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April 04, 2003
Rebuilding Iraq: Humanitarianism Versus Opportunism
    by William Baue

Socially responsible investing supports companies and nonprofit initiatives that advance humanitarian efforts to rebuild Iraq and avoids investment in profiteering companies.


Regardless of political leaning or opinion of the war in Iraq, most people are eager to see the conflict end. While the rebuilding of Iraq and surrounding areas ravaged by the war will certainly entail massive humanitarian efforts, it will just as certainly involve work by corporations that have positioned themselves to profit handsomely. Many social investors want to avoid exposure to such companies, but how to do so is unclear.

"Should there be an Iraq screen?" asked Tim Smith, president of the Social Investment Forum (SIF), a socially responsible investment (SRI) industry trade organization. "It's an interesting concept, though I don't know how such a screen would be created."

"What would you assess companies on? That they're doing something in Iraq?" Mr. Smith continued.

Mr. Smith stressed the need to distinguish between humanitarianism and opportunism.

"There's a difference between rebuilding and taking advantage of the situation to be an economic occupying power," Mr. Smith told SocialFunds.com. "The social investment movement will not rush forward to say 'Let's rebuild through private enterprise,' but will look toward other, more constructive ways."

Toward that end, the Calvert Foundation has devised several innovative ways to support constructive humanitarian rebuilding efforts.

For example, 100 percent of Calvert Foundation's Relief and Recovery Initiative donations are passed on to groups in the InterAction coalition. The alliance comprises relief, development, and refugee assistance agencies operating in Iraq, Afghanistan, and other war-torn regions. InterAction members will uphold a set of standards that ensure their accountability, professionalism, and effectiveness. Investors in Calvert Group mutual funds can redirect any dividends and capital gains to this initiative.

Pax World Funds has established a similar initiative (see related article.)

The Calvert Foundation also offers two other ways to support constructive efforts in the Middle East. First, the foundation is offering $50,000 in matching funds to leverage tax-deductible donations to the Middle East Microcredit Giftshare. This pool will fund small loans to entrepreneurs operating in the Middle Eastern communities most vulnerable to the effects of the war.

Second, the foundation's Middle East Peace Giving Folio focuses on promoting peace by supporting seven nonprofits that operate in the region. The companion Global Peace and Security Giving Folio focuses on relieving the underlying tensions that threaten peace globally.

In addition to supporting such nonprofit efforts, investors can use their financial leverage to voice their support for constructive rebuilding efforts and their opposition to opportunistic ones.

"It will become clear very soon which companies are in there for exploiting what happened and those companies that are in there for real humanitarian purposes," said Michael Lent of Progressive Asset Management (PAM), a national network of SRI investment advisers. "I would recommend holdings in companies where you could clearly identify humanitarian efforts--providing food and medicine, for example."

"In terms of those companies that are going to be profiting from the war, look at construction companies such as Caterpillar (ticker: CAT), companies that are involved in the oil industry, and those that have close ties to the Bush Administration and the federal government in general, such as Halliburton (HAL)," Mr. Lent told SocialFunds.com.

Mr. Lent pointed out that devising a screen to identify companies profiteering from the pain and suffering of war may not be necessary, as existing SRI screens may do just that.

"Socially responsible investment professionals have been paying attention to these issues for years, and for investors who are concerned about companies exploiting what happens in the war with Iraq, the environmental and military screening we do has already excluded most if not all of these companies from portfolios," said Mr. Lent. "My clients don't own any of these companies, and if they do, as we find out who is profiting from the war, we will discuss the possibility of selling the stock or doing shareowner action."

 

 
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