Talk about socially responsible investing
I almost didn’t listen to Julie Frieder, research analyst for the Calvert Group, because this topic didn’t sound all that interesting to me. But the weather was blustery out, and they moved her from outdoors to where I already was, so I stayed. Am I glad I did! This turned out to be a speech I think many of you will find both interesting and helpful.
She spoke on socially responsible investing (SRI), what that means, and the trends therein.
Here’s the notes:
The roots of SRI go back to the abolitionists, who refused to invest in companies that dealt in the slave trade, then to the religious folk in Prohibition days, who didn’t want to invest in companies who sold alcohol or tobacco, or who financed gambling or brothels. Today, the focus has shifted and in some ways broadened.
In the time period 2005-2008, the stock market in general gained 3%, while SRI gained 18%. People want to invest in companies where their moral and ethical concerns are not violated.
When she evaluates a company, some of the things she looks for are:
- how workers are treated (fair pay, human rights protected, worker safety)
- workplace diversity
- how the communities the company is in are treated, including respecting the rights of the indigenous peoples
- business ethics
- product safety
- in-house and independent auditing
- disclosure practices
- environmental issues. This she broke down into several categories:
- where and how are the materials used obtained?
- what’s the environmental impact of getting and transporting the materials, and making the product? Is there any hazardous waste or pollution produced, and if so, how are they dealing with that?
- what’s the environmental impact of the end use product? How about when it’s disposed of?
One example she gave was the Dell corporation, who had no computer recycling program, although computers are full of toxic things including heavy metals. When she went to speak with them about why they weren’t recommending Dell as an investor, the company made major changes in its practices.
This willingness to talk to and work with companies, and the use of shareholder advocacy (as a mutual fund, the group holds the stocks for their investors, so they are a major shareholder and can put forth resolutions that companies have to respond to by law) were things that really impressed me. Using shareholder resolutions, Ms. Frieder said, provides leverage that she didn’t have even when she worked for the EPA.
Sustainability is now mainstreaming, Julie Frieder said. “Companies that used to laugh at us now are launching energy efficiency initiatives.” She said “there are real opportunities in clean energy.”
Environmentalism is becoming a positive for companies instead of the negative view it used to have in people’s eyes. Consumers are looking for companies to make innovations and there are “fabulous opportunities for investors as well as the businesses themselves”.
“Companies that are positioning themselves as sustainability leaders are going to profit.”
Companies that offend shareholders are beginning to be scrutinized. The Carbon Disclosure Project is a group of shareholders of major institutions, holding $57 trillion in stock investments, who monitor where their investments are going.
“I’m very optimistic about the changes companies are making,” says Julie Frieder. Even major polluters who make small changes such as developing less polluting products can bring huge improvements in their environmental impact.
What does she see as the government’s role? Verification that companies are holding to current standards. “Trust, but verify,” she said.
