What work do you do?
I’m the senior analyst on the Social Research and Advocacy team at Trillium Asset Management, a Boston-based investment management company dedicated solely to socially responsible investing.
The biggest part of my job is actively engaging with companies we hold to encourage them to improve their social and environmental performance. So for instance, we played a role in convincing PepsiCo to establish its first strategic plan on water conservation and stewardship, Staples to set goals to more than triple the amount of recycled content in the overall mix of paper products it sells, and Citigroup to adopt groundbreaking policies to review and reduce the environmental impacts of the large projects it finances. Of course, many of these victories also came about because of work by lots of environmental groups and other players from around the world. Yet as shareholders, we often have a unique ability to offer our input and press senior corporate managers to consider the need for better environmental and social policies and performance.
How many emails are currently in your inbox?
There are 173 right now, and that’s even after a morning spent mostly reading, responding to, and deleting emails. I was on work travel last week, and any time I’m away it’s a huge struggle to catch up.
Who’s the biggest pain in the ass you have to deal with?
Some corporate general counsel are not the most fun people to deal with … initially at least. We seek to work collaboratively with companies we hold. As investors, we want the companies we hold to be successful as businesses as well as act responsibly — and in fact, we think acting responsibly is the best way companies can minimize future risks and protect long-term shareholder value. But early on, some general counsel and others within companies see us much more as adversaries than as partners discussing common goals. The hard part is, once we’ve built a level of trust and understanding with senior managers within a company and are satisfied they are moving on the right path, it’s time to start over with a new company full of people suspicious about our intentions. So it’s back to calling the next defensive general counsel.
Who’s nicer than you would expect?
On the flip side, plenty of people within companies, from CEOs on down (and even many general counsel), are very nice and great to work with. Despite the egregious things you read about in the newspaper almost every day, I don’t think many people in companies go to work every morning eager to make sure more rainforest is cut down, more poisons are dumped into local communities’ drinking water, and more kids are working in sweatshops. Promoting those outcomes is just not going to feel like a day well spent to most people. Yet companies do play a role in those things happening, I think in large part because we’ve built an incredibly complicated system of global commerce that is almost entirely focused on quarterly earnings and rewarding companies for short-term thinking. Many corporate managers are actually surprisingly eager to explore ways their organizations can take a step back and figure out how to narrow the gap between the common values most of us share and the way their businesses operate day to day.
Who is your environmental hero?
One group of unsung environmental heroes is the growing number of environmental-affairs managers and other people acting as internal advocates within companies. They are doing the hard, unglamorous, and often thankless work of lobbying for change from the inside. There are too many of them to name individually, and I wouldn’t want to leave anybody out, but hopefully they know who they are.
On the other side of the table (or banner sometimes), over the last five years, the San Francisco-based group Rainforest Action Network has had an incredible impact on corporate behavior at corporate giants from Home Depot to Bank of America. It’s particularly amazing when you realize they only have a staff of about 20 people. Like all of us in the environmental movement, they’ve achieved their victories with the help of lots of allies and coalitions, but they’ve really led the way and had a tremendous impact.
What’s your environmental vice?
I’m sure my biggest environmental impact comes from too much air travel, both for work trips and fun trips. I’m getting better about trying to cut down on work trips and schedule meetings by teleconference rather than in person. On the other hand, I’m currently based in Seattle and a teleconference is really no substitute for a winter vacation in Mexico.
What are you reading these days?
I’m just finishing Mountains Beyond Mountains, which is about Dr. Paul Farmer’s efforts to address the global health crisis in Haiti and the world’s poorest populations. It’s inspiring, but for those who are in the mood for a lighter read, I’d also recommend another book I’ve recently read, So You Wanna Be a Rock & Roll Star, written by the drummer for Semisonic (whose song “Closing Time” you may have heard highly overplayed on the radio a few years ago). If you’re looking for a book related to socially responsible investing and corporate responsibility, I really enjoyed Marc Gunther’s new book Faith and Fortune. I doubt those books have ever been mentioned together in the same paragraph before.
What’s one thing the environmental movement is doing particularly well?
