Now that I finally have a “real job”, and my husband and I are expecting our first child, I have begun to think more about long-term investing and retirement income. Money is a tricky thing though. I know I will need to grow my savings now if I ever want to retire or have a safety net for later in life. But how can I grow my savings in a way that aligns with my morals?
Retirement accounts, such as IRAs and 401Ks, allow you to invest money for the long-term with certain tax benefits. Contributions to these accounts can even been matched by your employer. As the owner of a retirement account, you can choose from a number of investment vehicles like stocks, bonds, and mutual funds. For those of us with limited time to research companies and track the stock market, mutual funds seem like an easy choice. An investment firm tracks, buys, and sells interests in many different companies while you simply invest in the single mutual fund. The downside of a mutual fund, from my perspective, is that it’s less transparent than purchasing individual stocks.
As a graduate student, the university opened a retirement account for me and invested my money in a mutual fund. I have no idea what companies that fund includes. I’m sure I could do some research and find out, but that somewhat diminishes the convenience of having a mutual fund to begin with. And what if there is one company, out of all of the companies they have invested in, that I would not want to support? Do I go through the holdings of every mutual fund available to find one without any offending holdings? What if the holdings change with time?
What I really want is a mutual fund that I know reflects my values so I don’t have to spend a lot of extra time checking up on the fund. Apparently, there are a lot of people seeking the same thing because socially responsible investments (SRI) are becoming more prevalent these days. These are funds that make investment choices based on a set of principles adopted by the fund. Some funds focus on fair business practices. Others will simply reject sectors they consider bad for society such as alcohol, tobacco, and gambling.
Unfortunately, I have yet to find a food sustainability mutual fund, which would exclude companies that genetically modify foods, develop chemical fertilizers and pesticides, or manufacture sugary drinks and snacks. However, there are some SRIs that come close and many more that consider other factors such as worker compensation and environmental sustainability. So there may be a convenient mutual fund that at least gets me closer to a clear conscience. There are also ways of investing in sustainable food systems directly (more on this in Part Two), but there are additional constraints on using these investment vehicles for retirement savings.
Mutually beneficial funds.
The website, Social Funds, maintains a database of socially responsible mutual funds, which you can search based on different social issues (go to the Mutual Funds tab, select Mutual Fund Center from the drop-down menu; then select Social Issues from the SRI Fund Charts drop-down menu). There isn’t an option for sustainable agriculture, but there are options for environment, animal rights, community investment, and human rights. There’s no way I could do an in-depth analysis of every fund on this list, so I picked out a handful to see what’s available.
I found Parnassus Funds, Portfolio 21, and Calvert a bit too vague about their qualifications for investment, but they do consider more than just financial gains. Sentinel Investments and Domini Social Investments did provide detailed information on how they assess companies, but neither made specific statements about agriculture. Looking through their holdings, I didn’t find any GM seed companies or pesticide manufacturers. However, the funds do invest in companies that produce unhealthy foods and beverages like Coca-Cola, PepsiCo, and Kraft Foods. Coca-Cola, in particular, has also come under fire for their water usage practices.
Green Century Funds were the only ones I found that made specific statements about the food and farming sectors. According to their website, the fund looks for companies involved in organic and natural foods, water solutions, alternative energy, sustainable development, and the like. They avoid companies involved in factory farming, genetically-modified organisms, and agricultural pesticides. However, McDonald’s and PepsiCo are both in the top 10 holdings of Green Century’s Equity Fund. Technically, these companies do not engage in bad agricultural practices, but they do benefit from the low cost of factory-farmed beef and chicken, corn-based sweeteners, and other products of industrial agriculture. The Green Century Balanced Fund, on the other hand, does not have any food or beverage companies in its top 10.
Based solely on my concerns about ethical food, I would probably opt for a Green Century Fund because they make the most specific statements about food and farming. However, none of the funds I looked into were without faults. And none of them made me feel like my money would be building a more sustainable food future.
The plethora of socially-responsible mutual funds makes me hopeful that I will be able to invest with my morals in mind. It may take some more investigation to find exactly what I want, or I may simply have to become a vocal investor. Depending on your priorities, you may be able to find a fund that allows you to invest in the future you envision. And it just might help you make some money too.
In Part Two, I will discuss additional investment options in the sustainable farming sector that may not be right for retirement savings.