Estate Conservation Associates: Terminology

Socially responsible investing, social investing, socially aware investing, ethical investing, mission-based investing, and natural investing all describe the same concept. These terms are often used interchangeably to describe an approach to investing that integrates social and environmental concerns into investment decisions.

Community investing is financing that generates resources and opportunities for economically disadvantaged people in urban and rural communities in the U.S. and abroad that are under-served by traditional financial institutions. Community investors make it possible for local organizations to create jobs, provide financial services to low-income individuals, and supply capital for small businesses, affordable housing and community services such as childcare.

Community investing: types. Both individuals and institutions invest in four main types of Community Development Financial Institutions (CDFIs) that provide funds to communities in need. They are:

Investors place capital directly into any one of the four types of community investing organizations or through specialized community investment portfolios—made available through trade associations or others such as Calvert Foundation or Partners for the Common Good.

Community investing: The 1% in Community Campaign. The Social Investment Forum, in conjunction with Co-op America, a national provider of consumer and investment tools, has launched a "1% in Community Campaign." The campaign aims to dramatically increase the assets devoted to community investing. If all social investors shift one percent of their investment dollars into community investing, this shift will effectively triple the real dollars available to finance work in economically distressed communities and for lower-income families. It will create a permanent tier or capital to serve under served communities and hasten the day when every investor's asset allocation chart shows one percent of total investments in community investing.

Corporate social responsibility means open and transparent business practices that are based on ethical values and respect for employees, communities, and the environment. It is designed to deliver sustainable value to society at large, as well as to shareholders.

Index, indexes. An index is simply a number derived from a formula used to characterize a set of data. A stock index attempts to represent a class of stocks. The S&P 500 is an index composed of 500 stocks that attempts to represent the entirety of the stock market. The Russell 2000, by contrast, is an index of 2000 stocks that represents the smaller end of the large company market. When discussing more than one such index, we call them indexes. Calvert, Citizens and Domini have social indexes. Click on Indexes to find out more about these social indexes.

Index, indices. In this sense, an index is a characteristic that serves to guide, point out or otherwise facilitate reference, something that reveals or indicates, an indicator or pointer. A social index or indicator might be employer non-discrimination policies or environmental impact or community support. Two or more of these indicators are called indices.

Index: socially screened. An index that measures the performance of a representative portfolio of socially and environmentally-screened companies.

Issues: environmental. Issues involved with environmental degradation, such as toxic emissions and spills, generation of hydrocarbons into the atmosphere, nuclear power, air and water pollution, soil erosion, etc.

Issues: social. Issues involved with social behavior. The most commonly discussed social issues are: tobacco manufacturing and distribution, human rights, employment fairness, gambling, alcohol production, weapons production.

Screening is the practice of including or excluding publicly traded securities from investment portfolios or mutual funds based on social and/or environmental criteria. Generally, social investors seek to won profitable companies that make positive contributions to society. "Buy lists" include enterprises with outstanding employer-employee relations, excellent environmental practices, products that are safe and useful, and operations that respect human rights around the world. Conversely, they avoid investing in companies whose products and business practices are harmful.

Screen: social. An evaluation matrix composed of a series of social indices.

Shareholder advocacy describes the actions many socially aware investors take in their role as owners of corporate America. These efforts include dialoguing with companies on issues of concern, as well as filing, co-filing, and voting proxy resolutions. Proxy resolutions on social issues are generally aimed at influencing corporate behavior toward a more responsible level of corporate citizenship, steering management toward action that enhances the well-being of all the company's stakeholders, and improving financial performance over time.

Social Investment Forum is a national nonprofit organization providing research and education on socially responsible investing. The Forum Foundation provides cutting-edge research on the trends, practice, performance and impact of social investing.

Socially responsible investing (SRI) is an investment process that considers the social and environmental consequences of investments, both positive and negative, within the context of rigorous financial analysis. It is a process of identifying and investing in companies that meet certain baseline standards or criteria of corporate social responsibility (CSR) and is increasingly practiced internationally.

Estate Conservation Associates
California Insurance License No. 0538317. Insurance and annuity services available to California residents only.
PO Box 6881, San Rafael, CA 94903 • phone: 415-491-4762 • fax: 415-491-4763 • e-mail: jshell@ecafinan.com.

Comprehensive Planning & Investment Advisory Services offered through Pacific West Financial Consultants, Inc. Securities offered through Pacific West Securities, Inc., member NASD, SIPC. 555 South Renton Village Place, Suite 700, Renton, WA 98055.

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