Forming new alliances with investors. For instance, the environmental coalition CERES has incubated the Investor Network on Climate Risk. Through INCR, state pension funds and other major institutional investors are demanding to know how oil, utility, auto, and other companies are planning to address long-term business risks from climate change. In the past two years, the INCR and other broad coalitions of shareholder groups including Trillium Asset Management have convinced major utility and energy companies to issue their first-ever reports on what risks climate change poses to them and how they plan to address the issue. Some of those reports, such as a recent one by Cinergy, acknowledge that further regulatory action to address climate change is inevitable and build the case that the U.S. government needs to take more action now to address the risks of climate change rather than continuing to delay.
I don’t think we’ve done a good enough job of getting people’s buying decisions to reflect their social and environmental values, at least here in the U.S. There’s a greater level of awareness in Europe, and there’s certainly been strong demand here for some environmental products, notably organic foods and hybrid autos. Still, while people consistently tell pollsters they factor environment and social issues into their purchasing decisions, their everyday choices don’t seem to send a clear message that they value a clean environment or an end to sweatshop labor. There are some resources out there for socially conscious consumers, like IdealsWork.com, but I think there’s an opportunity to do a lot more. I would love to see a group or coalition of groups organize and mobilize consumers to act in a way that’s as high-profile as MoveOn.org‘s efforts to mobilize grassroots engagement in political action over the past several years. (Or maybe someone at MoveOn could take this on, if anyone there is reading this.)
What was your favorite band when you were 18? How about now?
If I think back to what I was blasting out my dorm window, it was probably U2. I don’t think my upstairs neighbors have heard me playing “Where The Streets Have No Name” anytime recently, but they have probably heard more of The Magnetic Fields than they’d like to. Stephen Merritt, the force behind that band, might actually be as brilliant as Bono thinks himself.
If you could have every InterActivist reader do one thing, what would it be?
Do at least one thing to make your investing or purchasing decisions reflect your environmental and social values. The Social Investment Forum and SocialFunds.com have directories of socially responsible mutual funds, information about options for community investments in your local community or around the world, and resources that can be a great start in changing some of your investments. Or pick one brand or product you use a lot, see what environmental information they have on their website, and write the CEO to commend them for anything positive they are doing and challenge them to do more.
This applies not just to individuals, but to institutions too. It drives me crazy that many environmental foundations and environmental groups are using traditional money managers that are actually using the shares those groups own to vote against environmental shareholder resolutions filed by socially responsible investors. They probably don’t even know it’s happening, but it makes no sense that they are voting against proposals asking companies to stem global warming or pledge not to drill in the Arctic National Wildlife Refuge. If you’re an environmental foundation, do you really want to be voting in lockstep with the management of ExxonMobil on these issues? Because you probably are right now. The Foundation Partnership on Corporate Responsibility has good information on how foundations can leverage all their assets to create change, not just the grants they give.
I want to emphasize that this isn’t motivated by self-interest, or at least not by financial self-interest. I’d love to help more foundations invest their money responsibly, but would be just as happy to have another SRI firm invest their assets instead or even to get them to change how their traditional money managers vote shareholder proxies. I just don’t want their investments to be used to vote against the types of environmental change we’re all working for.
Lippman Smacking Good
What criteria do you use to make the ultimate yay or nay decision on what constitutes a socially responsible corporation? — Maire McDermott, Winnipeg, Manitoba, Canada
We’re in a little different boat than SRI mutual funds, because as an asset manager we offer individual investment portfolios to our clients and thus can customize their accounts to reflect their values. However, to meet the basic values of the majority of our clients, Trillium Asset Management typically excludes from our clients’ portfolios companies that are significantly engaged in the production or marketing of firearms and weapons, tobacco, gambling, pornography, and nuclear energy. On a case-by-case basis, we also avoid companies that have systematically failed to protect the environment, human rights, or workers.
In addition to our basic avoidance screens, we proactively seek to invest in companies with strong records of corporate citizenship and those that offer sustainable products to the marketplace, such as renewable-energy technologies and organic foods. Even after all that, we hold plenty of companies that have mixed records of strengths and opportunities for improvement, and we generally put more emphasis on our efforts to actively engage with the companies we hold to improve their performance once we do our basic screening.
