We all want the world to be a better place
to live in. We may not agree on all the details but I think
we can agree on some of biggies that we would like to reduce
and even eliminate. Starvation, wars and crime would be
a start. Exploitation of other human beings another. Protection
of our earth for future generations is becoming more urgent
Or, turning it around, we would all like to
live in a peaceful world where everyone has the opportunity
to recognize and live their full potential. As individuals
we would like harmony with our neighbors and as nations
we would like harmony with other nations.
Most of us are not in a position of sufficient
power or influence to do much about these things on a large
scale. This is where the five percent principle comes in.
The idea is that we start from where we are and make a five
percent increase in our efforts and actions towards bringing
about positive changes in areas that concern us.
You are probably thinking what does this have
to do with money and investing. The link is in two parts,
both related to your own values. The first part is through
investing in companies with products and services that you
believe in. The second is through supporting causes that
you care about. Just a small, but widespread, increase in
these activities can bring about a hugely different world.
But before I talk about this, I would like to give some
Family, society and the five percent principle
Do you care about your parents? If so, I am
suggesting that you increase the time you spend with them
by five percent. Or, perhaps even better, spend the same
amount of time with them, but increase by five percent the
amount of attention you give them. Be a five percent better
The same applies to your children. Be five
percent more appreciative and supportive of them.
Why five percent? Why not ten percent, twenty
percent or more? Or two percent or one percent? All I can
say is that both from my own experience and talking to a
lot of people in my investment workshops and elsewhere,
this seems to be the most effective level. When you try
to implement a lower level you can have the impression that
it is so low that it is not worth doing. When this happens
it slips out of your awareness and you stop doing it.
On the other side, higher than five percent
can end up making you feel too pressured and once again
you stop implementing the principle. It is like making New
Year resolutions. We start with a great flurry of excitement
and determination, but if we set the bar too high then we
quickly give up.
So five percent is a happy medium. It is high
enough that you have the feeling that you are actually doing
something. It is worthwhile starting. At the same time it
is low enough that you are not overwhelmed by the task.
It does not require superhuman resolve, nor is it so demanding
that you quickly give up.
Of course, we can't really measure whether
we are being a five percent better listener or whether we
are five percent more supportive. It is more an inner benchmark
that you set for yourself and which you are comfortable
with. And no one is checking up on you to see whether you
are five-percenting or not.
The idea of the five percent principle is
that you can apply it to any, or all, areas of your life.
Suppose you read in the newspaper about an increase in crime
in a particular area, perhaps where you live. This upsets
you. How does the five percent principle apply?
The first thing is to look at the problem
from a personal perspective. You could start with the fact
that all crimes are committed by the children of someone.
Few of us imagine that our children would use drugs or steal
from liquor stores. Yet clearly, on average, we have to
do more to help our children to be stronger in resisting
the pressures from their peers to be involved in illegal
activities. The five percent principle could be implemented
by being more open to the problems faced by your children,
by spending more time with them, or by being more supportive.
Another approach could be to become more active
in community planning meetings when they are discussing
the issue of crime. Or more supportive of youth clubs or
This is one of the general ideas of the five
percent principle. Wherever you see something that disturbs
you, simply take a small step to increase your understanding
of the problem and then, if you are able, take some action
in whatever way you can.
You might be thinking that you see so many
things that disturb you that even if you only take small
steps in relation to each one, you will still need 25 hours
in the day. Don't worry. Just focus on the five percent
of the areas that you find most disturbing or are the most
important to you.
This is the five percent principle applied
to the unsettling areas of your life. On the other side,
we can apply it to the positive areas of our life. Being
kinder and more considerate to our friends, our children,
our parents. Giving others the benefit of the doubt and
wishing them well in our hearts. Having tolerance for people's
shortcomings. These are all ways that we can do our part
to make the world a better place to live in.
