Journal--Put Your Money Where Your Heart Is

The Myths of Wall Street

It takes courage to honestly examine the ethical component of one’s investments and recognize any inconsistencies. So it is understandable that many people try to avoid the issue by leaning on one or both of the following myths.

MYTH ONE: Limiting one’s investment choices by using social, environmental, or ethical criteria results in lower financial returns.

The Facts: It is true that Natural Investors voluntarily limit their choices, but this has not led to any systematic underperformance in their stocks. In fact, solid statistical evidence shows that investments chosen with social, environmental, or ethical criteria perform as well as or better than those chosen with financial criteria alone.

The Domini 400 Social Index was launched in 1990; it includes socially screened companies in a range of sizes and industries similar to those of the unscreened Standard and Poor’s 500. Through December 1998, the Domini 400 has outpaced the S&P 500 with a total return of 442 percent compared with the S&P’s 366 percent. This is truly remarkable, but it is only one of many gauges that show a positive correlation between corporate responsibility and corporate profitability. So much for the myth that “good guys finish last.”

MYTH TWO: Natural Investing is only for tree-hugging radicals and aging ­hippies.

The Facts: Natural Investing in the United States traces its origins to Quakers and other Christians who could not live with ­inconsistencies between their beliefs and their investments. Today a range of strategies is available to support a variety of investors and ­values, from conservative Christians to farm-belt traditionalists to environmental visionaries. Most screened mutual funds aim at a broad cross-section of common interests. Natural Investors are not antibusiness, nor do they dabble in fringe companies. The Domini 400 includes many household names, including Home Depot, Xerox, Johnson & Johnson, Coca Cola, and Bank of America. Although none of these companies is free of controversy, each has particular strengths that led to its inclusion in the index.