Another advantage values-based investing has over philanthropy is that it provides people with an opportunity to direct much more money toward funding their social entrepreneurship. Someone with $1 million in cash might decide that she can comfortably donate 5%, or $50,000, to charity.

Yet by investing in an organization providing loans to disadvantaged small business owners, she can put the entire $1 million to work for a particular cause. When the loan term ends and the principal is returned, the investor can commit the same $1



million once again to another worthy organization. Likewise, if she operates a private philanthropic foundation, she can use program-related investments, which support charitable activities and anticipate a certain return within a set amount of time.

To fulfill a philanthropic goal of promoting understanding and ending violence in the Middle East, the founder of a popular e-commerce Web site had been donating money directly to various nonprofit agencies. But short of increasing his charitable gifts, he wondered how his dollars could have an even greater impact. Hilary Giles, his Private Wealth Advisor at Merrill Lynch, suggested the Calvert Foundation, which sells Community Investment Notes to fund such initiatives as building affordable housing or providing small loans to business owners in impoverished areas — a process known as microfinancing.

Owning an investment that delivers returns as it fosters economic development in the Middle East appealed to the entrepreneur. “I realized that helping people create jobs is an effective tool in fighting terrorism,” he says. “And I can afford to loan a lot more money than I can afford to give away, so the Calvert Foundation is a way for me to get a lot of cash to people who need it. It’s a sustainable model.”

When investors buy Community Investment Notes from the Calvert Foundation, they choose a return rate of 0% to 3%. The lower the rate of return, the more money goes toward the cause the investor wants to support. Of the foundation’s 2,500 investors, some 350 have elected zero returns, says Shari Berenbach, the foundation’s executive director.

After a quarter-century, there is little doubt that values-based investing is more than just a passing trend. Though the field will undoubtedly continue to evolve with new products — and with causes to invest in, as world events thrust new issues to the fore — more and more portfolios are including investments that contribute to an individual’s notion of an ideal world as well as to his or her bottom line. And the feel-good factor is a bonus. Says Merrill Lynch Private Wealth Advisor Waitrovich, “There’s an afterglow from knowing your values and your investments are in the same place.”

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