The founder of Smith & Hawken discusses his vision for responsible investing.

As an author, activist, investor, and serial entrepreneur, Paul Hawken has committed his career to the issue of responsibility. In the 1960s he founded the first organic food wholeseller business, trekked across the American wilderness, and worked as a staffer for Dr. Martin Luther King Jr.. In the 70s, Hawken lived on a commune with his five children and founded Smith & Hawken, which has since grown into a multibillion-dollar garden supply company. In the 80s and 90s, he wrote the bestsellers Growing a Business and Natural Capitalism.

Now Hawken manages companies that design fan blades and solar panels based on patterns that occur in nature. He also runs the Highwater Global Fund, a socially responsible investing (SRI) fund. SRIs encompass many trendy areas of investment — including renewable energy, electric cars, smart grid, biofuels, and organic foods — and have attracted major-league investors like Warren Buffet, Bill Gates, and Al Gore. Hawken is a vocal critic of most SRI funds, arguing that their evaluation criteria are far too lenient; Highwater has particularly rigorous screens (more than 90 percent of Fortune 500 companies don’t qualify), and has performed better than any other SRI fund to date.

What does responsibility mean to you?

It means the ability to respond to the problems of the world in a helpful way. This is a time of great transformation in human civilization and planetary ecology; the world as we know it is going down the toilet. Therefore, as they said in the Civil Rights movement, you're either part of the solution or you're part of the problem.

How does this thinking shape your investment strategy?

We identify companies that are either shifting from bad practices to sustainable ones — Ford Motors, for example — or contributing solutions inadvertently, like Amazon or eBay, or directly innovating breakthrough solutions, like First Solar or Vestas. We invest in all categories, as long as they’re moving us towards a decent, respectful world.

How do evaluate a company’s level of responsibility?

First we eliminate companies involved with alcohol, tobacco, weapons, pornography, gambling, nuclear energy, industrial agriculture, animal cruelty, hazardous waste, human rights violations, management corruption, and so forth — basically get rid of the chaff.

Even wine companies don’t make the cut? Why is drinking wine irresponsible?

It’s not. But it isn’t exactly putting humanity on a course toward greater good. We want to push the ball down the field.

How do you vet the remaining companies?

We screen them in more than 200 categories related to the product, the management, the employees, the facilities, the ethos. We examine lobbying practices, policy implementation, executive compensation, board size and diversity, shareholder participation, manufacturing materials, waste generation, energy use, and on and on. We score performance in each category, generating an overall grade on a scale of 1 to 5.

What’s the goal?

We want to develop a gold standard for evaluating corporate responsibility. We want to promote transparency. And on a deeper level we want to show that the dichotomy between investing for profit and investing for good is a false one. We believe that putting your money behind the long-term prosperity of the human race is the most conservative approach you can take to investing. If a company doesn’t take into consideration how we care for each other and the environment, and promote a prosperous society, we do not think it will prosper.

What are some surprising examples?

Amazon is an example of a company that perhaps is doing unintentional good; the Kindle, for instance, is saving millions of trees by digitizing books. And like eBay, Amazon empowers really small businesses all over the country, thousands of sellers of secondhand books and products, to participate in an online marketplace.

We had to drop Apple when it didn’t confront the issue of Bisphenol A — a toxin in the plastics it was using in its products. But eventually they sorted it out and we bought them back. Whole Foods is a company held by most SRI funds, but it failed our screens because of unethical behavior among corporate leadership and dubious practices like sourcing organic crops from China. Maybe the most shocking thing is that we haven’t found a single company in the finance or pharmaceutical industries that passes our screens. These two industries comprise something like 40 percent of most investment portfolios.

Highwater’s portfolio value has grown more than 52 percent since it was founded in 2005. But most SRI funds have not fared well in the declining economy. Why?

In part because they fudge. They say, “We won’t do military,” then make an exception for companies that generate less than five percent of the revenue from the military. I think one reason we’ve done really well is that we stuck to our guns. We ask: "Is the company helpful? Is it sustainable in the fullest sense?" Sustainability has become a catch-all term that means less than it could and more than it should. We believe sustainability is a scientific concept, not a feel-good term. It is rooted in biology and physics, and describes the limits within which society can prosper over time.

What experiences have shaped your commitment to living responsibly?

My grandfather was a farmer; nothing was thrown away. We had gardens, we canned, we kept cows, we made bread, we made butter. Life was tough; you were frugal. Anything we couldn't use we just put in the barn in case we could use it later. It was just the idea that you live within a system that is intact. We had small joys, like immersing yourself in puddles when the irrigation was turned on: not enough water to swim in, but enough to wash over you. The little fish would come and you could feel them on your toes.

You’re a wealthy man. Does amassing wealth make it harder to act responsibly?

I live a comfortable life but a simple life. I live in a two-bedroom houseboat. I eat mostly foods grown in my garden or by friends and local farmers. To be honest, I see very few people who have great wealth who don't carry that as a burden. Wealth tends to clutter your life and suck time. Your time becomes devoted to managing your property — whether that's financial investments or real estate — and to managing professional networks, managing expectations. You don’t have enough emptiness within which to create. You begin to lose connectedness to your community and society — and we can’t respond to the world and its problems if we’re not connected.

Amanda Little is the author of Power Trip: From Oil Wells to Solar Cells—Our Ride to the Renewable Future, published by HarperCollins. A former columnist for Outside, Grist, and Salon.com, she has written on energy and the environment for publications including Vanity Fair, The New York Times, Wired, and Rolling Stone.