Doing well by doing good.

One day in the mid 1960s, in London, I wandered into a used-book store the size of a Victorian mansion. I'd heard that it was the largest bookstore in the world. I forget the name of the place now, but recall making my away around huge pries of the relics of poets and proselytizers now long dead--including stacks of old religious tracts that I couldn't imagine anyone ever wanting to read. But then suddenly, among those stacks, I saw a very large book with a title I knew. It was The Journal of George Fox. To the clerk I approached, this book was probably just another oversized door stop, and he was happy to sell it to me for a couple of pounds. But for me it was a treasure. George Fox had been the founder of Quakerism--the religion I grew up with.

The Quakers strongly affected my views on the issues of violence, overconsumption, and social justice that would subsequently become so central to the work of World Watch. Quakers are stubbornly nonviolent (getting arrested repeatedly for their anti-war protestations); they make an almost ostentatious show of simplicity (not quite to the extreme of the Amish, but not far off); and they have a long tradition of defending the oppressed. In the days of American slavery, for instance, it was mainly Quakers who ran the "Under ground Railroad"--a network of safe-houses and sympathetic whites who secretly sheltered runaway slaves as they fled north to freedom.

In their insistence on material simplicity, the Quakers who followed George Fox anticipated an important element of the modern environmental movement. In the eighteenth and nineteenth centuries, they were identifiable by their plain clothes--no jewelry, no frills, no cosmetics. They said "thee" instead of "you," when speaking to individual persons, because "you" was a plural pronoun that had been pretentiously adopted by royalty, and Quakers disapproved of pretentiousness. (My mother called me "thee" all her life, as in "Will thee be coming alone this weekend, or will you both be coming?") Their places of worship--not churches, but "meeting houses"--were simple wood buildings with no steeples, statues, stained glass, or adornment. Worship services included no ritual, no sacraments, no preacher.

But for all this elaborate simplicity and conspicuous non-consumption, the Quakers were far from poor. There was a joke we all knew. The Quakers, it was said, "came to America to do good--and did very well." Over the generations, the Quakers have continued their anti-war and social justice activism (and have continued to get themselves arrested), but have also done quite well with their personal investments.

A few months ago, the question of whether it is possible to "do good and do well" came up for me in another context. For years, I had wondered whether the kind of information we generate at the Worldwatch Institute might not have considerable value not only for those who want to know what kinds of policies or practices will lead to the sustainable economy of the future, but also for those wire want to invest in such a future--to put their money where their conscience is.

I had long been inhibited by a sense that "good" industries often operate at an economic handicap, insofar as they refuse to exploit the planet in ways that are routinely profitable for the industries we might consider unsustainable. Many businesses extract profits by exploiting sweatshop labor (or slave labor, or child labor, or the labor of unpaid women in the shadow economy), or by operating plants in places where they can avoid expensive pollution control. If a business refuses to profit from such exploitation, isn't it going to be less profitable?

At the same time, however, I had learned that interest in SRI--socially responsible investing--is growing fast. My question was, can SRI investments really do as well as, say, investing in cigarettes or oil wells? I wondered whether putting money into a socially and environmentally responsible company shouldn't really be regarded to some degree an act of charity--a calculated willingness to sacrifice some near-term return in order to encourage a better future. What made it a hard question to grapple with is the real world fact that, contrary to what my ideals may suggest, short-term considerations can't always be shrugged off as having a morally lower priority. Not when the short-term consideration is, say, your family's health. My question wasn't whether good works could succeed, but whether, in an open market, the good could succeed enough to compete with and begin to displace--the bad.

I decided to cheek out this idea with some professional managers of socially and environmentally responsible investments. Would I be compromising my family's well-being if I invested in SRI funds, I wanted to know--or could I really do some good and do well too?

Steve Lippman, a senior social research analyst at Trillium Asset Management, replied without hesitation, "There's a lot of compelling evidence that socially responsible investing doesn't require investors to make compromises between their financial goals and their social and environmental values. For instance, one of the best known socially screened funds, the Domini 400 Social Index, has beaten its benchmark, the S&P 500 Index, for almost the entire life of the fund." Over 10 years, while the S&P 500 gained 8.54 percent, the Domini 400 gained 9.13 percent. Both figures reflect the heavy losses of 2000-02, but the social fired lost less.

