This week, “Time” magazine published their list of the world’s 100 most influential people. On the list is Amy Domini. She runs the $1.5 billion Domini Equity fund, one of the oldest mutual funds based on social responsibility. Inner worth interviewed Ms Domini a few years ago. In the cutthroat world of investing, she offers a thought-provoking, alternative perspective. Here are a few excerpts from our interview with her.
What is a socially responsible company? Ms Domini believes that many corporations operate under the assumption that profits are the first and only priority; many corporate leaders believe they should make money at any cost, but adhering to this standard has social consequences. Ms Domini argues that the company’s “fiduciary responsibility will consist of meeting that standard, and they will feel justified to do that by any means. They may feel it is moral to bribe somebody at the accounting standards board to create new accounting standards that may make the company look more profitable. Under that standard, it will be their moral obligation to cheat, bribe, and steal. They will feel it is moral to do whatever they can to make money, regardless of the social costs.”
What role can investors play? Ms Domini pointed out that, “The way you invest builds the world your children and grandchildren will grow up in. You must ask, ‘What kind of world do you want them to grow up in?’ There are two issues to consider: universal human dignity and ecological sustainability. One should be comfortable as a human being; you would like to avoid needing an armed guard every time you left home or requiring your children to play behind a barbed-wire fence. There’s also a health aspect as far as the planet goes. It’s pretty simple and straightforward, but right now, the corporate culture works against these issues because the standard is to make a profit at all costs, and human dignity costs money. Environmental responsibility costs money.”
In our interview, Ms Domini pointed out that there are advantages to investing in socially responsible companies, in addition to the fact that they address issues of human dignity and ecological sustainability. It’s harder to turn a profit and remain socially responsible. Innovative executives usually run companies that address social and ecological issues. They are on the ball and proactive. And because socially responsible companies are more innovative, they tend to be more profitable over the long run.
According to Ms Domini, it’s possible for companies to be both profitable and socially responsible. As Ms Domini points out, “One wants to be mindful of the world you want your children to grow up in. One wants to be mindful when investing. The investor has the ultimate power. The investor is overweighted in power. He or she has more power than other players at the table and needs to take responsibility for his or her actions.”