Boomers want peace of mind and ease of living
Many boomers can rest easy at night in the simple knowledge that they have enough capital accumulated to carry them comfortably through their golden years. But for a growing number of their peers, peace of mind entails more than financial security.
They need to know that the companies in which they've invested their retirement assets also subscribe to the civic values they hold dear. These "socially responsible investors," say advisors interviewed by National Underwriter, are fast becoming a force for mutual fund companies–and life insurers–to reckon with.
"The SRI space has experienced tremendous expansion over the past decade," says Gary Matthews, a principal at First Affirmative Financial Network, New York. "The market is probably growing two to three times as fast as the rest of the financial services industry."
Paul Ellis, a principal at Ameriprise Financial Services, Fishkill, N.Y., agrees. "I am definitely seeing an increase in interest [in SRI]. For many individuals, it's not only a matter of personal ethics but also corporate ethics. Over the last two years, 80% of my clients have put money in socially responsible investment funds."
That heightened interest is reflected in the growing number of large, publicly traded U.S. companies that are reporting annually on environmental and social performance, just as they do on financial results. According to a July 2005 study by the Social Investment Research Analyst Network (SIRAN), more than half of the S&P 100 Index (58 companies) have special sections of their Web sites dedicated to sharing information about their social and environmental policies and performance.
Almost 40% of the S&P 100 Index (39 companies) now issue annual corporate social responsibility (CSR) reports. And nearly a quarter of the S&P 100 Index (24 companies) say they base their CSR reports on the widely recognized external standard provided by the Global Reporting Initiative's Sustainability Reporting Guidelines.
Issues that spurred the growth of SRI in the 1990s, such as concerns about companies' environmental and labor practices and the poor treatment of animals by large agribusinesses, continue to fuel the industry's growth. But observers say that corporate ethics and governance have been top priorities of investors in recent years.
"Because of the Enron debacle and other recent corporate scandals, there is an increasing focus on corporate responsibility," says Michael Lent, a principal at Progressive Asset Management, New York. "Investors want to see that companies are well managed."
According to an April 2005 report of The Social Investment Forum titled "Mutual Funds, Proxy Voting and Fiduciary Responsibility," SRI funds support more shareholder-supported corporate governance resolutions and "vote no" campaigns than their conventional peers by a margin of 2 to 1. They also tend to support more controversial governance resolutions, like separating CEO and chair positions or limiting non-audit services by auditors.
SRI funds are also more consistent in their backing of "plain vanilla" governance issues, the report says. Among them: "poison-pills," expensing stock options, golden parachutes and declassifying the board. A total of 90% of SRI funds support these 4 issues, vs. 72% support by conventional funds.
