • Saving for the long-term (> 5 years) • Shorter-term goals: may need access to cash in the coming 5 years • Informing myself for when I have long-term savings • Organizing investors 16
  17. 17. Asset Allocation Mix of stocks, bonds and funds depends on our two key factors: time & risk Rule of thumb used to be: age % in fixed income. E.g. at 30 years old, 70% stocks and 30% bonds. Start conservatively, and spread your risks. 17
  18. 18. But these are unusual times… 18
  19. 19. THE FACTOR OF TIME  Long-term “buy and hold” investments  Over time, you’ll get used to the ups and downs and will get clearer about your goals  Make a couple of good choices, and try to forget about them  The most you should check your investments is about monthly 19
  20. 20. Questions at this point? 20 Do we all feel comfortable with these basics first? Next up: making politically-informed choices
  21. 21. Conscious Choices Industry Exclusions – Pharmaceuticals – Prisons – Military Contractors Corporate Behavior – Environmental responsibility – Policies on gender or racial discrimination – Best in class Proactive Support – Community lenders, infrastructure – Clean energy – Social ventures, microfinance 21
  22. 22. Socially Responsible Investment Companies (SRI’s) Dramatic growth, wide range of products to suit different investment goals. Examples: • Domini • Calvert • Green Century • Pax • Parnassus • Walden • Increasingly, 401(k) and other plans offer SRI funds 22 No longer a fringe movement: Today, approximately $3 trillion of the estimated $25 trillion US investment market complies with some SRI criteria.
  23. 23. SRI Funds 23 Pro’s  Investment Criteria, screens  Build progressive capital  Proxy voting  Shareholder engagement Con’s  Limited definition of “responsible”  Diversifies risk and return  Fees Use these tools when they serve your plan
  24. 24. Shareholder Resolutions • GMOs • Fracking • Board Diversity • Packaging • Climate change • Marketing practices • E-Waste • Political interference 24
  25. 25. Shareholder/Stakeholder Activism 25 Changing policies & practices Raising public visibility Amplifying activism within the Boardroom
  26. 26. Researching Corporate Behavior • Corporate Website • SEC.gov • Limited only by your search terms! 26
  27. 27. Researching Corporate Behavior • Shareholder resolutions: http://www.iccr.org/shareholder/trucost/index.php http://faireconomy.org/shareholder_activism http://www.greenamerica.org/socialinvesting/sharehol deraction/index.cfm • OpenSecrets.org – Contributions – Lobbying – Revolving Doors – Congressional Ownership 27
  28. 28. Researching Corporate Performance • Annual Report & Financial Statements • Investor section of the website • Yahoo! Finance or other investor coverage • Consider the industry and the long-term value proposition • Assess the risks 28
  29. 29. Yahoo! Finance (or Google, etc.) 29
  30. 30. More Info • Terminology / Glossaries: – www.investopedia.com – www.investorwords.com • Researching investments or markets – www.yahoo.com/finance or Google – Bloomberg, other news agencies – Commentators and blogs e.g. Motley Fool: http://www.fool.com/ • SRI’s – www.ussif.org – http://www.socialfunds.com/ 30
  31. 31. Thank you for coming! 31 …and cast your vote for the 2014 Corporate Hall of Shame at www.stopcorporateabuse.org Refuse to be intimidated Continue to learn and share Connecting for Justice Thurs. Sept 11

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