Overall, I’d personally define a socially responsible company as one that: (1) has systems in place to identify the key social and environmental impacts relevant to its business; (2) recognizes that it has obligations to address those impacts and sets goals and targets for improvements; (3) engages its employees and works collaboratively with key external stakeholders to address its impacts and meet its goals and targets; and (4) reports openly and honestly on its performance and progress. I’m not sure all of the companies we currently hold are yet leaders at following this path, but we’re working on getting a lot of them farther along it!
You mentioned that you would like to see a group or coalition of groups organize and mobilize consumers in a way similar to MoveOn.org‘s efforts politically. Have you ever heard of Co-op America and the Green Pages? — Melissa Leonard, Naugatuck, Conn.
I should have mentioned Co-op America when I mentioned IdealsWork in my response earlier this week. Both their Green Pages and Responsible Shopper websites are definitely useful resources for consumers who care about social and environmental issues.
But I look at MoveOn‘s successes — getting millions of its members to take their power as citizens seriously and make their first political donations, go door-to-door registering voters in their neighborhood, and even volunteer to travel to another state as poll watchers — and it makes me hope for the development of a similarly ambitious and successful effort to mobilize people to take their power as consumers seriously. So I threw out the challenge to Grist readers with the hope that some smart people out there would figure out how best to do it … or that MoveOn would offer to!
If you live in a place where the notion of socially responsible investing is alien, what’s the best way to get advice on how to be a green investor? — Shannon Brennan, Lynchburg, Va.
There are free guides to investing in socially responsible mutual funds and other SRI topics geared to the individual investor available at SocialFunds.com that you can order online. There are also publications you can read, like the GreenMoney Journal, and Co-op America offers a Financial Planning Handbook and Real Money journal to its members.
If you do want to talk to a financial planner in your area who knows about socially responsible investing, one way to find them is through the First Affirmative Financial Network, a nationwide network of financial advisers who specialize in socially responsible investing.
I’ve looked into all the socially conscious mutual funds several times over the last few years, and I’m always turned away by the high fees — much higher than those charged by high-performing funds that don’t concern themselves with the future of the planet. Can you explain why these fees are so high? — Elizabeth M. Ferranti, Marstons Mills, Mass.
The main reason some SRI mutual funds have higher expense ratios than some traditional mutual funds isn’t that they practice SRI, it’s that they tend to be smaller. Some of the huge mutual-fund companies have tremendous economies of scale and thus can have lower fees, just as Wal-Mart can offer lower prices than many neighborhood stores. To take this into account, the Social Investment Forum did a study that compared SRI funds to other mutual funds of similar size and found their fees were basically the same.
I know from experience that at Trillium Asset Management our fees are generally comparable to traditional asset managers that don’t do SRI. And I’d argue we’re providing our clients more value, because we are doing screening, carefully voting clients’ proxies, and engaging with the companies we hold while charging the same fees as many companies that don’t offer these services.
The good news is that fees at SRI funds are now tending to come down a bit as those funds get bigger and gain economies of scale. And the mutual fund giant Vanguard, known for its efficiency and low fees, now offers a screened SRI product based on the Calvert Social Index that may be attractive to investors who are particularly concerned about fees.
When working with large corporations on improving their environmental track records, what would you say is your best leverage point in achieving change? — Christopher Walts, Kalamazoo, Mich.
A key leverage point unique to socially responsible investors is the fact that corporate managers are supposed to be working in the interests of their shareholders, which gives us the opportunity to offer input on behalf of the companies’ owners … or those who are our clients, anyway. Most companies have established formal channels for responding to inquiries from investors, which helps us get our voice heard and hopefully begin a dialogue. Also, with share ownership comes the right to bring policy issues to a vote of all the owners of the company through a shareholder resolution. Companies most often hate having to deal with shareholder resolutions at their annual meeting, and often work to address our concerns without things resorting to the resolution process.
Does the Securities and Exchange Commission effectively require companies to disclose the information that you need as an SRI analyst? Also, how has the SEC been reducing the rights of SRI shareholders to file shareholder resolutions on the financial risks of issues like global warming and toxic-chemical exposures? — Sanford Lewis, Amherst, Mass.
