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Social(k) - A New Option for Retirement Planning
by Rob Thomas
Most of us are too busy to think about retirement. While we give careful thought to the environmental impact of even the smallest decisions in life-paper or plastic?-we trust huge and often uncaring financial institutions to manage some of our most significant assets. Here's a new option. You still can be too busy to think about retirement, but at least you can rest assured that your social consciousness goals are being kept in mind.
A close friend, Joe Sibilia, began his journey toward corporate responsibility and sustainability fifteen years ago. He established Meadowbrook Lane Capital, a socially responsible investment bank and became a board member of Pioneer Valley (MA) Businesses for Social Responsibility.
At the time I was retirement investment planner dealing exclusively in conventional mutual funds. I watched from the outside as Joe created Gasoline Alley, a small business incubator in Springfield, MA, which houses several entrepreneurial enterprises having in common a mission of social responsibility. Having a strong personal environmental and social ethic, I was intrigued by his work that supported business while integrating environmental and social values.
Joe's message was: "We are in an age of enlightened capitalism. The successful corporations will be those that realize this." While my work with conventional retirement planning took me away from this world, my increasingly frequent visits to Gasoline Alley convinced me of the need to apply this thinking to my own business.
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From 1998 to 2005, I worked for a large investment bank learning the retirement plan business. Personally intrigued with socially responsible investing, I found a paperless 401(k) provider, ExpertPlan, that offered Calvert Funds. The paperless nature of the business and the inclusion of socially responsible investments (SRI) fit well with clients I had cultivated while attending the Natural Products Expos and Organic Trade Association conferences.
In 2000, "socially responsible investing" was not a phrase in widespread use. A few businesses were seeking 401(k) plans that had socially screened funds. Oil prices were low, the tech boom had not yet busted, and relatively few people had heard the term "global warming." Over the next five years, more and more companies began looking for socially responsible investment options and found little in the marketplace. Socially and environmentally-oriented business owners and organizations became tired of looking for 401(k) plans that offered so few options. While the major providers of retirement plans were not interested in such a small market niche, it struck Joe and me as an opportunity to put the philosophy of Gasoline Alley into practice.
I called ExpertPlan to see how we could expand their offering of funds to include more socially responsible options. They developed an "open architecture" platform which placed no limitations on the funds that could be offered.
We came up with the name "Social(k)" to reflect the focus of this new 401(k) platform. Today Social(k) offers over 100 funds that run investment decisions through positive and negative screens that cover a broad range of social, environmental, and even faith issues that allow employers and employees a chance to align retirement assets with their beliefs. (Social(k) also offers over 600 traditional funds).
Social(k) now joined the other enterprises of Gasoline Alley. It was still a new concept, however, and I would tell the story to anyone who would listen. The first real sign of acceptance came in October 2005 at the annual "SRI in the Rockies" conference. Attended by more than 500 SRI-savvy financial advisors, this was the acid test for the Social(k) concept.
The response was instantaneous and beyond what I had imagined. Managers of Parnassus Investments not only asked to be included on the Social(k) platform, but also told me they wanted to offer Social(k) to their own employees as part of their own 401(k) program. Subsequently, other fund families including First Affirmative Financial Network, Winslow Management Company, and Women's Equity Mutual Fund. have asked to both be included on the Social(k) platform and to offer the plan to their employees,
Social responsibility has not come at the cost of investment return. As of June 30, 2006, the Domini 400 Social Index was up an average of 8.6% over the past 10 years, while the S&P 500 was up 8.3% for the same time frame.
The response from individuals, businesses, and organizations continues to be gratifying. Co-op America has recently announced it is teaming with Social(k) to promote the platform to its 3,500 business members to help employees match their retirement funds with their beliefs. Honest Tea, MoveOn.org, the Organic Trade Association, Oregon Tilth, Tierra Farm, Portland Energy Conservation, Sambazon, and Prime Health Dietary Supplements (manufacturer of Think Products) are among the clients now being serviced.
Social(k) is well-accepted within the financial advisor community as well, with almost 300 advisors registered with us in the last nine months. There is no longer any barrier to companies and organizations that embrace social and environmental responsibility to express those same values with their retirement investments. Finally, employees can match funds with personal beliefs and still enjoy strong financial returns.
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