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.
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
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
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
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.