A World Resources Institute report promotes free, prior, informed consent from communities affected by major projects; an International Finance Corporation report advocates consultation.
By Bill Baue
A mere two letters separate consent and consult, but that slight spelling shift makes a profound difference in meaning—denoting the dividing line between, for example, lovemaking and date rape. This distinction extends to the case of negotiations between communities and corporations over major projects such as mines and pipelines, where two models of stakeholder engagement have evolved: free, prior, informed consent (FPIC) and free, prior, informed consultation.
The splintering into these two models culminated with the 2003 “Extractive Industries Review” (EIR), an independent report commissioned by the World Bank in 2000 to determine whether resource extraction aligns with the bank's mission of poverty alleviation and sustainability. EIR promoted FPIC, which empowers communities with self-determination.
Investment indexes with a socially responsible tone abound, but it appears there is always room for more.
By James Hyatt
In February, JPMorgan and Innovest Strategic Value Advisors announced the first bond index “designed to address the risks of global warming.”
The new JPMorgan Environmental Index-Carbon Beta is intended to take into account risks and opportunities bond issuers face as they address climate change.
The new index is based on JPMorgan’s U.S. Liquid Index, a benchmark for the U.S. investment-grade corporate bond market. Then the calculations are adjusted using Innovest’s environmental analysis.
“For example,” the companies said, “within the automotive sector, an automaker that has curbed emissions from its plants and produces a fleet of vehicles with relatively high fuel efficiency might be overweighted compared to an automaker that has not taken such steps.
New white paper explores how companies can develop a strategic plan that goes beyond the checkbook.
By Danielle Lee
Referencing Bill Gates’ designation of American high schools as “obsolete” during the 2005 National Education Summit on the first page of their new white paper “Best in Class: How Top Corporations Can Help Transform Public Education,” the FSG Social Impact Advisors begin their analysis of the U.S. education system with statistics of an equally dire outlook. The study, prepared for Ernst & Young, offers ways for corporations to help change these numbers by getting involved in public education reform. It also includes case studies of companies that have already begun education initiatives.
Among the statistics listed is the United States’ ranking of 24 out of 29 in math scores among developed countries and a 30 percent rate of students that do not finish high school.
Discussing the study in Ernst & Young’s May 2 thought center webcast “How Top Corporations Can Help Transform Public Education,” General Electric Foundation President Bob Corcoran quoted another famous line when he referenced the movie Network’s “I’m mad as hell” idiom being an appropriate response to these statistics.
How best to accomplish a foundation’s mission? Passive investment vs. shareholder activism
By Michael Connor
Bill and Melinda Gates may not be that unusual after all—at least when it comes to the investment policies of their eponymous foundation. The Gates Foundation is the largest in the world, with an endowment larger than the gross domestic products of 70 percent of the world’s nations.
Amidst general praise for its work on social issues, the foundation found itself in the spotlight in January following the publication of a two-part Los Angeles Times investigation, which claimed that hundreds of Gates Foundation investments have been in companies that “contribute to the problems of health, housing and social welfare that the foundation tries to solve.”
Among examples cited by the Times: a polio and measles vaccination program in Nigeria that takes place amidst pollution filled with “toxic byproducts” from nearby petroleum plants—owned by oil companies in which the Gates Foundation has invested $423 million.
The Bill and Melinda Gates Foundation says that its investment practices have little or no impact on social issues.
The principles of socially responsible investing (SRI) and shareholder activism don’t work for the Bill and Melinda Gates Foundation – the largest in the world – according to Patty Stonesifer, the foundation’s CEO.
Stonesifer put forth the position following publication of a two-part Los Angeles Times investigation, which claimed that hundreds of Gates Foundation investments – “totaling $8.7 billion, or 41 percent of its assets, not including U.S. and foreign government securities” – have been in companies that “contribute to the problems of health, housing and social welfare that the foundation tries to solve.”
Among examples cited by the Times: a polio and measles vaccination program in Nigeria, supported by the Gates Foundation, which takes place amidst pollution filled with “toxic byproducts” from nearby petroleum plants – owned by oil companies in which the Gates Foundation has invested $423 million.
