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Investing for Change: Profit from Responsible Investment (9780195370140): Augustin Landier, Vinay B. Nair: Books. Asset managers Augustin Landier and Vinay B. Nair explain how to make your investments reflect your values--without sacrificing returns in the process. Their well-researched book offers portraits of typical values investors, presents statistics that convince the skeptical, and makes a convincing argument for adding socially responsible investments to your portfolio. Questions for Co-Authors Augustin Landier and Vinay B. Nair Amazon.com: In your book, you identify three types of values investors: blue, yellow and red. Can you describe them? Landier & Nair: In Investing for Change, we divide investors into three stylized color categories based on their motives. (In reality, all investors are a mixture of these categories with regard to specific values and causes.) These categories are structured according to two key questions: What are your beliefs, and how much are you willing to pay for them? YELLOW investors feel morally obliged to avoid companies that are incompatible with some of their values. They consider that doing otherwise would be immoral. RED investors are at the other end of the SRI spectrum, as they are not motivated by moral concerns. Instead, they will not tolerate investment strategies that negatively impact performance in any way. BLUE investors are pragmatic. They are only interested in being responsible investors if they are convinced that it can change the world in the direction of their values and that the financial cost is small. Amazon.com: You estimate that Socially Responsible Investments (SRI) will outperform the benchmark indices in the long term. Does the recent turbulence that we've seen in the markets change that prediction? Landier & Nair: There are two conflicting forces. On the one hand, as many investors have lost a lot in recent months, being socially responsible might seem to them as a sort of unnecessary luxury and this might delay the growth of responsible investing. On the other hand, there is a real demand to find a new meaning in financial markets, something beyond greed, and this might give traction to the idea that markets can be used to express values. Moreover, we are entering a period of regulation tightening, which is favorable to the more responsible companies. These last two forces make the current period favorable to the growth of SRI and therefore also to its returns. Amazon.com: Which comes first, the chicken or the egg? Does corporate responsibility create wealth or do companies adopt socially responsible practices because they can afford to do so? Landier & Nair: We explain in Investing for Change that increasing profits is not the only reason for companies to listen to the demands of responsible investors. In fact, being responsible sometimes does actually reduce profits. But it doesn't mean companies have to be altruistic to be responsible: responsibility can indeed create shareholder value indirectly by securing a strong base of loyal investors, which has a stabilizing impact on stock-prices and can allow companies to take a long-term view, to invest on more ambitious projects. Amazon.com: Some investors may drop sin industries from their portfolios. Will strict values investors change the way that industries do business? Landier & Nair: No. The fact that they are banned from responsible portfolios will not convince tobacco companies or casinos to become green energy companies! These companies cannot reasonably be expected[6334] Academics turned portfolio managers, Landier and Nair offer up evidence for socially responsible investing's potential for financial gain and real social change, highlighting how returns, risks and goals differ in ethical investing. The book traces the evolution of socially responsible investing (SRI) from its 18th-century Quaker roots to the first socially responsible mutual fund, 37-year-old Pax World, and finally to more recent responsibility indices and the increasing availability of corporate sustainability reports. The authors wisely credit the growing influence of the corporate governance movement, the increasing number of socially responsible mutual funds, large public pension funds' interest in responsibility issues, and the dynamic regulatory landscape for pushing change on environmental, human rights and other social fronts, making an ethical investment approach a viable option. The authors assess the research on stock returns in ethical investing and the trade-offs for one's principles, projecting that a more balanced socially responsible investment portfolio can grow close to industry averages on the S&P 500, for example, and better than benchmark portfolios. While the fictitious investors in the book grate, its appeal to invest in who you are is genuinely persuasive. (Dec.) Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
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