The SEC does have rules that require companies to disclose potential environmental costs and liabilities — both the amounts of money reserved to pay for future litigation and environmental compliance, and a written analysis of developments that could significantly affect the bottom line. Unfortunately, the SEC hasn’t strongly enforced the disclosure of these issues, so SRI analysts have to attempt to draw the information from other sources such as other government records. To address this, there’s a strong coalition of environmental groups, socially responsible investors, and others called the Corporate Sunshine Working Group that is working to lobby the SEC and Congress for stronger disclosure requirements, which are in the interest of all investors.
Shareholders have also tried to use shareholder resolutions to get companies to assess and disclose to investors the financial risks they face from major looming environmental issues like climate change or potential liabilities associated with past environmental disasters like Bhopal. In a disappointing move, over the past two years SEC staff have begun allowing companies to exclude these types of shareholder proposals that demand disclosure of future risk. They argue that companies are supposed to address such risks in their annual reports, instead of through the shareholder resolution process, yet ironically they aren’t doing much enforcement to ensure that companies do disclose those risks in annual reports. It’s a bit of a catch-22, and both the environment and investors come out poorer for it.
What do you think about the role of private certification schemes such as the Forest Stewardship Council and those created to deal with sweatshops? Do you think that there is potential for a multi-issue progressive certification scheme? — Evan Thomas Paul, Columbia, Mo.
I do find independent third-party certification systems, like FSC standards for sustainable forestry or the Social Accountability 8000 and Fair Trade standards on social performance in global trade, incredibly useful in judging corporate performance. The standards that are most credible and useful are those that were developed with input from key stakeholders (and have governance structures representing those stakeholders) and include independent monitoring mechanisms, as opposed to some industry self-regulation systems.
Some of these standards, like the FSC standard, do incorporate multiple issues, addressing a mix of environmental and social issues. I’d welcome the development of more multi-issue standards, but think it’d be most helpful if they were still tied to specific sectors so they focus on key industry-specific impacts and issues and don’t get overly abstract or watered down.
What companies are most active in development of technologies using wind and/or solar? Do any of these companies trade publicly? — Tom Svoboda, Kent, Ohio
One interesting source of information on green technology investments is Clean Edge. Its website currently lists about 30 publicly traded U.S. companies involved in wind, solar, fuel cells, and other forms of alternative energy and green technologies. I’m not the clean-tech analyst at Trillium Asset Management, so I’m not personally familiar with all the companies on the list and am not endorsing them as investments. But I do think the website and company list at Clean Edge could be a good place to start your own research about potential investments in this sector. One other cautionary note is that many of these companies are so-called small-cap stocks, which tend to have more volatile share prices and be more risky to invest in than larger, more established companies.
I am currently studying to become a Certified Financial Planner through an evening program at Virginia Commonwealth University. Do you have any suggestions for folks that have spent about 10 years in the environmental field who want to begin careers in social investing? — Chip Goyette, Arlington, Va.
There’s a large range of jobs related to socially responsible investing, from doing research on corporate performance at a rating agency like the Investor Responsibility Research Center or KLD Analytics to a job like mine doing shareholder advocacy for an SRI firm to being a certified financial planner helping clients make investment decisions.
Your mix of specific environmental experience with certification courses in financial planning sounds like a strong combination to bring to the field. Like most social change-related jobs and jobs in the environmental movement, there’s a lot of demand for the good jobs that are out there, so it can take persistence, good networking, and sometimes a lucky break to get your foot in the door. But I’d point out that Al Gore has just started his own socially responsible investment firm, so at least he was able to make a mid-career switch into socially responsible investing.
Are you aware of any initiatives, projects, or programs that connect SRI with churches and religious communities? — Bruce Wiggins, Kansas City, Mo.
A great resource is the Interfaith Center on Corporate Responsibility, an association of 275 faith-based institutional investors, including national denominations, religious communities, pension funds, endowments, hospital corporations, economic development funds, and publishing companies with an estimated $110 billion in assets. ICCR members have been pushing companies for greater social responsibility for more than 30 years on issues as diverse as ending support for apartheid in South Africa to challenging automakers to make more fuel-efficient vehicles.
