January 08, 2008
Top Five Socially Responsible Investing News Stories of 2007
by Anne Moore Odell
New alternative energy and green funds fuel expansion of socially responsible investing; climate
change is pushed to the forefront; community development organizations flourish despite the
subprime mortgage debacle; consumers demand healthy products and work environments; and SEC limits
In 2007, socially responsible investing gained momentum through the passion of shareholders, the
demands of the consumers worldwide, and companies, governments, and non-governmental organizations
working toward common goals around the globe. Mainstream media and investors trumpeted what SRI
investors have known for years: businesses need to address climate change now. When toxic toys hit
the shelves around the holidays, the mainstream media picked up on another topic where social
investors have been active: improving product and workplace safety. When the subprime mortgage
scandal made the front page, community development organizations and investors continued working to
promote and offer fair lending practices. Shareholder activists faced a setback, however, when the
SEC limited their rights to nominate directors. With the SRI movement leading the way, it is no
surprise that so many green, alternative energy and socially responsible funds and indices were
introduced in 2007.
1.Socially Responsible Investment Options Continue to Expand
A wave of new socially responsible funds, indexes and green mutual funds were launched in
2007, largely in response to climate change. As investors looked to address the shift from oil to
other energy sources, the demand for alternative energy funds also heated up.
February 2007, English investors needed go no farther than their neighborhood M&S to invest
responsibly as Marks & Spencer Money
launched its new Ethical Fund, marking a huge leap into the mainstream for the SRI investing
Two SRI mutual fund pioneers launched new funds in 2007. In October, the
Portsmouth, NH-based Pax World added the
Pax World Value Fund that invests in undervalued large-cap companies. Calvert, based in Bethesda, MD, launched the Calvert International
Other SRI funds launched in 2007 include the Gabelli SRI Fund, MMA
Praxis Small Cap and Growth Index Funds, Domini PacAsia Social Equity Fund and the Domini
EuroPacific Social Equity Fund.
Winslow launched the Winslow Green Solutions Fund in
November, investing in mid-cap domestic and international companies that pass Winslow's green
screens. Calvert's Global Alternative Energy Fund and the Spectra Green were two other green funds
launched over 2007.
Four mainstream financial players-Deutsche Bank, F&C, HSBC, and
Schroders-launched climate funds, as well, with Virgin Money planning to launch its climate fund in
On October 1, KLD Research & Analytics launched the KLD Global Sustainability Index and three
area specific sub-indexes. The Merrill Lynch Energy Efficiency Index was launched with a universe
of 40 global companies found in four sectors that should benefit from improved energy efficiency.
The Merrill Lynch EEI is possibly the first index to focus solely on energy efficiency. Index giant
Standard and Poor's launched its Global Thematic Index Series, which includes the S&P Global Clean
Energy Index, the S&P Global Water Index and the S&P Global Infrastructure Index.
Launch of Five Climate
Change Funds May Enrich Investors, But Won't Save the World
Growing Up Green: Winslow Offers New
Mid-Cap Green Mutual Fund
Book Review: The Clean Tech Revolution
Angels: Venture and Private Equity Capitalists Help Sprout a New Generation of Environmentally
New Pax World Value Fund Follows
"Contrarian Value" Strategy
KLD's New Index Finds Sustainable
Companies the World Over
Canada is Coming Clean: First Canadian
Global Clean Energy Fund Launched
Merrill Lynch Offers New Energy
Businesses, Governments, and NGOs Join to Address Climate Change
When Al Gore and the UN's
Intergovernmental Panel on Climate Change were awarded the 2007 Nobel Peace Prize for their work on
educating the world on the causes and consequences of the Earth's rising temperatures, the business
community was listening. Many companies in 2007 put their names, expertise and money into helping
mitigate climate change.
At the beginning of 2007, the U.S. Climate Action Partnership (USCAP) released a report that urged the Federal
government to create legislation to cut gas emissions that lead to the warming of the atmosphere.
USCAP's members include Alcoa, BP America, Caterpillar, Duke Energy, DuPont, FPL Group, General
Electric, Lehman Brothers, PG&E, and PNM Resources along with four non-governmental organizations,
Environmental Defense, Natural Resources Defense Council, Pew Center on Global Climate Change, and
World Resources Institute.
