1 - The meaning of social investment

Summary

We are accustomed in our society to the idea of making economic investments, but not to the idea of making social investments. Social investments introduce noneconomic criteria into investment decisions and thus change the order of business. Social investors are interested in the impact of their investment on people as well as in making a profit. They believe they can maintain economic returns on their capital while expressing a social concern about corporate conduct; that by investing only in socially responsible companies they can have an effect on corporate behavior; and that social criteria can provide incentives for business to function more reliably in the public interest. Other investors hold that social investments will help business become more self-regulating. Still others contend that investments should be directed toward the cultivation of social objectives within the economy. At a more theoretical level, we might say that they are all interested in social development while remaining steadfastly committed to economic development and financial returns on their investment. They all seek to encourage the development of social values within the free enterprise system.

The origins of the movement are hard to trace, but the use of social criteria became visible among large organizations in the 1960s during a period of urban unrest. In 1967 the Ford Foundation, stimulated by a concern already being expressed by church and university leaders, announced that social investments would become part of its philanthropic program. It hoped to increase the impact of its giving by making higher-risk, lower-return investments in minority businesses, housing, and conservation projects.