We Love the Bad Boys

But do we reallyw ant to invest in them?

by NINA WINHAM

Why, oh why, do we love them so? The racy girls with a curled lip and just the right put-down. The bad boys with the dangerous look; the guys who are all flash and sizzle, who make you want to leap into that slick car and fling your rational self out the window in a dowdy heap of sensible shoes and plans for tomorrow.

Oh yes… we love them. (Or we would, if given the chance!) But beneath our pulsating lust, we know they’re a fleeting infatuation. When it comes time to get serious, we seek out a gentler, steadier partner. One who’s more predictable, more caring. One who’s clear on values. The thought of the risky adventure may set our hearts racing—but we know what’s good for us in the long term.

Kind of like a winning investment strategy. (OK, maybe that wasn’t the first thing you thought of. Come back from that open highway…) If you’re lucky, you might make a lot of money quickly on some racy stocks. But (just look at the tech boom), you might get burned. Meanwhile, here’s the secret we’ve known all along: over the long term, the good guys win.

Socially responsible investing (SRI) means choosing investments based on more than just their financials. Sure, it’s great to see those black and white numbers sizzle on the chart, zooming along. It seems so simple and clear. But they only tell part of the story. Add in environmental performance, governance, community relations, and the treatment of employees, and you’re getting a much better picture of a long-term partner. One who’s clear on values; who’s steadier, more predictable.

The nice thing is, even the black and white digits prove the value of socially responsible investing. In any given quarter, the indexes that follow SRI portfolios may do a little worse or a little better than traditional market indexes. But follow them over time, and you will find they steadily outperform the mainstream market. The Jantzi Social Index, for example (developed by Michael Jantzi, Canada’s pre-eminent SRI researcher and analyst), has outperformed two general Toronto Stock Exchange indexes by four per cent and seven per cent respectively since being launched in 2000. U.S. index results are similar.

In the early days of socially responsible investing, analysts warned against limiting the universe of potential stocks in your portfolio (never mind that this is exactly what financial advisors do, based on your investment goals). It wouldn’t work, they said; you would pay a price. After all, the fundamental idea of portfolio theory is that you minimize risk by drawing from a large pool to diversify what you hold. But the steady, respectable performance of SRI indexes has proven that there are plenty of good actors to choose from: enough to maintain diversification, give good returns, and make you happy for the long term—financially and otherwise.

And there’s more good news. As more investors choose companies based on their full performance (social, environmental, and financial), there’s more capital under SRI management. And that means—guess what?—more companies are cleaning up their act to appeal to those investors. So you get to shift the norm of corporate behaviour—and you get solid returns.

So what about that guy in the sexy car? Put him on a racing bike and feed him organic. Tell him you love it when he shows his sensitive side. Maybe those long-term values aren’t so dowdy after all.

Nina Winham is principal of New Climate Strategies (newclimate.ca), a consultancy working to engage consumers and employees in social change. She thinks the SkyTrain is way sexier than any car.