In March, a group of 65 institutional investors and US
companies called on Congress to pass federal legislation to cut greenhouse gasses that lead to
global warming. Organized by Ceres and the Investor Network on Climate
Risk (INCR), Investors and Business for US Climate Action presented a "Climate Policy Call to
Action" with detailed explanations of responses to climate change they believe need to happen on a
nationwide scale. This was the largest group of pension funds, state treasurers, state/city
comptrollers, financial service firms, asset managers, foundation endowments and US companies ever
to ask the Congress and federal government to act on this issue.
The US's two largest
banks also pledged substantial investments to help mitigate climate change. Bank of America's
announced in March a pledge of $20 billion to support environmentally sustainable businesses and
combat climate change. Citigroup committed $50 billion in investments and financing to mitigate
climate change over the next decade.
The Carbon Disclosure Project (CDP) released its fifth Global Corporate Climate Change
Report that tracks carbon disclosure and attitudes toward climate change in the world's largest
companies. The CDP welds the strength of over 315 global institutional investors with more than $41
trillion in assets under management. This collaboration includes some of the largest US and foreign
institutional investors, including CalPERS, Merrill Lynch, and Goldman Sachs. The CDP has collected
90 new signatories and almost $10 trillion in assets since its 2006 report.
Burning Bunker Fuel:
The Shipping Industry's Dirty, Not-So-Secret Shame
Connecting the Dots Between Climate
Change, Companies, and Financial Performance
Risking the Weather: The Insurance
Sector Faces Climate Change
Companies, Carbon and Climate Change:
The Carbon Disclosure Project Issues its 5th Global Corporate Climate Change Report
Reports Upbeat, Ignoring Climate Change Risks
Banking on the Future: The Two Biggest
US Banks To Dedicate Billions to Halting Climate Change
Organizations Support Home Ownership
A report from the Center for Responsible Lending indicated that more
than 36 subprime mortgage companies failed in just first four months of 2007. However, in 2007
community development financial institutions (CDFIs) continued their work supporting homeownership,
small businesses, and non-profits, surfing above the subprime crash.
Hundreds of CDFIs
around the country work to bring capital to the low-income areas they serve by providing banking,
credit, and other services to people who might not have access to mainstream financial
institutions. CDFIs can take several forms, including community development banks, credit unions,
and loan funds.
CDFIs support their clients by offering technical assistance, below market
rate loans, and other programs and mortgage products along side of traditional banking services.
CDFIs themselves are supported through a combination of federal programs and tax credits from the
US Department of Treasury and private sector investments and donations. CFDIs rely on thousands of
donors and investors including foundations, churches, businesses, community groups, partners, and
The default rate for mortgages issued by CDFIs is incredible low compared to
all mortgages and subprime mortgages. For example, one of the most well known CDFIs is Self-Help Credit Union, with
headquarters Durham, NC, had a foreclosure rate of 0.62% as of the end of September 2007, which
mirrors many CDFIs' default rates. To put this rate in perspective, the US Federal Reserve listed
the default rate in residential mortgages for the first quarter of 2007 as 2.07% for loans through
all banks. More relevant perhaps is a report by Friedman, Billings, Ramsey, an investment bank with
offices in Arlington, VA, which states that as of August 2007 default rate on adjustable-rate
sub-prime mortgages had reached 8.05%.
CDFIs also got a boost of cash and recognition in
2007 from the Wachovia NEXT Awards for
Opportunity Finance, created and financed by Wachovia Bank and Opportunity Finance, in
partnership with the John D. and Catherine T. MacArthur Foundation. In December 2007, ACCION Texas and the Latino Community Credit Union were announced as
2007 winners of $8.25 million in awards.
Giving to the Givers: Honoring
Community Development Organizations
Good Mortgages Still Going to Good
Subprime Meltdown and SRI: Engage, Avoid, Predict
17th and Jackson: Community
Development in Action, Turning a Vacant Lot into Affordable Housing and More
Subprime Lending Hurts
4.From Factory Floor to Store, People are Demanding Safe Products
Toys were flying off the shelves this holiday season, but not into the hands of children. The
huge toy recalls from Mattel and other manufacturers highlighted the growing dangers of toxic
components in consumer products. Issues regarding toxic chemicals not only threaten a company's
brand image, but the health of consumers and workers alike.
