Socially Responsible Investing

How to Be Charitable…and Hold Onto Your Money

Bench in Yosemite
You can inexpensively plan for a donation from your 401(k) while retaining access to the account if you need it.

Four Green Ways to Pay Less Tax

A lot of people think that green financial planning is all about investments.

I beg to differ. As a comprehensive planner, I love to talk about the good you can do without investing a dollar. One great way is to act green and save money is on your taxes. Here are four big opportunities:

1. Donate to charity
If you itemize, donating items that you don’t need is a great way to get a deduction.

When acting green, there are generally good, better and best alternatives.
In this case, “good” is contributing your used clothing and household items to the charity of your choice rather than pitching it into the garbage stream.

Even better: you can also contribute used TVs and electronic items to charities that will recycle them.

best is finding charities that will actually reuse your electronic items. Domestic violence shelters use cell phones. Other charities refurbish your old electronics and send them to schools and developing countries that need them. One time I even donated an old mountain bike to a charity that sends them overseas.

Here’s a
nationwide website that connects you with local charity pickup services. You might have to scan the listings of each individual charity to figure out which accept items like mattresses and TVs that some charities won’t accept:

a Chicago charity that accepts electronics for re-use called FreeGeek. They have a resale shop and accept drop-offs:

Here’s a handy list of Chicago charitable organizations that details what each organization is looking for and what they do with it:

And here’s
where I donated my bike:

Common sense caution applies. Donating a computer with a hard drive full of personal information? Make sure you are comfortable with programs that wipe it clean before setting up your pick-up. Even if you don’t want to donate your hard drive, giving away old printers, scanners and cords don’t offer security challenges.

2. Improve your home
These purchases get you a
tax credit through 12/31/2013 if your purchases meet energy star criteria:

1. Insulation
2. Roofs (metal and asphalt)
3. Water heaters (non-solar)
4. HVAC systems
5. Windows and doors
6. Biomass stoves HVAC systems (I’ve got to admit that I didn’t even know what these were!)

Doing a more ambitious project to either your principal residence OR your second home? Consider following energy star guidelines and get a tax credit. The credit for these expires 12/31/2016:

1. Geothermal Heat Pumps
2. Small Wind Turbines (Residential)
3. Solar Energy Systems

Also for your principal residence (sorry, no second homes here) if you get one of these bad boys before 2016, you can get a credit:

1. Fuel Cells (Residential Fuel Cell and Microturbine System)

You can find more details about all the above credits here:

3. Buy a Plug-in Car
The credit for hybrid cars is gone, but there are still some credits left for buying a plug-in. Here’s the link:

4. Get money from your state
Finally, most states have green tax incentives. Here’s the website to help you look up your state:

I looked over Illinois’ list and it seemed to be primarily incentives that relate to the construction industry. However Illinois is in a fiscal-crisis-mode, not a dolling-out-tax-incentives mode at the moment. Other states are more promising.

By Bridget Sullivan Mermel

Check Your Insurance Before You Need It

The insurance socially responsibility test. Subject your insurance to it even if you don’t care about “social responsibility.”

What is that test?

Socially responsible insurance companies pay their claims.
One of insurance company’s most important implicit social agreements is helping people when the chips are down. Just ask the people caught up in Katrina or Sandy. Insurance companies play a pivotal role after disasters.

As part of financial planning, planners routinely look at the financial health of insurance companies to make sure we’re recommending sound insurance companies to clients.

But it makes sense to look deeper, even if you don’t give a hoot about socially responsible investing.
The key question to ask: how do customers rate insurance companies on their claims experience?

Turns out, this information is readily available. Just look at the ratings on
The customer satisfaction numbers for claims experience are right there. This link points to homeowners insurance. Auto insurance is here.

The inspiration for this blog post came from the work of Ann C. Logue in Socially Responsible Investing for Dummies. Until I write my own book, that’s the one I recommend. Thanks!

by Bridget Sullivan Mermel

How do Guns Make the Grade in a Portfolio?

confused blog picture
Dear Bridget,

Recently I’ve read reports that the
both the California and Chicago teachers pension funds are either reviewing or selling investments in guns. What do you make of it?


The trustees in these cases are walking a fine line. If they decide to divest of all gun manufacturers, they are eliminating a market sector, and research shows that hurts investment returns.

Divesting in entire market sectors was the approach back when the socially responsible investing (SRI) movement started. Funds that follow the strategy are called “Excluders” because they are excluding investments based on their market sector.

The problem is that research has subsequently shown that Excluders show weaker returns. Lowering your diversification by eliminating a market segment doesn’t help your portfolio in general.

Because Excluders were the initial strategy that many socially responsible investors followed, the entire SRI movement has been labeled with not making market returns.

If the trustees decide to keep investing in gun manufacturers, but judge which gun manufacturers are the best on environmental, social and governance issues, they are following the strategy of “Includers.”

Many studies support that Includers do as well or better than the market in general.

So the current debate: First, a
lot of the newspaper stories are unclear about what the trustees of different funds are actually doing. The headline might imply they are dumping the gun market sector, but buried in the story are details that really matter. In the case of California’s teachers pension fund, they are reviewing their portfolio for gun manufacturers that make guns that aren’t legal to own or sell in California. If they find investments in their portfolio that meet that criteria, then they will give the manufacturer an opportunity to change to comply with their new standards.

That approach doesn’t make for sound-bite headlines, but that approach has been successful with other SRI initiatives.

Most of the divestments are small. In the case of the Chicago teachers pensions, less than $200,000 was sold, out of a total portfolio over 9 billion.

The biggest news on the scene is that the California pension trustees, known as CalPERS, is voting on an initiative similar to the California teachers. This pension fund is the Warren Buffet of socially responsible investing. When they make moves, research shows that just following their moves improves investor returns. I’m waiting for news on what they decide.

by Bridget Sullivan Mermel