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Amy's Column

In a recent column, Amy, the daughter of an immigrant, discusses the importance of immigration to American culture. 

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Meet Amy Domini

Responsible Investing—Finding a New Path

In 1980, while working as a stockbroker, Amy Domini noticed some of her clients weren't happy investing in military weapons manufacturers or tobacco companies. Her clients began asking whether it was possible to pursue their investment objectives without violating their principles.

One of Amy's clients, an avid birdwatcher, had inherited stock in a large paper company that used a chemical in its manufacturing processes that was highly toxic to birds. She asked Amy what to do.

Join Amy on her back porch for a discussion of how responsible investors are building a brighter future. 
 

Soon Amy realized a new way of looking at investments was emerging. Amy wasn't the only one thinking along these lines. Many individuals had already made the connection between their investments and personal beliefs, and sought to invest in companies they respected while avoiding those they did not. At the time, a handful of mutual funds existed to screen for ethical concerns, and community development financial institutions were developing ways to use their capital to reinvest in their local communities.

In 1984, Amy wrote Ethical Investing, one of the first attempts to understand what these various strategies meant, and how they could complement each other. One critical question kept coming up: Would an investor who chose not to invest in tobacco companies or major polluters, preferring companies with better environmental and human rights records, perform better or worse than investors who did not consider these factors? She saw this uncertainty as the primary obstacle to the growth of responsible investing.

Amy realized that what social investors needed was a benchmark — similar to traditional investment benchmarks like the Standard & Poor's 500 or the Dow Jones Industrial Average—that could be used to determine whether there was a cost or a benefit, in dollars and cents, to invest this way.

In 1989, she and her partners Peter Kinder and Steve Lydenberg began work on the Domini 400 Social Index. This index of 400 primarily large-cap U.S. corporations was designed to look like the S&P 500 in virtually all ways except for one – its holdings were selected based on a wide range of social and environmental standards. When launched in 1990, it was the first index of its kind. A year later, they launched the Domini Social Equity Fund to provide investors with a fund that tracks the Index (The Fund is no longer an index fund. In 2006, the Fund received its shareholders’ approval to change from a strategy of passive index investing to active management).

Analysis of the long-term record of the Domini 400 Social Index* demonstrated that social and environmental standards have led to strong individual stock selection and potentially higher returns.

Responsible investing has come a long way since Amy’s bird-loving client first asked her about choosing companies that reflected her social and environmental beliefs. Today, we are guided by the knowledge that it is possible to earn a competitive return while using our investments to make a difference in the world. You no longer have to choose between your principles and your investments.

It is now widely recognized that social investors use three basic tools, often in tandem, to achieve their social and financial goals — application of social and environmental standards, shareholder advocacy, and community investing.

Learn more about how we leverage our shareholders’ investments to encourage greater corporate responsibility and build communities through the Domini Social Equity Fund, the Domini International Social Equity Fund and the Domini Social Bond Fund.

*Now known as the MSCI KLD 400 Social Index, owned by MSCI, Inc. MSCI and Domini Social Investments LLC are not affiliated.