Can I make my portfolio terror-free?

Ethical investors care about many subjects - treatment of workers or the environment - but a growing area of concern is terrorism. Now, it's possible to make portfolios terror-free, says our Monitor panel. Julie Gorte, who has held numerous policy positions in and out of federal government, is director of social research for the Calvert Group ( www.calvert.com ). Adam Sheer is president of the Roosevelt Investment Group, the investment adviser to the Bull Moose Growth Fund, which bills itself as the only certified terror-free fund ( www.terrorfreeinvesting.com ). Here are excerpts of their comments:

Ms. Gorte: It really depends on what the act of terrorism is. After 9/11, certainly we saw an immediate downturn in air travel and then this long-term impact in the airline industry that still continues. The second ripple of the long-term impact is that it creates demand for technologies to combat or avoid or curtail acts of terror - for example, facial-recognition technology. So you see those things coming onto the market, maybe new investment opportunities.

Mr. Sheer: After 9/11, we looked at markets in England, Japan, and Israel and we saw that the first time a terrorist act occurred, the markets were impaired significantly. However, when we saw the subsequent attacks, we found that the markets got hurt less and less. So it's very interesting. Obviously, in the beginning, emotion is the biggest factor. But over time, it's earnings that drive the markets.

JG: Investors are very hard people to scare over a long period of time. They can be very volatile in the short run.

AS: Bull Moose Growth ... is a three-year-old fund. But in April of this year, we hired a company called Conflict Securities Advisory Group. They maintain a database of 450 public companies worldwide that have ongoing business operations in countries that our State Department says sponsor terrorism.

AS: Iran, Libya, Syria, North Korea, and Sudan.

0AS: Any business that has ongoing business activities there - as long as it's not purely humanitarian. So if it's a pharmaceutical company or a medical-device company and that's all they do, that would be allowed in the portfolio. However, any other company that has ongoing business activities we would not put in the portfolio. And that's simply because those companies are writing checks worth hundreds of billions of dollars to the regimes in those countries.

JG: What Adam is trying to do and what Calvert is trying to do with our investments is not to be a party to something that we abhor. What's going on in the Sudan is dreadful. [But] we don't take a country-by-country approach to it. What we do is invest only in companies that we can certify are not doing business with the repressive regimes. It's one thing if you sell tennis rackets in a place. It's quite another if you're running the phone system, which is part of the infrastructure ... or in the extractive business, where there's a long history of facilitation payments made to governments.

JG: What you really want it to do - and why it worked in South Africa - is that you bring pressure to bear on companies. If the pressure works, they pull out. They pull out, that deprives the country of the dollars, which does put pressure on those regimes, which is just what you want. But it can also deprive ordinary people on the street of economic opportunities and they're already mired in poverty. So what you want is some kind of expression - and we did have it in South Africa - from the people who are there: 'Yes, we want you to go ahead and do this. We know it will cost us. But please do it, because it's worth it in the long run.'

JG: You have to drill down pretty deep at the company and see what's really going on. Are they dealing with the government in a way that really props this government up? [Or are they] just employing 500 people?

JG: The things we can invest in - things like facial-recognition technology - it's not so much that they fight terror. What they do is help to prevent it if it's deployed in that way. So if you're using facial-recognition technology in order to identify known terrorists or people who are suspected or wanted, then great! [But] technology itself isn't necessarily good or evil. It's how you use it. So for investors, again, the choice is a nuanced one where we're looking at how [companies] are using these tools.

AS: Investing that $3,000 in the fund is not going to prevent anyone from being blown up, unfortunately. But the State of Illinois recently decided to divest all its holdings in the Sudan. And shortly thereafter, the European conglomerate ABB decided that it was going to leave Sudan. So I do believe that if enough investors vote with their dollars and speak up, companies will divest, which will have a significant impact.