Saturday, January 31, 2009

SRI: Integrity & The Unasked Question

Socially Responsible Investment (SRI) is a hot topic, made hotter by the vision of an Obama-inspired era of service coupled with the reverberating shock waves of devastating financial crisis. In case there was any doubt, the recent panel “Different Faces of Socially Responsible Investment” (presented by New York Women Social Entrepreneurs held at Columbia University) attracted a highly engaged, standing-room only crowd, even on an icy cold, January, NYC weeknight. Two thoughts linger from our discussion:

  • there’s no substitute for integrity, and
  • the best question was the one not asked.

Let’s start with the unasked question.
Funny thing is, while I loved participating as one of the “faces of SRI” on the panel, at times I wondered if I was in the right place, or if the panel had the right name. Why? Because our start-up, the Fast Forward Fund, isn't an SRI fund; FFF is a youth Social Investment venture. What’s the difference? SRI is a financial investment strategy; “social investment” is a philanthropic strategy. So, while I jumped in and enjoyed the provocative discussion swirling around the question of what is a socially responsible investment, here’s what we didn’t ask: what is a responsible social investment?

The distinctions between socially responsible investments and social investments may blur or overlap, especially as new investment models emerge and merge. But for now, I think the question of what makes a financial investment socially responsible is fundamentally different from what makes philanthropy responsible. It’s the latter that grabs me. How do you know if a social investment is responsible?

I suggest looking at three things: the soundness of social investment vehicle itself, compatibility with social investor profile, and (perhaps, most importantly and elusively) integrity.

First of all, know where your social investment goes. We have more capacity than ever today to assess the operational, financial, and social soundness of social investments. Online tools like Guidestar, Charity Navigator, and other hubs of nonprofit management information, offer good, though limited (and potentially contorted) snap-shots of organizations in the social sector. Responsible social investments consider available information from primary and secondary sources indicating how effectively the operation is run, how impact is measured, how finances are managed, how an organization is developed and how it is responsive to its mission and stakeholders.

Secondly, know who you are, or want to be, as a social investor. I say “social investor” rather than “philanthropist” here because I want to emphasize that the way we give, the way we direct capital to social causes, is a real investment with real returns and real impact. As social investors, we need to choose social investments reflecting our own investor profiles. Just as financial portfolios reflect investor profile in terms of capacity, style, risk threshold, financial goals, etc., so should social investment portfolios. Responsible social investments match investor interests, capacity, style, commitment, engagement, and philanthropic goals.

Finally, the heart of responsible social investment comes down to integrity. I raised this issue as the panel discussed governance and how we ensure that we’re doing the best work we can do as social entrepreneurs. While we talked about the challenges and importance transparency, leadership development, internal performance measurements, benchmarks and other governance metrics, I suggested there was another piece that may be even harder to address: we really need to talk about integrity. While perhaps immeasurable in quantifiable terms, integrity in governance is indispensable to doing your best work in social investment. Most of us recognize its quality when it is present, and notice when it is absent. Integrity is more than workplace ethics, though that’s essential, too. It’s about bringing a sense of wholeness to our work, and deriving a sense of respect, creativity, growth and fulfillment. The integrity of social investment establishes its reputation, enhancing its ability to recruit talent, attract investors, forge collaborative partnerships, and optimize social impact. Thinking about what is responsible social investment brings me back to my other key take-away: there’s just no substitute for integrity.