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The Investor Environmental Health Network (IEHN) and the Interfaith Center on Corporate Responsibility (ICCR), recently released a guide intended to help increase disclosure and mitigate the impacts of natural gas operations using hydraulic fracturing  (?fracking?). Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operationsoffers best practice recommendations to energy companies for reporting and reducing risks and impacts from natural gas operations in shale relying on hydraulic fracturing.  1211

A Brief History
The origin of what we call sustainable, responsible impact investing (SRI) dates back centuries. In biblical times, Jewish law laid down directives about investing ethically. In the mid-1700s, the founder of Methodism, John Wesley, considered the use of money as the second most important subject of New Testament teachings.

For generations, religious investors whose traditions embrace peace and nonviolence have avoided investing in enterprises that profit from products designed to enslave or kill fellow human beings. It is likely that Methodist and Quaker immigrants brought the concept of values-based investing to what is now the United States. The Quakers never condoned investing in slavery or war. And, the Methodists have been managing money in the U.S. using what are now referred to as "social screens" for over two hundred years.

The modern roots of this phenomenon can be traced to the impassioned political climate of the 1960s. During that tumultuous decade, a series of themes served to escalate sensitivities to issues of social responsibility and accountability. Concerns regarding the Vietnam war, civil rights, and equality for women broadened during the 1970s to include labor-management issues and anti-nuclear convictions.

The ranks of socially conscious investors grew dramatically in the 1980s as millions of people, churches, universities, cities, and states focused investment strategies on pressuring the white minority government of South Africa to dismantle the racist system of apartheid. Then, with the Bhopal, Chernobyl, and Exxon Valdez incidents, the environment became top of mind for socially aware investors.

In recent years, school shootings, human rights, Native American issues, respect for indigenous peoples around the world, and healthy working conditions in factories that produce goods for U.S. consumption have become rallying points for investors with dual objectives for their investment capital. Most recently, the climate crisis has awakened investors to opportunities inherent in directing investment capital in more transformative ways.

Three Dynamic Strategies
A sustainable and responsible approach to investing includes both quantitative and qualitative analysis. All investors look for profit potential, but responsible investors also integrate an evaluation of environment, social, and governance (ESG) factors into the investment decision-making process.

A double bottom line (quantitative + qualitative) analysis provides the basis for designing investment portfolios aligned with personal values and social priorities, while delivering the returns needed to achieve an investor's financial goals. The process considers the impact of an investment on all stakeholders, within the context of rigorous financial analysis.

ESG Integration. Management of environment, social, and governance issues and impacts can have a material influence on company profitability, value, and share price. Qualitative ESG analysis offers valuable insights into corporate policies, practices, attitudes, and impacts. Analysis of ESG issues can help illuminate corporate character and identify better-managed companies.

Shareholder Advocacy efforts include engaging in dialogue with companies, and submitting and voting on proxy resolutions to encourage more responsible corporate citizenship. Efforts are focused on improving financial performance over time and enhancing the well-being of all stakeholders -- customers, employees, vendors, communities and the natural environment, as well as stockholders

Community Investing directs capital to people in low-income communities who have difficulty accessing it through conventional channels. Many socially conscious investors earmark a percentage of their investment portfolios to community development financial institutions (CDFIs) that work to alleviate poverty, create jobs, provide affordable housing, and finance small business development in disadvantaged communities.

$3 Trillion
The Social Investment Forum's 2010 Report on Socially Responsible Investing Trends in the United States* identified over $3 trillion in professionally managed portfolios using one or more of the three dynamic strategies that together define sustainable and responsible investing in the U.S. -- ESG integration, shareholder advocacy, and community investing.

In the fifteen years between the Social Investment Forum's first Trends Report in 1995 and the most recent report in 2010, responsibly managed asset pools have grown from $639 billion to over $3.07 trillion, an increase of 380%, versus a 260% increase in the broad universe of assets under professional management as tracked by Thompson Reuters Nelson.

From 2005 through 2009, SRI assets surged more than 34%. Between the beginning of 2007 and the end of 2009, broad markets declined, and overall assets under management stayed flat, but SRI assets grew by 13%. The Social Investment Forum reports that as of 2010, nearly one out of every eight dollars under professional management in the United States was involved in some form of sustainable and responsible investing -- that's 12.2% of the $25.2 trillion in total assets under professional management in the U.S.

* 2010 Report on Socially Responsible Investing Trends in the United States. The Social Investment Forum is the nonprofit trade association for the sustainable and responsible investment industry in the U.S. (www.socialinvest.org).

What is Fueling the Growth

Information. Investors are significantly better educated and informed today. Social research organizations provide higher quality information than ever before. The better informed investors are, the more responsible their actions tend to be.

Climate Change. As consumers and investors have become increasingly aware of both the dangers and business opportunities embodied in the climate crisis, more and more are looking to invest in solutions.

Performance. An impressive body of academic evidence plus real world results effectively dispel the myth that social screening (ESG integration) will automatically result in underperformance. Investors are realizing that responsibility can walk hand-in-hand with prosperity.

Availability. Some 260 mutual funds* are designed for socially conscious investors. Sustainable and responsible investment options are increasingly being offered within retirement plans, and hundreds of asset managers now promote their ability to manage responsibly invested portfolios.

Values and Authenticity. There is a spiritual yearning on the part of a large and growing segment of the population to integrate personal values into all aspects of life, including finance and investing.

Corporate Scandals. Numerous recent instances of accounting fraud and other scandals have eroded trust in company leadership. Many investors are attracted to an investment process based on research that goes deeper into corporate character.

Women. As women have filled the ranks of MBA programs and law schools, climbed corporate ladders, started their own companies, and assumed roles as fiduciaries, many have brought with them an affinity for a more caring approach to investing.

Sustainability. The growth of sustainable and responsible investing has marched in lock-step with increasing public interest in everything green-natural and organic food, renewable energy, green building, and alternative health care-providing new inspiration and expanded investment opportunities.

Adapted from Sustainable and Responsible Investing in the United States by Steven J. Schueth.

Steven J. Schueth is President of First Affirmative Financial Network, LLC, an independent Registered Investment Advisor that specializes in serving socially conscious individual and institutional investors (SEC File #801-56587). You can contact Mr. Schueth at 303-442-8400 or steveschueth@firstaffirmative.com.

Past performance is never a guarantee of future results. Investing involves risk and investors may incur a loss.

*2010 Report on Socially Reponsible Investing Trends in the United States. The Social Investment Forum is the nonprofit trade association for the sustainable and responsible investment industry in the U.S. www.socialinvest.org