Bob Dunn, CEO of the San Francisco-based Business for Social Responsibility, agreed that "there is unquestionably a way for small investors to combine financial and social purposes without seriously compromising either." He, too, cited the Domini Index. But Dunn, who was the 2002 winner of Amnesty International's Corporate Leadership Award, also told me that there are two caveats to keep in mind: First, "This is a realm where patience is truly a virtue. In the short term, any set of investment decisions can look brilliant or painful." And second, "Corporate responsibility can enhance corporate performance, but it cannot overcome inadequate capital, poor products, lack of customer service, etc. In other words, people really need a double screen--one for business fundamentals and one for good corporate citizenship. While 'virtue is its own reward,' it won't help you pay for tuition for your kids if it isn't married with sound management."

Jack Robinson, president of the Winslow Management Company in Boston, put that point into a sobering historical perspective. "The early SKI people were truly passionate, and a lot of people got into the business who were not particularly savvy about management," he told me. "Our focus is [strictly] on environmental factors, because they're measurable." Robinson's focused approach seems to be working, as the Winslow Green Growth Fund finished the first quarter of 2003 with a return of 6.3 percent, compared with a minus-3.9 percent return for the benchmark Russell 2000 Growth Index.

Rona Fried, president of Progressive Investor newsletter, made it clear that a case like the Winslow Green Growth Fund is not just an exception. "A number of studies have been done comparing SRI and conventional funds," she said. "Some studies show the SRI investment performing slightly better. Some show it doing about the same. But none show SRI doing consistently worse."

There's a conundrum, though, when it comes to picking "good" companies. Sometimes you find a business that's taking bold steps toward more sustainable practice--and then you discover that that business is owned by a much larger company that's doing the same old exploitative business as usual. A wind-power business owned by an oil conglomerate, for example. Moreover, that sort of impediment is becoming more common, as giant, old-regime corporations hedge their bets and diversify small amounts of their capital into green enterprises, often by buying out smaller, more progressive, companies. What do you do then? Rona Fried, whose newsletter publishes lists of recommended SRI stocks, confirmed that this is happening quite a lot, given the trend toward increasing concentration in many industries. For example, she said, just a few days before we talked, the Odwalla company, which sells fresh juices that put supermarket "fruit drinks" to shame, had been bought up by Coco-Cola. But in answer to my question about what to do, Fried had a tough-love answer: "We take them off the lists."

Reflecting on all this, I realized that we've come a long way since the days when idealists were considered fuzzy-brained and unrealistic, whereas businessmen were hard-nosed and rational. Environmental economists have made it quite clear that a rational economy must be one that accounts for real-world changes in the planet's natural capital, it is the conventional industrialists who are fuzzy-brained in thinking they can regard environmental destruction as an "externality" that need not show on the books. Idealists used to be the people who were passionate but not necessarily "practical." They were, I thought, people like the women who got publicly whipped in Dover, England, or burned at the stake in Salem, Massachusetts, for being too vociferous about their opposition to restrictions on individual conscience--or, before them, George Fox, the itinerant preacher who knew how to raise the hackles of British merchants. When was it that idealists had moved from being troublemakers to being savvy investors in sustainability? I turned to SocialFunds.com, which has a Social Investment Timeline. Beginning with the most recent events, I read back through the history:

1982: Calvert Group becomes the first money market to have a social screen;

1971: Pax World Fund becomes the first mutual fund to offer screened investments;

1970: Ralph Nader launches Campaign Gift;

1928: Pioneer Fund is established to meet the needs of church group investors who did not want to invest in "sin" such as alcohol, tobacco, and gambling activities; and on back to the first item in the timeline:

1652: George Fox founds the Quakers ... the first group of investors to apply social criteria to investing standards based on their beliefs in human equality and nonviolence.

And so, it seems, the idea that you can do good and do well is not revolutionary at all. It's just that for several centuries, that idea has been routinely disparaged, by those who profit from environmentally destructive practices, as "unrealistic." But for those who really knew, the profitability of investment in the long-term well-being of the world was never in doubt.