The Green Advisor: Ideas from a Green Investor

As Domini explains it, there are three common elements that define the responsible investor–the use of standards to pick stocks, active engagement with company management, and support of community development financial institutions.

On the first point, the use of standards, Domini has a strict list of criteria that range from the general–no weapons, no alcohol, no firms majority-owned by repressive regimes–down to those specific to particular industries and sub-industries. Domini says, "I'm looking for an indication that this company is one that social investors or responsible investors would feel is in the better half of the universe," she says.

Since the days of the fight against apartheid Domini has placed a great deal of emphasis on shareholder activism. "We've filed or co-filed over 200 resolutions as a mutual fund," she says. Although Domini Social Investments has two people whose primary duties center around activism, much of the most effective work is accomplished through coalitions under the umbrellas of CERES or The Interfaith Center on Corporate Responsibility.

While Domini knows that activism produces results, she also cautions that it takes time, lots and lots of time. It requires the involvement of people who have on-the-ground knowledge of the problem at hand, such as child labor in clothing factories selling to American companies. It takes shareholder education and the threat of proxy resolutions to get the corporation's attention. Ultimately, it takes a willingness of the company to come to the discussion table. It can take years.

In the area of community development, the Domini Social Bond Fund, which is managed by Seix Advisors in Upper Saddle River, New Jersey, places deposits in about 20 different community development financial institutions as well as buying other high-quality social purpose bonds. The firm's money market account is with ShoreBank, the first and largest community development and environmental bank corporation.

In assessing the changes over the last few decades, Domini can see that she and her colleagues have made a difference not only in the financial world, but in the world at large, but she still has fights she wants to win. "I'm trying to create ongoing accountability. I will have succeeded when your annual report, 10-K, and proxy address the company's earnings when taking into account the external factors," she says. "My goal on standard-setting is to open up the full cost or benefit of corporate behavior. That's a long-term strategy."