The New Mainstream? Investing with Social and Environmental Conscience

The New Mainstream? Investing with Social and Environmental Conscience

Amy Domini says recent academic literature validates the need for investors to look beyond profit to people, planet

A woman named by Time Magazine as one of the most Influential People in the World has a hunch that a major shift is underfoot on Wall Street. And if Amy Domini, founder of Domini Social Investments, is correct, then her magnum opus is about to be achieved.

Amy, who is best known for creating an alternative financial index that takes into account social and environmental risks, says assessing financial investments based on social and environmental criteria is about to go mainstream.

Founder of Domini Social Investments Amy Domini

She bases her prediction on the influence she says academia has on financial asset management. "What happens in academia matters on Wall Street,” according to Amy.

It was a paper written by Harry Markowitz in 1952 that introduced the need for a diverse portfolio to mitigate risk, a theory that continues to guide Wall Street today.

Yet recently, a string of papers stemming from top universities including Harvard, Stanford and Chicago are suggesting that when investors look beyond a company’s earning potential to how they treat people and the planet, the investments perform better.

“We already knew (this), because the Domini 400 Index told us that,” says Amy, referring to her alternative index that has outperformed the S&P 500 over the long term since its inception in 1990.

“Now, you’ve got the academic world saying ‘this could be a new tool that Wall Street has ignored,’ and that will push Wall Street.

“I think we will see this mainstreaming, as it’s called in my industry, happen quite rapidly because when Wall Street sees an advantage, they take an advantage.”

Amy says the shift is already underway, pointing to the global firm UBS Securities, which asks all of its analysts to understand environmental and social risks in the investments they’re making as well as how management is addressing those risks.

The same goes for major insurance group Munich RE, which only purchases bonds after examining how companies are addressing environmental and human rights.

Governments are also increasingly mandating disclosure. The approach is being championed in 24 countries including Denmark, which requires companies to disclose Corporate Social Responsibility (CSR) activities and use of environmental resources. In Ecuador, mining companies must maintain records on consumption of materials and present an annual environmental audit.

“All these companies around the world are now having to do these things, and that’s going to affect the way management behaves,” Amy says.

Amy predicts we will see significant impact from this shift in the future, as she believes more than half of Wall Street will begin examining environmental and human dignity risks in their investments.

“My greatest hope is that I’m correct, that there is mainstreaming bearing down on us very quickly, and I see that building up very rapidly around me, and that this mainstreaming puts tremendous pressure on all of these companies to provide a better framework for the way they interact with people and the planet,” she says.

“I want to live to see it. This is what I’ve been here to do. And it’s right there within grasp.”

Related Story:
Amy Domini: Driven to put Ethical Investing on the Map

Axiom News provides Stakeholder News to Social Venture Network, where a version of this article first appeared. Click here to view this article's original post.

Writer Bio

Camille Jensen's picture
Camille Jensen

Camille Jensen is an employee share ownership consultant with ESOP Builders, Canada’s largest provider of employee share ownership plans (ESOPs) for small- and medium-sized enterprises.

Prior to joining ESOP Builders, Camille was a generative journalist and team member at Axiom News. She credits her time at Axiom as fundamental to her understanding that business is one of the best opportunities to make a difference in the world.

Camille is a B.C. Partner for Social Impact and volunteer with Okanagan Changemakers.

Reprint This Story

Axiom News content is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Stories may be reprinted in their entirety with permission and when appropriately credited.

Please contact Axiom News at
1-800-294-0051 for more information.