April 07, 2004
Socially Responsible Investment Runs the Gamut on Animal Welfare and Testing
by William Baue
Investors who prioritize respect for animals have a range of options, from funds that use
shareowner action alone to specialty SRI firms with stringent animal welfare screens.
Socially responsible investor concern for animal welfare and tolerance of animal testing span a
wide spectrum. Some investors favor humane guidelines and limits for the use of animals in
scientific experiments or product tests, while others cannot abide any animal testing. Socially
responsible investing (SRI) options similarly practice varying degrees of engagement on corporate
practices regarding animals, ranging from shareowner action, to "soft" qualitative screens, to
"hard" exclusionary screens. This continuum allows investors to match their personal priorities to
those of different SRI vehicles.
Shareowner action with regard to animal rights can
include active proxy voting, dialogue with management, and filing shareowner resolutions. The
proxy voting guidelines for several SRI firms, including Domini Social Investments, Pax World Funds, and Walden Asset Management, indicate that they support
shareowner resolutions asking companies to report on their animal testing and welfare policies.
However, even these policies exhibit variance. Take, for example, Walden's proxy voting
"Walden votes generally FOR shareholder proposals that ask management to
report on animal testing, and votes generally AGAINST shareholder proposals that ask management to
end consumer product safety tests with animals," the guidelines read.
Investors can take a
somewhat stronger stance by using qualitative screening, which assesses degrees of involvement and
sets thresholds of tolerance for animal testing. Consider, for example, the policy of Citizens Funds:
"We avoid those
[companies] that test on animals in excess of legal requirements," reads the Citizens policy. "We
avoid companies with a pattern of violations of the Animal Welfare Act."
The Calvert Group has a more detailed animal welfare screen that similarly sets thresholds of tolerance for animal testing,
and maintains more stringent requirements for companies involved in animal husbandry. For example,
Procter & Gamble (ticker: PG), which won a 2002 Humane Award from the Humane Society of the United
States (HSUS) for advancing alternatives
to animal testing, passes Calvert's screen.
However, some investors bridle at the notion
of investing in companies such as Procter & Gamble that do a significant amount of testing on
animals, no matter how responsibly they do so.
"That's the difference between a hard
and a soft screen," said Brad Pappas, president of Rocky Mountain Humane Investing (RMHI), an SRI separate accounts
management firm with much more stringent and wide-ranging animal welfare screens. These screens
exclude not only in companies that obviously employ animal testing, such as pharmaceutical
companies like Pfizer (PFE) and Merck (MRK), but also in less obvious
connections, such as the tobacco and extractive industries.
Mr. Pappas illustrated the
connection to tobacco with an historical example.
"When the tobacco versus Congress wars
were raging in the mid-'90s, tobacco companies were using information supplied by the Tobacco
Institute to justify that cigarettes were not addictive using laboratory animals to do that," Mr.
Pappas told SocialFunds.com.
As for the extractive industries, exploration and extraction
often displace important animal habitats.
However, even RMHI's screens are not absolute.
For example, Patterson Dental (PDCO) distributes veterinary
medicines tested on animals.
"We frequently find ourselves in these gray areas, where
there's really no right answer" said Mr. Pappas. "I defer to clients to decide whether or not to
Mr. Pappas thus also operates within the constraints of thresholds of
tolerance. However, as a separate accounts manager, Mr. Pappas enjoys the latitude of
individualized decision-making, whereas mutual funds must implement policies with pre-set
thresholds. Some investors may not have the luxury of investing with RMHI, which suggests minimum
account balances of $100,000.
Other options do exist. One creative solution is the
American Trust Allegiance Fund (ATAFX), which does not screen
animal testing, but as a fund based on Christian Scientist beliefs, does screen out health care
industries. This screen effectively limits exposure to the majority of companies practicing animal
Unfortunately, one option for animal welfare screening no longer exists. The
HSUS launched the Humane Equity Fund in January 2000, but the bear market prevented the fund from
gaining a stable enough asset base to survive.