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August 27, 2003
Quakers and Socially Responsible Investing: A Natural Match
    by William Baue and Mark Thomsen

The Friends Fiduciary Corporation practices both positive and negative screening, in keeping with Quaker values that prioritize social justice and non-violence.

Socially responsible investing (SRI) comes naturally to Quakers, or members of the Religious Society of Friends, who are deeply committed to social justice and non-violence. Earlier this year, spoke with Connie Brookes, executive director of Friends Fiduciary Corporation (FFC).

FFC, which has roots dating back more than a century, offers two primary investment services. It manages the Consolidated Fund, which is a balanced fund available to Quaker individuals and organizations, and it serves as trustee for more than 60 trusts.

"We're a religious organization: we practice socially responsible investing because our investments should follow Quaker beliefs," Ms. Brookes told "We shouldn't be investing in companies that make implements of war, which are totally opposed to Friends' testimonies and concerns."

"It doesn't bother us if a company does a lot of business with the Department of Defense selling them underwear, but we have zero tolerance for companies that sell them any weapons or weapons components," she added.

FFC's screens, which also exclude companies involved in alcohol, tobacco, or gambling, apply to all of its invested assets, totaling about $150 million. These negative screens evolved after FFC started divesting from companies doing business with South Africa during the apartheid era.

"Before that, Friends had a general policy of investing in 'good' companies," Ms. Brookes said.

FFC rewrote its investment policy in 1998 to formalize its commitment to SRI, in terms of both positive and negative screening.

"Our investment policy is short and sweet: it only has three bullet points, which basically say that the companies should be chosen that are ranked above average in their industry on social responsibility issues, after reviewing the major concerns for exclusion," said Ms. Brookes. "In terms of positive screens, we want to identify companies that are trying to do a better job on labor issues and environmental issues.

"We take into account what type of corporate citizen a company is," Ms. Brookes said.

Four outside managers handle FFC's equity investments. FFC has a small committee comprised of three investment professionals that reviews each and every company in FFC's portfolios.

"This is not to second guess the managers in terms of companies in general and how they want to structure the portfolio; it's to look at the SRI questions," Ms. Brookes said. "Sometimes, the small investment committee will pick up things that slip through the screens."

"The small investment committee process is very quick, usually turning around their decision within 24 hours, and our managers have told us this review process doesn't really affect the performance of the portfolio," Ms. Brookes continued. "The managers have a good idea of the companies we are looking to invest in, so there are not many rejections."

Two members of the investment committee vote all of FFC's proxies. However, FFC does not currently file shareowner resolutions nor engage in dialogue with companies.

"But in the fall [of 2002] we formed an ad hoc committee to look at how to expand our SRI activity," said Ms. Brookes.

FFC has already joined the Social Investment Forum (SIF), the SRI industry organization, and the Interfaith Center on Corporate Responsibility (ICCR), which promotes shareowner action.

"We are looking for opportunities to join in shareholder activity," Ms. Brookes concluded.


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