IS YOUR MONEY WHERE YOUR MOUTH IS?
Social Screening, Part II

Socially Responsible Investment Strategies with Darron Stover

In the last column, we finished up a discussion of screening our investments to make sure they are in line with our social values. Most socially responsible investors have become conditioned to think about their investment accounts, retirement accounts and college accounts in this way, making sure not to own any securities of companies, individually or through money managers, that violate human rights, pollute the environment or have a negative impact on other social issues they deem important. We also discussed positive screening, a method in which an investor would seek out companies that have a positive impact on those important issues. But, are those investment accounts, retirement accounts and college accounts the only place you have assets? Probably not!

Many people have assets invested in real estate, including their primary home. For most people, a primary residence makes up the most significant portion of their net worth.

So, is your home a socially responsible investment? Do you expect it to increase in value? Do you think that investments in energy efficiency, in an environmentally friendly and health-friendly structure would increase the value of your properties? Do you think these investments in your properties would result in an immediate financial return through lower energy costs and lower health expenses?

Although sometimes hard to quantify, the answer is a resounding YES. And that's not to mention the potential tax deductions that exist with these types of investments. The social return of such investments can be immense.

Another place most people have non-investment assets is at the bank, in liquid savings, CD's and checking accounts. When we deposit money at a banking institution, the bank makes money by redeploying it elsewhere for a higher interest rate than they give us. In essence, we are lending money to banks for them to lend to someone else.

So, is your bank socially responsible? Do you know the lending practices of the people that employ your money for you? Are they making predatory loans with your money, or using unfair lending practices? Do they give back to the community, treat employees well and embrace environmentally friendly business practices? Is your money being plowed back into your own community, or is it being lent to people and businesses in other communities? These are questions that the socially responsible investor would want to have answers for.

There are a number of ways that you can make sure your liquid assets are being used responsibly.

One way to ensure that more of your money is staying local, helping individuals and businesses in your community is to use a smaller, local bank. With only local branches and local lending officers, it is unlikely that much, if any of your money will be lent outside that geographical footprint. And, in general, people find that smaller banks, hungrier for business, also provide better service and may even have more appealing interest rates. Don't forget though to ask about their lending practices and make sure any bank lives up to all of your social standards.

An even more positive, but usually less convenient way of socially responsible banking is the use of Community Development Financial Institutions (CDFI's). CDFI's are a place where we can deposit our dollars, knowing that they will be redeployed in a way that helps a specific demographic of our population or perhaps even a certain cause. While anyone may deposit money at a CDFI, the institution then uses those deposits to fund loans for a limited group or purpose that matches a certain set of social values, perhaps helping women and minorities purchase homes or start businesses. A CDFI could loan money to people with income challenges or people that want to start up businesses that benefit the environment. Ultimately, to the depositor, there's little difference in the banking experience. But, behind the scenes, it's nice to know our dollars are working nobly to help someone that we would want them to help.

As always, I ask, is your money (and your house) where your mouth is?

Some links:

www.kilowattours.org

ncgreenpower.org

www.idealbite.com

www.cdfifund.gov

www.cdfi.org

www.self-help.org (Durham)

For over 11 years, Darron Stover has provided wealth management services to clients. It is his higher purpose to help investors meet their financial objectives through socially-responsible investment strategies. Darron is registered to offer securities in NC, FL, GA and NY and to dispense investment advice in NC through FSC Securities Corporation, a Registered Investment Advisor & Registered Broker/Dealer, member NASD & SIPC.  Ask for Darron at (919) 782-0033 or visit www.invest4change.com 3356 Six Forks Road, Raleigh, NC 27609.

Printed in the February/March 2007 issue of Innerchange.