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March 28, 2003
Socially Responsible Investment Firms Respond to New War with Tried and True Tactics
    by William Baue

SRI firms are sticking with their traditional strategies, such as screening, community investment, and support for humanitarian aid, in response to war.

Most socially responsible investment (SRI) firms have long expressed their opposition to war by employing military and weapons screens. Such screens avoid investment in companies that manufacture arms or have significant contracts with the military. Now that the U.S. has attacked Iraq, SRI firms are holding fast to this strategy while employing other tools.

"We're certainly not going to change our core investment policy based on politics," said Adam Kanzer, general counsel and director of shareholder activism at New York City-based Domini Social Investments. The Domini Social Equity Fund (ticker: DSEFX), which tracks the Domini 400 Social Index (DSI), utilizes a weapons screen. The Domini Social Bond Fund (DSBFX) still screens out Treasury Bonds that contribute to the Defense Department. Domini manages assets of more than $1.2 billion.

Pax World Funds and Citizens Funds, both of Portsmouth, New Hampshire, as well as the Calvert Group of Bethesda, Maryland, have not reconstituted their portfolios. Pax manages more than $1 billion in four funds, Citizens manages more than $820 million in ten funds, and Calvert manages more than $2 billion in 20 funds. Pax and Citizens have each issued statements that express opposition to war by proposing alternative solutions.

Pax has been highlighting its longstanding mechanism for supporting humanitarian aid by enabling shareowners to funnel some or all of their capital gains and/or dividends from the Pax World Balanced Fund (PAXWX) into the Pax World Service. This nonprofit organization then redirects the funds to Mercy Corps, an international relief organization. Mercy Corps established its Iraq Emergency Response Team in October 2002 to aid Iraqis affected by war.

"Mercy Corps estimates that a contribution of $500 could provide lifesaving medicines for 300 Iraqi children cut off from health care while $2,750 would buy a 10,000-liter water bladder tank that will be able to store water for 333 people in a refugee camp," states Pax World Funds. "Donations of $10,000 would be enough for water delivery to 1,500 people in a refugee camp near Kuwait for one month."

Some SRI firms advocate reallocating portfolio assets toward investments that counteract the destructive nature of war.

"We are nudging our clients, especially those who are incredibly distraught about the war, toward community investments," said Joan Bavaria, president of Boston-based Trillium Asset Management. "Global funds that do microlending, such as ACCION, work to alleviate the core problems that create war, namely poverty and the alienation of the third world."

Some social investors are turning their attention to media companies that seem to have a pro-war bias. One of those companies is Clear Channel Communications (CCU). Clients of Progressive Asset Management (PAM), a national network of SRI advisors, are expressing concern about Clear Channel on three counts, according to Neil Stallings, PAM's director of social research.

First, many of the company's 1,200 radio stations around the country have been organizing pro-war demonstrations under the name "Rally for America" and removing from playlists artists that question the war, such as the Dixie Chicks. Second, PAM clients and advisors are concerned that Clear Channel is peddling it influence in Washington power circles, including in the Federal Communications Commission (FCC).

"There is a possibility that CCU's pro-war orientation is designed to curry favor from FCC chief Michael Powell, whose father is U.S. Secretary of State Colin Powell," Mr. Stallings told "The notion that a media company would skew its content/policies in a time of war smacks of opportunism at the very least and, at the worst, a more sinister manipulation of the machinations of power for the continued enrichment of the company."

Clear Channel stands to benefit from the FCC's proposed Omnibus Ownership Ruling that would eliminate the limit of eight radio stations in one market. Clear Channel mushroomed after the Telecommunications Act of 1996 raised the limit to eight stations per market, a fact that many critics consider monopolistic and a breach of anti-trust laws.

"Finally, for quite a while now, CCU has been on a 'watch list' for PAM clients," said Mr. Stallings. "In some client portfolios with stringent anti-trust screens, the company is not even considered for inclusion."

"We feel the potential risks from litigation and perhaps even re-regulation of the radio industry, coupled with allegations of blackballing pro-peace artists, is enough to question CCU as a social investment, let alone an investment at all," Mr. Stallings concluded.


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