November 14, 2001
Socially Responsible Investing: An Academic Issue?
by William Baue
TIAA-CREF opposes enhanced social responsibility for its Social Change Account, despite the fact
that the overwhelming majority of the account's investors favor such an initiative.
College Retirement Equities Fund (CREF) announced at its Annual Meeting in New York City on
November 13 that 70 percent of its participants rejected a proposal to divest from tobacco-related
stocks. The vote disheartened CREF participants who advocate socially responsible investing.
CREF, along with the Teachers Insurance and Annuity Association (TIAA), manages $280 billion in
pensions for 2.3 million teachers and academics.
TIAA-CREF originally answered the call for socially
responsible investment options by establishing the Social Choice Account (SCA) in 1989, after five
years of pressure from a group of TIAA-CREF investors organized under the moniker “Clean Up
TIAA-CREF.” SCA, which is now the largest social fund (among those subject to the Investment
Company Act of 1940) with $4.1 billion in invested assets, established “negative”
screens that end up weeding out some 35 percent of the S & P 500.
socially responsible investment strategies have matured in the intervening decade, with well-known
firms such as Salomon Smith Barney and Vanguard offering products that use “positive”
investment strategies. SCA investors urged TIAA-CREF to follow suit, but when it did not, SCA
investors organized another group, Soci
al Choice for Social Change (SCSC). Dr. Neil Wollman, a senior fellow in Peace Studies at
Manchester College in Indiana, founded SCSC to take up where “Clean Up TIAA-CREF” left
Under pressure from SCSC, TIAA-CREF commissioned a scientific, randomized survey of
SCA investors in 1995 to “evaluate how well [investors’] needs and wants are being met
and whether changes should be made.” The findings? Of the 200-300 respondents, 81 percent
favored investment in “companies that have an outstanding record of good performance on
social issues, rather than relying on negative screens”; only three percent opposed positive
If there were a mechanism for investors in the Social Choice Account to vote on
how to structure their investments, the results of this survey strongly suggest they would elect to
employ positive screening. However, no such voting mechanism for specific accounts exists,
according to TIAA-CREF Media Relations Specialist Lemuel Brewster. A vote to change an investment
procedure, even one that affects only one account, must be open to all TIAA-CREF participants.
The “TIAA-CREF Official Statement on ‘Positive’ Social Investing”
points out that the TIAA Traditional Annuity invests in community development initiatives such as
low-income housing and venture capital for progressive companies, two of SCSC’s main
requests. The statement also addresses the issue of positive screening more directly:
“Despite the fact that we do not actively seek out ‘good’ companies, our social
funds tend to have holdings which are very similar to those at institutions which say they are
investing with a positive methodology.”
However, SCA investments do not support
low-income housing and venture capital for progressive companies, even though a socially-oriented
account seems like the most appropriate place to house such investment. Furthermore, the
implication that negative screening achieves the same ends as positive screening ignores the
substantive distinction between negative and positive screening. For example, negative screening
limits investment options by eliminating certain companies from consideration, whereas positive
screening opens up investment options to emerging and smaller companies.
demonstrations both inside and outside the CREF Annual Meeting under the banner “Get Out of
the Bad, and Into the Good.” After years of TIAA-CREF officials “stonewalling”
his appeals, Dr. Wollman says he now sees such campaigns, as well as media coverage, as the best
way to advance SCSC’s cause of enhancing socially responsible investing at TIAA-CREF.
Press coverage has included mainstream business media such as the Wall Street Journal
and Worth. In the November 19 edition of Businessweek, Robert Barker calls for
TIAA-CREF to hold a vote and let its investors decide if positive screening should be pursued,
though he quotes Dr. Wollman’s statement of doubt that more than half of TIAA-CREF
participants would support a measure that only SCA investors are pushing for.
why TIAA-CREF cannot institute positive screening just within the Social Choice Account, Mr.
Brewster replied that TIAA-CREF is “not prepared to go beyond our ‘Official
Statement.’” However, the “Official Statement” does not answer many of the
questions raised by SCSC, and specifically it does not answer why TIAA-CREF cannot institute
positive screening in response to the clearly-stated desires of its SCA investors. Until TIAA-CREF
offers positive screening, or at least more comprehensive answers, SCSC will continue to voice its