Concerns over toxic chemicals
in products come from recent scientific studies of the effects of chemicals on the body. The common
plastic ingredient phthalate has been linked to underdeveloped reproductive organs in males.
Nano-particles can enter the bloodstream and cause tissue damage. Polyvinyl chloride (PVC) can
contain toxic metals like lead and cadmium and the waste products of PVC are toxic due to the
chemical properties of chlorine.
Shareholders worked with companies that produce
everything from foodstuffs to household products to automobiles to reduce toxics in products. The
Investor Environmental Health Network (IEHN), a
group of investment managers that work with their portfolio companies concerning the toxic
chemicals in their products, reported that proxy votes in 2007 in favor of shareholder resolutions
on sustainability reporting and toxic chemical reporting were very strong. In 2007, shareholders
submitted thirteen resolutions concerning chemicals in products, up from ten the previous year.
IEHN also reported that many resolutions regarding the safety of products and toxic
reporting were withdrawn as companies made commitments to act, including Apple on PVCs and
brominated flame-retardants, Sears on PVC, Mohawk Industries on PVC and CVS on regulating
Over 500 personal health care and cosmetic companies have signed the Campaign for Safe Cosmetics' pledge
Compact for Global Production of Safe Health and Beauty Products. When companies sign the pledge
they promise to replace hazardous materials with safer alternatives within three years.
Three major reports on toxic chemicals were released at beginning of the year including IEHN's
report, entitled "Beneath the Skin: Hidden Liabilities, Market Risk and Drivers of Change in the
Cosmetics and Personal Care Products Industry," and Innovest Strategic Value Advisors' report called,
"Cross-Cutting Effects of Chemical Liability from Products" that examines four major industries and
the loss of market share if companies don't address toxic chemicals in products.
third report, "Toxic Chemicals, Asian Investors are at Risk," was released January 2007 by the
Association for Sustainable & Responsible Investment in Asia (ASrIA ). This report looks at Asia's lack of response to chemical
reforms passed in other areas of the world. The report warns investors that Asian companies could
face loss of market share unless they start to address chemicals found in products.
Getting Under the Skin of Concerned Investors
Making Toys is Not Child's Play
Going Beyond Monitoring to Achieve Truly Sustainable Supply Chains
Chocolate Giant Commits to
Responsible Supplier Code
Shareholders Push Social and Environmental
Issues to the Forefront
5.The SEC ends 2007 curtailing shareholders' rights
After spending the year flip-flopping on the shareholder right to nominate directors, the
Securities and Exchange Commission (SEC) finally
ended the year withdrawing the privilege.
SEC director Christopher Cox gave several
reasons for the ruling, which include the potential conflict of interests. Cox also cited antifraud
The SEC ruling in December took place against a background of shareholder
activism, which worked against this final ruling limiting shareholder rights. The Social Investment
Forum (SIF) and the Interfaith Center on
Corporate Responsibility (ICCR), with the
support of Ceres, worked diligently to oppose the SEC proposals.
SEC's new rulings go
above and beyond an earlier attempt in 1997-1998 by the SEC to limit shareholders' rights. These
earlier attempts were withdrawn.
In July 2007, the five-member SEC commission divided
their votes on shareholder resolutions plans, following party lines, with SEC Republican
chairperson Christopher Cox supporting proposals by both parties.
SEC Sacrifices Shareholder Rights to
Achieve Temporary Certainty
Shareholder Activists Turn Up Heat on the
SEC Chair Cox Votes For Two
Opposing Proxy Access Proposals--Both May Curtail Shareowner Rights
Opening Up Pandora's Box: SEC
Proxy Roundtable Questions Role of Non-Binding Resolutions
Environmental, Social and Governance
Standards: Glass Half-Empty or Half-Full?
"Say on Pay" Highlighted in the
Upcoming 2007 Proxy Season
Shareholders One Step Closer to Having a
"Say on Pay"