First came the surprise. Then the suspicion. "The bank's doing what?" people asked when they called. "Where's the gimmick? What's the catch?"
There was none. Vermont National Bank, the state's second-largest, was offering to take investors' money, put it in certificates of deposit, passbook-savings accounts and the like, pay the going interest rate, and then made a unique promise.The funds would be used only to "maintain Vermont's way of life," which meant loans for affordable housing, environmental projects, farming, education and small, local businesses.
Moreover, the money would not be invested in any companies that did not meet like-minded social needs. That meant firms involved in South Africa, defense work and nuclear power, as well as those with poor environmental records or histories of unfair labor practices.
All for as little as $500 down. Officials called it the Socially Responsible Banking Fund. They said it was the first of its kind in the nation.
"It's for everybody," Elizabeth Kent, the fund coordinator, said matter-of-factly. "It's for the common person."
And the common person has responded, not just in Vermont but across the country. In less than five months, to even Vermont National's astonishment, the fund has grown to more than $9 million in assets. Depositors have signed up from Ohio and California, from New York and Pennsylvania.
"It's a product whose time has come," proclaimed Robert Soucy, the bank's executive vice president.
Not so long ago, the term "socially responsible banking" would have been laughed away as an oxymoron. Making loans with the foremost goal of benefiting society was equated with making bad loans. Soft hearts equaled soft minds.
But a few banks such as Vermont National are proving otherwise.
"This is good business," stressed John Kolesar, president of Cleveland's Ameritrust Development Bank, which was organized three years ago with the singular intention of financing economic and community development in the city's low- and moderate-income neighborhoods.
The movement that is variously called social or ethical investing has been around at least two decades, spurred on by a post-Vietnam War consciousness that believed business decisions could not be divorced from moral judgments.
Not until the early 1980s, however, as concerns over divestment in South Africa came to the fore, did the notion of social investing really catch the public's attention. And ethical investing has grown faster than the most bullish of bull markets.
According to the Social Investment Forum, a Boston-based professional association for those involved in the field, more than $450 billion was committed last year to funds screened for one or more social issues. Four years ago, when the group was organized, that figure was $100 billion.
"It's a consumer-driven movement," said Gordon Davidson, the forum's executive director.
No longer are just a handful of philanthropically minded church funds letting their convictions direct their pocketbooks. Multibillion-dollar city and state pension funds are social investors. College endowments are, too. Baby boomers who have inherited money or made a pile of it themselves are choosing to invest it in the values of their youth.
Available to them are an amazing array of investment options, everything from money-market mutual funds to stock mutual funds, bond funds and individual retirement accounts.
There are non-profit community-development funds targeting specific neighborhoods and projects, and venture-capital funds intent on supporting new businesses that will be socially aware.
Brokerages now bill themselves as specializing in social investing, and monthly newsletters such as Good Money and Clean Yield scrutinize companies for their readers. The Social Investment Forum puts out a 70-page guide to such publications and services.
Classes are taught on how to invest in socially responsible ways. One California mutual fund, Working Assets, offers a "socially responsible" VISA credit card. Every time the card is used, a nickel is given to non-profit groups working for peace, human rights, the environment or the hungry.
"Social investing is fast becoming as important a buzzword as competitiveness," said Amy Domini, a portfolio manager with Loring, Wolcott & Coolidge in Boston, and co-author of the 1984 book "Ethical Investing."
Yet until recently, many financiers still pooh-poohed the whole idea. Some wondered whether it was just a marketing gimmick: Not everyone agrees, after all, on how stringent a fund's investing criteria must be to be "socially responsible."
And many contended that such investments wouldn't hold their own financially.
"There was this myth in American businesses that nice guys finish last," said Wayne Silby, who 12 years ago founded the Calvert Social Investment Fund, a Washington mutual fund that now has $300 million in assets.
The stock market debacle of '87 apparently changed some minds.
"Financial credibility, I think, came with the crash," Boston College sociology professor Ritchie Lowry said. Lowry, the editor of Good Money, is writing a history of the social-investment movement. He says that on Oct. 19, 1987, when the Dow Jones industrial average declined by 22.6 percent, the "Good Money Industrial Average" of 30 "socially responsible" stocks fell 15.7 percent.
In general, he said, the social factor doesn't seem to hurt profit margins. "At the very least, you don't do any worse," he said, "and with a little luck you'll do better."
For more information:
For the Socially Responsible Banking Fund, write Vermont National Bank, SRB Fund, P.O. Box 804, Brattleboro, VT 05301, or call 1 (800) 544-7108, Ext. 2414.
Write Ameritrust Development Bank at 1228 Euclid, Cleveland, OH 44101, or phone (216) 861-4074.
Write South Shore Bank at 71st and Jeffery Blvd., Chicago, IL 60649, or phone (312) 288-1000.
For a copy of the Social Investment Forum's Social Investment Services guide, send $8 to the forum, 711 Atlantic Ave., Boston, MA 02111.