Before looking at investing, there is one
final point which may well be the most important point of
the whole article. When you are trying to be more forgiving,
more compassionate, more friendly, make sure you include
yourself in this. If we always strain to 'do what is right'
by the other person, then too often we become resentful,
angry and mistrustful. This is not good for us and frequently
not good for the other person since we can begin to take
on a righteous, I-know-what's-best-for-you attitude.
Investing and the five percent principle
How does the five percent principle apply
to investing? A first step could be to become five percent
more aware of the social, political and environmental goals
that you would like companies to have. Then you could compare
these with the actual policies and actions of the companies
you invest in. This could be followed by a five percent
modification of your portfolio away from companies that
don't meet your goals and towards those that do.
You can increase the proportion of socially
responsible companies in your portfolio through avoidance
screening and affirmative screening. Avoidance screening
areas include alcohol, animal rights, genetic engineering,
environmental issues (global warming, pollution and toxic
products), gambling, human values, labour discrimination
and exploitation, nuclear power, repressive regimes, tobacco,
and weapons and the military. Examine your attitudes to
these. Do you have any strong feelings about any of them?
Affirmative screening areas include clean
transportation, environmental repair, natural foods, recycling,
reforestation, renewable energy and conservation, and sustainability.
What are your attitudes to these?
Another route to implement the five percent
principle in investing is through putting some money in
areas such as community development banks and credit unions,
community development loan funds, and international microcredit
The original community bank is South Shore
which started more than 25 years ago when the current owners
purchased a failed bank. It focuses on serving the inner
city Chicago areas where it is located. "All our community
loans are loans other banks probably wouldn't make,"
said Jean Fogge, a bank representative. "And loan losses
are at or below industry standards."
Microcredit banking is the practice of making
extremely small loans to people who would have no collateral
and therefore no chance of getting a loan from a conventional
bank. The Grameen Bank provides credit to the poorest people
in rural Bangladesh. It is the largest rural finance institution
in the country with more than 2.3 million borrowers, 94
percent of whom are women. Through over 1000 branches, the
bank provides services in 38,951 villages, covering more
than half of the total villages in Bangladesh. The repayment
rate on its loan, which average $160, is over 95%.
Finally there is shareholder activism through
dialogue, shareholder resolutions, and public strategies.
Starbucks is a company with a commitment to environmental
care. This probably made it easier for the stockholders
and customers who expressed their concern about the effect
on songbirds of Starbuck's methods of growing coffee. The
company responded by forming a partnership with Conservation
International to develop coffee production methods that
are friendly to birds.
Another example of a company that tries to
be a 'good' neighbor is Reebok. It commissioned an independent
report on labour conditions in its Indonesian factories
involving 1,400 hours of studying conditions and interviewing
workers. Full credit goes to Reebok for making public the
results of the report. Many were decidedly unfavourable
but the company has been systematically implementing solutions
ranging from installing new safety systems to providing
education for workers on their labour rights and means of
resolving complaints and disputes.
In the United States, roughly 13 percent of
all money under management is invested in a socially responsible
manner according to a 1999 study by the Social Investment
Forum. This amounts to $2.16 trillion in assets, up a strong
82 percent from 1997 levels.Another area where individuals
can and do make a difference is through donations to charitable
and philanthropic organizations. The latest report from
Giving USA states that US foundations distributed $13.37
billion in 1997. In many cases the donations do not have
to be large to make a meaningful difference. Also you could
consider making donations in terms of time or of expertise.
I recall reading that someone said that not
only did change come about through the joint action of individuals,
but that this is the only way it takes place. This is really
the heart of the five percent principle. When enough people
begin to act even slightly in a new way, then change is
inevitable. Also it may not need to be a large proportion
of people. For example, many physical and biological systems
exhibit a phenomenon whereby just a small change in a few
of the components brings about a dramatic change in the
whole system. This is called a phase transition.
On a personal level the five percent principle
can certainly bring a phase transition to increased quality
of individual and family life. If adopted by a sufficient
number of people, I believe it can do the same on community,
national and international levels.
We hope you will join us at Conscious Investor
in having more 'five percent' days.
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