September 05, 2002
Pension Funds, Fiduciary Duty, and SRI
by William Baue
An interview with Meredith Miller from the Connecticut State Treasurer's Office gives some insight
into why the State of Connecticut is increasingly embracing SRI.
This Sunday, the inaugural Green Mountain
SRI Summit will convene in Stowe, Vermont. The conference will address a wide spectrum of
issues regarding socially responsible investing (SRI), including how institutional investors can
adopt SRI strategies. One of the participants will be Meredith Miller, assistant treasurer for
policy at the Connecticut Retirement Plans
and Trust Funds (CRPTF).
CRPTF is one of a growing number of institutional
investors that have integrated SRI strategies into their investment process. For example, CRPTF
has engaged in shareowner action with companies such as the Stanley Works (ticker: SWK) and EMC (EMC).
Ms. Miller will
moderate a panel on the opening day of the conference entitled "Determining Your Approach--Equity
Investing, Community Investing, and/or Shareholder Advocacy?" SocialFunds.com recently spoke with
Ms. Miller about CRPTF's approach to SRI strategies.
SocialFunds.com: Why is the
Connecticut Retirement Plans and Trust Funds attending the Green Mountain SRI Summit?
Meredith Miller: We're attending the summit primarily because the Treasurer of the State of
Connecticut, Denise Nappier, has established a program at the Treasury that seeks to hold the
companies we invest in to standards of good corporate citizenship. The Treasurer's strategies have
ranged from community reinvestment to a series of shareholder initiatives and exploring--but at
this point not implementing--screening for the funds beyond those required by state law for
compliance with the MacBride Principles.
SF: Is the Treasurer's implementation of SRI strategies motivated primarily by social and
environmental concerns or by the financial considerations of fulfilling your fiduciary
MM: The Treasurer believes that environmental, social, and economic
issues are inextricably tied to the financial performance of our portfolio company investments.
That view is consistent with Connecticut law. We have a law that directs the Treasurer, in every
investment she makes, to consider the implications of the economic, social, and environmental
effects of those investments.
There are several reasons why this is important. One is the
belief of the Treasurer that you need not sacrifice fiduciary responsibility by taking into
consideration the economic, social and environmental implications of an investment. And the reason
she believes it is possible not to sacrifice fiduciary duty is because of the due diligence she
requires for those kinds of initiatives.
The bottom line is that if a public fund does
its due diligence--taking into account that social, environmental, and economic implications can
have an impact on the financial bottom line--then we believe it is possible to not only pursue your
fiduciary duty, but that it is part of your fiduciary duty.
SF: When was the law you are
referring to implemented?
MM: Several decades ago. It's not a recent law.
Do you see foresee the Connecticut State Funds implementing screens?
MM: In the Nappier
administration, we have chosen to lead with being a shareholder activist as a way to bring those
issues through because of the effect we can have on a company while we have ownership in that
company. Thus far, we have not started actually screening the funds. It's been very difficult to
take a fund like our $18-20 billion fund and screen it across the board.
We are working to
understand what options are available. What are the appropriate applications for a public fund?
Can public funds screen only a portion of their portfolio and what would be the justification?
What are the issues public funds should screen on and how does a fund decide which issues to
include and which not to include? Rather than screening the fund, would it make better sense to
take some fund money and put it into a socially responsible fund as opposed to screening your own
fund? These are really important questions. I think a lot of public funds are still trying to
understand how they can use socially responsible screens.
That's why I think the
conference will be so strong, because it will bring together research and best practice
applications so funds can see how to go about implementing SRI policies.