I am on the board of a local Audubon chapter. Several years ago, we decided to invest $20,000 in an SRI mutual fund with Calvert hoping to make money on the capital, but after five or so years of earning nothing, we’re now revisiting our investment strategy. Some board members feel as though we should invest in a higher-earning, non-SRI fund so that we can earn more money to put to good local use in building a nature center. They feel it’s a worthy trade-off. Can you comment on this argument? — Laura Henry, Fairbanks, Alaska
I’d argue it’s a trade-off you and other groups don’t have to make. There’s now more than 10 years of experience from SRI benchmarks and a set of over 15 rigorous, peer-reviewed academic studies (compiled at SRI Studies) that suggest that socially screened investments don’t perform any differently from comparable conventional mutual funds. For instance, one of the best-known U.S. SRI indexes has performed just slightly better than its benchmark of the S&P 500 index over the past 10 years. During that period, there have been times it’s beaten the S&P and times it’s lagged it a bit, but it’s generally performed the same. (As an individual asset manager, Trillium Asset Management doesn’t offer mutual funds, but our client portfolios have been very competitive with the S&P 500 and other benchmarks we use to measure financial performance.) Also, SRI mutual funds as a group have ranked as well or better than conventional mutual funds in the widely watched Morningstar ratings of mutual-fund strength and performance. So there’s a strong body of evidence that you don’t have to sacrifice performance to get some of the benefits of socially responsible investing that are consistent with your organization’s mission.
OK, so I offer those arguments in theory, but you’ve still got the pain of looking at the past five years of your group’s financial statements. One key thing to keep in mind is that the last five years have been an incredible roller coaster in the U.S. stock market. I feel your pain because I put some money in the stock market about five years ago — at a time when the markets were at all-time highs, remember — only to see my funds shrink for the next several years. If you haven’t looked at how comparable non-SRI funds performed over the same time period, that would be useful information to have. It would also be helpful to consider how your fund did compared to similar non-SRI funds over the past three-year and one-year periods when the markets have picked up considerably and many SRI and non-SRI mutual funds have done quite well.
A final recommendation is diversification, an important strategy all investors should consider, whether they are in SRI funds or not. I’m not sure how your $20,000 was invested, but to hedge your bets and lower your risks, you could split the $20,000 into four different styles: such as a value fund, a growth stock fund, a global or international fund, and perhaps even an income fund. There are SRI options within each of these investment styles, and you’ll lower your transaction costs if you stay within the same family of funds.
My company offers a 401(k) retirement plan that allows us to choose from among about eight mutual funds to invest in, none of which are socially responsible. A group of us employees have pushed to get a socially responsible fund on the list of options. We’re getting fierce resistance from management, who say that they have a fiduciary responsibility to provide only the best-performing funds, in terms of return, as options in the plan. I wonder how other companies have overcome this problem and are able to provide socially responsible options to their employees, even if such funds are not necessarily the top performers in their fund categories. — Mark W., Auburndale, Mass.
First you can point to the growing number of large companies offering an SRI mutual-fund option in their 401(k) retirement plans, which now include Alaska Airlines, Coca-Cola, The Gap, Ford Motor Company, General Motors, Hewlett-Packard, and more. There’s general support for their actions from an official advisory opinion the U.S. Department of Labor’s Pension and Welfare Benefits Administration issued in 1998 on the appropriateness of SRI options under Employee Retirement Income Security Act rules. That opinion said that SRI funds can be offered if their expected returns are commensurate to other investments having similar risks.
As I note in other answers here, there’s now a long track record and a raft of academic studies demonstrating that SRI funds as a class don’t underperform financially compared to non-SRI funds, so this shouldn’t be a barrier to offering SRI options. And it’s not just fiduciaries of some of the large corporate 401(k) plans that have come to that conclusion. The trustees of state pension plans from states as diverse (and presumably conservative) as Indiana, Maine, Missouri, and New Mexico have also added SRI options to their pension-fund offerings for state employees. I hope you’re successful in convincing your employer to follow their lead!