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October 11, 2002
Book Review: The SRI Advantage
by Doug Wheat
In this important new book, author Peter Camejo makes a case for why socially responsible investing
strategies lead to higher returns than non-SRI strategies.
SocialFunds.com --
With the completion of The SRI Advantage, Peter Camejo has filled a large gap in the
existing literature about socially responsible investing. Previous books have concentrated on how
one can and why one should participate in social investing, often from ethical or moral
perspectives. Mr. Camejo’s contribution is focused squarely on dispelling a widely held myth
that SRI investments do not earn competitive returns.
 Mr. Camejo is very well versed in SRI strategies. He is
the founder and chair of Progressive Asset Management, an investment firm that specializes in SRI.
According to Mr. Camejo, SRI strategies enable investors to reduce company-specific risks in a
portfolio. SRI strategies also allow investors to identify firms with strong finances and
effective management. For example, SRI strategies weed out companies that harm society, such as
those that sell tobacco or emit pollution from their factories. Moreover, the author states that
SRI strategies identify companies that are less likely to develop unforeseen problems. These
strategies also detect companies that are likely to possess financial and managerial resources that
can “respond effectively to traditional business challenges.”
In addition,
the author posits that using SRI strategies sensitizes the investment process to the social
concerns of society. In essence, SRI strategies screen out companies that are in conflict with
public opinion. The result, he states, is that socially responsible investments financially
outperform investments that are not socially responsible.
Ultimately, Mr. Camejo asserts
that outperformance results because “SRI sees an aspect of reality not included in the
research of traditional Wall Street firms.” This concept is important because it allows the
author to designate SRI strategies as a financial screen. When SRI strategies are viewed as a
financial screen, the explanation of their ability to yield outperformance fits within accepted
financial theories. This logic may make SRI more palatable to financial analysts and institutional
investors than when the strategies are marketed as “socially responsible.”
Mr.
Camejo writes, “Wall Street’s traditional view is that you can add alpha (performance),
but that SRI does not because it uses screens that are external to financial performance. But Wall
Street is wrong in this judgment, precisely because SRI is a financial screen.”
The
recent jury award of $28 billion from Phillip Morris to a smoker must surely give pause to analysts
who think every portfolio should have a slice of tobacco because it passes traditional financial
screens.
Mr. Camejo does a commendable job presenting some complicated financial material.
However, lay readers may find themselves lost in a sea of alphas and betas while financial
analysts will likely be hunting in vain for detailed analyses. Nonetheless, both of these groups
will find the book useful. Individual investors will find some comfort in the fact that they do
not have to sacrifice financial performance to invest with their values. Financial professionals
will get a solid view of SRI strategies and copious references they can look to for further
clarification.
Readers will also benefit from the nine supporting chapters written by
experts in the socially responsible investing field. These chapters provide some key arguments as
to why SRI strategies should be considered by foundations and pension funds. They also offer
additional views on how to employ SRI strategies in such areas as the environment, international
investing, and community investing.
The SRI Advantage is sure to create some
discussion. Mr. Camejo does not hold back in making claims and seems to even encourage readers to
challenge his conclusions. He goes so far as to frame the premise of the book, that investments
using SRI strategies outperform investments that do not consider social and environmental concerns,
as a hypothesis rather than a proof. The author addresses some counter-arguments to his assertions
but never wavers in his belief that because SRI strategies avoid companies that produce social
harm, investments using these strategies outperform.
Finally, this book is also a call to
existing social investors to not be satisfied with sub-par financial performance. Indeed, most SRI
professionals will not claim that investments using SRI strategies outperform other investments;
they simply say that investments using SRI strategies earn competitive returns. Now, Mr. Camejo
suggests that outperformance is the new measure of success.
Order this book from
Amazon.com
©
SRI World Group, Inc. All Rights Reserved.
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