July 2, 2010
Amy Domini Calls
for an End to “Economically Useless” Investment Vehicles
Amy Domini, founder and CEO of Domini Social Investments, participated
in the high-level OECD Annual Forum in Paris on May 27, and published a new
article in the OECD’s magazine, OECD Observer. This year’s forum was entitled
“Road to Recovery: Innovation, Jobs & Clean Growth.” The Organisation for
Economic Co-operation and Development (OECD) is an organization of 34 developed
countries committed to democracy and the market economy.
Amy participated in a
panel discussion including representatives of both trade unions and private
sector firms regarding how improved business ethics could help to restore
public trust in financial and corporate institutions. Amy spoke of the pivotal
role of finance in achieving more ethical business models: “If finance is
working against the goals of human dignity and ecological sustainability, then
governments and civil society will be incapable of achieving those goals of
restoring trust.”
Concurrent with the
conference, Amy published a call for investors to cease the destructive practice of
diversifying their assets into “economically useless vehicles.”
In “Saving
Capitalism from Futile Diversification,” an article published in the OECD
Observer, Amy argues that Modern
Portfolio Theory, the dominant approach to professional portfolio management,
has promoted the benefits of diversification, yet broad diversification did not
protect investors during the global financial crisis.
In fact, Amy writes, the emphasis on diversification at all costs led
financial firms to create derivative instruments based on the value of real
assets that institutional investors didn’t own and didn’t want. “They found
they could bet on real estate without owning it, they could bet on the interest
rate a mortgage paid versus what a treasury bill paid, they could bet on robust
demand for rice without owning the rice.” Speculation on commodities drove
double-digit increases in the price of staple foods, creating starvation in
some African countries.
“Modern portfolio management gave birth to a healthy idea:
diversification,” Amy concludes. “But that healthy idea has been subverted.
This is not a problem that markets can correct on their own: the strong arm of
government must be utilized before the second wave occurs. Diversification into
assets that produce no goods or services to humankind undermines capitalism.”
Amy Domini was honored by Time
magazine in 2009 as one of 25 “Responsibility
Pioneers,” and in 2005 as one of the 100
most influential people in the world. In 2008, Directorship
magazine included Amy Domini in its Directorship 100, a list of the most
influential people on corporate governance and in the boardroom. In 2010, Investment Advisor magazine listed her
as one of the “30
most influential individuals in and around the planning profession over the
last three decades.” She has received honorary doctorates from the
Northeastern University College of Law and Yale University’s Berkeley Divinity
School.
Further Reading:
You should consider the Domini Funds' investment objectives,
risks, charges and expenses carefully before investing. View or order
a copy of the Funds' current prospectus for more complete information on these
and other topics. Please read the prospectus carefully before investing or
sending money.
DSIL Investment Services, LLC, distributor. 06/10