Just days before the November elections, advertisements began popping up on the liberal political website Daily Kos promoting the Blue Fund, described as the “The First No-Load, No Republican Mutual Fund.”
The Fund, actually a pair of funds, takes social investing to a new level, adding what it calls “political factors” to the more commonly used social issues. “We build our portfolios on core Democratic values like environmental sustainability, community participation and respect for human rights,” the Fund says. “Then we go a step further, investing only in those companies whose political contributions demonstrate a sincere commitment to these values.” Joe Andrew, chairman of the Blue Fund board, is a former chairman of the Democratic National Committee.
The fund excludes companies selling firearms and tobacco products, and screens for companies that give more than 50 percent of their political donations to Democratic organizations or candidates.
Sharing the wisdom of five financial advisers in socially responsible investing (SRI).
By Graham Sinclair
It is possible today to construct a prudent, complete, and balanced retirement plan using solely socially responsible investing (SRI) vehicles. To show how it can be done, Business Ethics invited five investment advisers to construct retirement plans for five different families and individuals of different ages and financial situations. (Names have been changed to protect privacy, and some persons represent composites).
In drafting their plans, the advisers drew from the many SRI mutual funds, which now number over 200 and cover virtually every asset class, from small-cap equity and income funds to hedge funds and exchange traded funds (ETFs). October saw the launch of the Domini European Social Equity Fund. Calvert added Asset Allocation Funds to its family of 30 mutual funds in May. And a new ETF by Barclays Global Investors tracks KLD's Social Select Index.
Pax World loosens standards; Domini switches strategy.
Two leading socially-responsible funds are moving to arrange more investing flexibility, in part to compete more effectively against growing numbers of exchange-traded funds with a social and sustainability focus .
Shareholders of three Pax World funds based in Portsmouth, NH, are being asked to approve “a more proactive and engaged approach to socially responsible investing,” according to proxy materials. The change would, among other things, no longer exclude investments in companies with alcohol and gambling interests, but would examine a company’s “entire social responsibility profile.”
The current alcohol-investment exclusion forced Pax World last year “reluctantly” to sell a more than $20 million investment in Starbucks Coffee Co. when it entered into a deal to sell a coffee-based alcoholic beverage.
ExxonMobil, Wal-Mart, Chevron are targets.
In January 2006, ExxonMobil achieved two dubious distinctions. It reached the peak proﬁt in the history of American capitalism of $36.13 billion for 2005, the year identiﬁed by many analysts as the peak in global production of oil — the resource primarily associated with global warming. Second, ExxonMobil received the most shareholder resolutions — a dozen — from members of the Interfaith Center on Corporate Responsibility (ICCR), a coalition of 275 faith-based institutional investors holding companies socially accountable for over 30 years. The two distinctions may be related, as proﬁting from planetary destruction tends to draw the attention of nuns and ministers who own your stock.
Placing second on the ICCR list was Wal-Mart with seven resolutions, and rounding out the top three was Chevron with six resolutions. These three companies provide a snapshot view across a range of concerns voiced by shareholder activists in the 2006 proxy season.
Socially-responsible investing, long the domain of fine-tuned mutual funds, is drawing more attention from the stock-index world.
Major providers such as Dow Jones and FTSE are expanding their index list, giving individuals and institutions more options, and licensing more products with a social focus. Moreover, by expanding their approach to “best in class” companies, the index-related products help overcome concerns by some institutional investors who want exposure to a broader market.
Exchange-traded funds are a major beneficiary of the trend. The New York Stock Exchange in early 2005 launched Barclays Global Investors’ iShares KLD Select Social Index Fund. KLD’s index managers select stocks from the Russell 1000 and S&P 500 indexes, but give greater weight to companies with the best social and environmental performance. At the end of March, the fund had net assets of $126 million and holdings in 224 companies.
At the American Stock Exchange, Power-Shares Capital has done well with two ETFs — the WilderHill Clean Energy Portfolio and the Water Resources Portfolio — tied to specialized indexes.
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