Jim Schmelzle, financial advisor at Arizona State Credit Union, says a small subset of clients feel it is important to invest in environmentally and ethically responsible companies, but the definition is variable.
“Typically, it’s environmental stewardship, or social responsibility,” he said. “For the latter, I tend to stay away from alcohol, tobacco, weapons, anything that caters to abortions.”
Schmelzle says mutual funds are one way to go. Popularized by Dave Ramsey and other financial management gurus, mutual funds combine money from a pool of investors and contain a mix of stocks, bonds and other securities. Schmelzle has a menu of mutual funds he can offer clients, which are built around various ethical guidelines. Popular, targeted mutual funds are also managed at Parnassus Investments (www.parnassus.com) and Calvert Investments (www.calvert.com). As for individual “green” publicly traded companies, there are not too many local ones, he says.
“First Solar (FSLR) is one that I’ve done quite a bit of business with,” he said. “There are a couple of other solar companies, but First Solar is probably the better one in terms of potential.”
So far, he says the few clients he has in ethically focused investment portfolios are faring comparably to the rest of his investors.
“I don’t think they’re doing any better, but they’re not doing much worse, if worse at all,” he said.
Alyn Rumbold is a financial advisor at the Edward Jones office on East Cedar Avenue. He says most of his clients who would prefer to invest in environmentally or socially responsible stocks are comfortable with technology companies, especially Apple (AAPL). He agrees that First Solar has been a successful example of an in-state company, although it has been volatile. He adds the caveat that diversity is important in any investment portfolio – and any time you start limiting your range, you raise your risk. “Right now,” for example, “solar’s pretty tough. There’s a lot of competition from China.”
Rumbold tends to search more broadly for solid, socially conscious enterprises.
“An example of that is Whole Foods Market (WFM),” he said. “They’re well-run. They have a good reputation. The stock price has been all over the map, but that’s had more to do with the recession than anything else.”
He also noted that Decker Outdoors (DECK), while not locally based, maintains an office in Flagstaff after taking over Teva, which was started locally. “That would show up on people’s list for socially responsible investing,” he said.
Rumbold says besides mutual funds, Exchange-Traded Funds, or ETFs, are rising stars for people wanting targeted investments. Available since the early 1990s, ETFs are professionally managed, mixed investments – often including stocks, commodities and bonds – that trade like stocks in the open market. The larger managers of ETFs are firms such as iShares (www.iShares.com) and Invesco Powershares (www.invescopowershares.com).
But investors should be doing a fair amount of homework before leaping into mutual funds or Exchange-Traded Funds (ETFs) that are branded as socially responsible, Rumbold advises.
“In many of the large mutual fund companies, they may have one or two socially responsible-branded funds. But that can really differ from one person to another. One person may say no tobacco, no alcohol, no firearms. But they might invest in companies that buy genetically modified organisms, oil and gas.”
For example, “Washington Mutual has billed itself as socially responsible,” he said. “But all that means is no alcohol or tobacco. They’ll invest in defense companies all day long.” FBN
On the web:
www.sustainablebusiness.com – Click on the “green investing” tab for a targeted site with some paid content and some free. The free stuff includes a list of favorite progressive companies for green investors.
www.fool.com – Motley Fool, a general financial advice and education site, is written in a fun, user-friendly style and great for people getting their feet wet. Also check out their podcast on iTunes.