Socially Responsible Investing

Socially Responsible Investing: What a 1950s Boycott Can Teach Us About How to Live Our Values in the Face of Adversity

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Fueled by alternative facts, revisionist history, as well as a Napoleon complex, some would argue, Russian president Vladimir Putin ordered his military to invade Ukraine on Thursday, February 24. Leaders around the world, with China being the most notable of the few exceptions, rushed to condemn the Russian leader’s unprovoked attack on a sovereign country.

In addition to the vociferous global condemnations, western governments such as the European Union, the United Kingdom, and the United States quickly imposed what they describe as ‘strong’ sanctions designed to create significant pressure on the Russian economy and its oligarchs. Recent history warns us that no matter how effective the sanctions may end up being in the short-term, they likely won’t have a meaningful long-term effect.

Rewind back to 2014 when Russia annexed Crimea. Then, as now, many of the world leaders voiced their outrage at Putin’s antidemocratic actions. Former German Chancellor Angela Merkel labeled the actions as “unacceptable” and stated a German goal of Crimea being returned to Ukraine.

Despite Russia not returning Crimea to Ukraine, in 2018 Germany gleefully helped build the Nord Stream 2 pipeline which would further enrich Putin and the aforementioned oligarchs. Opponents of the project presciently warned that Nord Stream 2 would weaken European security and might embolden Russia to take more aggressive action against its neighbors. However, present concerns of lower oil and gas prices trumped fears about future Russian hegemony.

This practical European expediency about access to Russia’s oil and gas highlights the daunting long term challenge of investors looking to engage in more socially responsible investing, or SRI for short. SRI is generally defined as the practice of investing money in companies and funds that have positive social impact. From addressing climate change to societal inequities, SRI can be a tremendous force for good that allows investors to support dearly held values.

Resources such as Tobacco Free Funds, Built In, Human Rights Campaign, and Yahoo Finance’s sustainability section make it easy to track entities whose business practices are best, or least aligned with our most important values. However, the ease of our ability to track an entity’s level of social responsibility or environmental sustainability is just a single step in the process.

Translating values into consistent action is not always as easy as it might seem. Abraham Maslow wrote in his A Theory of Human Motivation: “While behavior is almost always motivated, it is also almost always biologically, culturally and situationally determined as well.”

In other words, circumstances matter. If you are struggling to feed your family, heat your home, or pay your rent or mortgage, loftier societal ideals are often, at least temporarily, cast aside. Further evidence to support this concept are the words of Bjorn Lomborg. In The Skeptical Environmentalist Lomborg writes that people only start to become concerned about and take action on environmental sustainability issues once their income reaches a certain level.

Maslow’s and Lomborg’s words about how circumstances determine our actions elicit an important question: how do we stay true to our values at ALL times?

We believe that a great answer to this question lies in the Montgomery Alabama bus boycott of the 1950s. That boycott (December 5, 1955 to December 21, 1956) was organized by Jo Ann Robinson in order to change the racist and demeaning ways that African-Americans were routinely treated in the city’s bus system.

The real genius and effectiveness of the boycott, and a major lesson for us, was displayed through how organizers and supporters addressed and planned for the inevitable short term hurdles. They knew that it would certainly cause riders definite pain in the short term. However, they also believed that if the boycott was executed properly it would yield incredible long-term success.

The organizers accomplished this by simultaneously addressing the long-term gains, here greater racial equality, and short term concerns such as how riders would navigate travel in the interim. While many previous riders were able to walk, that was not the case for everyone.

Boycott leaders addressed these concerns by organizing carpools. African-American taxi drivers supported the efforts by refusing to engage in price gouging of their new customers. Instead, they charged riders the bus fare rates that they normally paid. The African-American community sacrificed for more than a year to support dearly held values.

For those of us who aspire to do more than engage in situational ethics and values, such as being socially responsible investors for the long term, there will always be a price to pay for clinging to these values. It will certainly mean missing out on profits from companies whose values don’t align with yours.

For example, many of our clients refuse to invest in tobacco companies, understanding that by clinging to their values they are foregoing dividend income and potential stock appreciation from an incredibly profitable industry. However, as Jo Ann Robinson and other boycott organizers taught us, the key to successfully living out one’s values, at all times, is to actually make sacrifices and signal to others our willingness to forgo what is easy for what is right.

To paraphrase the legendary Zig Ziglar, socially responsible investing is not always going to be easy, but it’s going to be worth it.

To partner with us, or to reach out with comments, questions, or concerns, please email us at info@taryagfinancial.com.