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Author: JohnQuixote Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2247  
Subject: Some articles on SRI... Date: 12/6/2000 7:44 PM
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I receive a newsletter via email subscription, called the Global Futures Bulletin. It contains all sorts of interesting interdisciplinary articles relating to sustainable development, etc. The following text was featured in a couple recent issues (GFB#118 and GFB#119) and as it pertains to Socially Responsible Investment, I thought it would be of interest to this board. [BTW, TMF staff, I did request and receive permission to post the text in full, so please don't delete it.]

I would encourage anyone who is interested to write to the publishers [Institute for Global Futures Research (IGFR)] at the email address featured at the bottom of this post.

Also, this was a two-part piece so I'll post the second part in a response under this same thread.

Enjoy!

John Quixote


Excerpted with permission from Global Futures Bulletin, issue # 118

SOCIALLY RESPONSIBLE INVESTMENT (SRI) (PART 1/2)
Investment in portfolios screened for socially responsibility (SRI) in
the US increased from US$639b in 1995 to almost US$3,000b in 1999
- a growth of ~45%/an [1]. Another source estimates SRI increased
from US$1,185b in 1997 to US$2,160bin 1999, an increase of
~35%/an [2].

There are now at least 175 SRI mutual funds in the US [3]

US SRI funds 1999- issues screened for [4]:
tobacco 96%
gambling 86%
alcohol 83%
environment 79%
human rights 43%
labour 38%
birth control
and abortion 23%
animal welfare 15%
weapons ?
nuclear power ?

Note 'birth control and abortion'. Environmental screening in 79% of
portfolios in 1999, is up from 37% in 1997 [5].

Investment by managed funds in ethical portfolios increased from 9%
of the total in the US 1998, to 13% in 1999. In Australia, SRI is
estimated at around US$520m, or only about 0.7% of total investment
portfolios in Australia.

A new social investment disclosure law in the UK requiring trustees
of pension funds to disclose how they account for social responsibility
issues in their investment strategies, is having some impact [6].
Pension funds with at least US$300b in assets said that they
incorporate SRI into their strategies (total pension fund assets in UK
~US$1100b). (On the otherhand 14% of funds, representing 4% of
total pension fund assets, stated specifically that social concerns will
not be taken into account !)

Penny Shepherd, Executive Director of UK Social Investment Forum,
says that 'the SRI disclosure regulation has brought a new level of
scrutiny by civil society to the investment decisions of pension
funds.' [7]

The Dow Jones Sustainability Group Index (DJSGI) covers 230
corporations. The index rates companies according to five principles:

technology - should be based on innovative technology and
organization..
governance - includes management responsibility, organizational
capability, corporate culture and stakeholder relations.
shareholders - sound financial returns, long-term economic growth,
long-term productivity increases, sharpened global competitiveness,
contributions to intellectual capital.
industry - should lead their industry's shift towards sustainability by
demonstrating their commitment
society - encourage lasting social wellbeing by their appropriate and
timely responses to rapid social change, evolving demographics,
migratory flows, shifting cultural patterns and the need for life-long
learning and continuing education.

Although these principles are based on 'integrating economic,
environmental and social growth opportunities', the references to
'environmental growth opportunities' and definition of the
commitment to social goals (any half-baked marketing department
needs to watch for 'changing demographics' and 'shifting cultural
patterns' !) are vague. A clear reference to the principles of
'ecologically sustainable development' and 'social justice' might have
been more reassuring…

The DJSGI prospectus says:
'Also excluded in all DJSGI indexes are companies with more than
50% sales derived from weapons and armaments (their weighting in
the index is reduced in cases where 5-50% sales is derived from
weapons and armaments).' It also says corporations involved in
tobacco, alcohol and gambling are excluded.

One would think that producing weapons and armaments is either
acceptable or not acceptable. Making this criterion suggests that it is
not acceptable. One would thus expect producers of weapons and
armaments to be excluded altogether.

Virtually all the corporations listed are large transnationals.

For example, they include Western Mining Corporation (anti Kyoto),
Nestles (aggressive marketing of formula milk), Unilever (destructive
logging in Solomons et al), Novartis (GM crops), Nike (sweatshop
labour exploitation).

Since 1995 the DJSGI has outperformed the global equity index [8].
The share price of Ballard Power Systems, manufacturers of new fuel
cells, for example, rose 229% in the first six months of 2000 [9].

Other promising companies in the DJSGI include:
Fuel Cell Energy, Inc.[10]
Calpine [11] power generation - combined cycle gas and geothermal
Vestas Wind Systems [12]
AstroPower [13] solar cells and panels

The burgeoning organic food industry is also currently a hot
investment area [14].

(Part 2/2 of 'Socially responsible investment' in GFB #119).
*
[1] Lee, Thomas Seattle Times, 09 Nov 2000
<www.seattletimes.nwsource.com/news/business/html98/greenf07_20
000911.html>
[2] Social Investment Forum '1999 report on socially responsible
investing trends in the United States' - increasing from US$40b in
1984. <www.socialinvest.org/areas/research/trends/1999-Trends.htm>
[3] Social Investment Forum op cit.
[4] Social Investment Forum op cit.
[5] Lee, Thomas op cit
[6] UK Social Investment Forum <www.uksif.org>
[7] UK Social Investment Forum op cit
[8] SAM Sustainability Index Fund prospectus
<www.sam-group.com/e/PDF/IF_Prospectus_E.pdf>
[9] SAM Sustainable Performance Group
<www.sam-group.com/e/PDF/SPG_SAR_2000_E.pdf>
[10] Fuel Cell Energy, Inc., formerly Energy Research Corp.
<www.fce.com>
[11] Calpine <www.calpine.com>
[12] Vestas Wind Systems <www.vestas.com> include Build-Own-
Operate-Transfer (BOOT) projects.
[13] AstroPower <www.astropower.com>
[14] Lee, Thomas op cit.




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PO Box 263E, Earlville, Qld 4870, Australia.
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Author: JohnQuixote Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1418 of 2247
Subject: Re: Some articles on SRI... Date: 12/6/2000 7:56 PM
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Whoops! My citation was a bit remiss. The prior article was excerpted with permission from Global Futures Bulletin, issue # 118, dated 11/20/2000.

The following four articles,
- Socially Responsible Investment (SRI), Part 2 of 2,
- Sustainable Development/SRI - one stop shop,
- SRI and microcredit, and
- SRI and weapons production/export
are excerpted with permission from Global Futures Bulletin, issue # 119, dated 11/28/2000.


Once again, I welcome those interested to write to the publisher for subscription to this informative and inspiring email newsletter. Institute for Global Futures Research (IGFR) can be reached at <igfr@igfr.org>.

Enjoy!
John Quixote




SOCIALLY RESPONSIBLE INVESTMENT (SRI) (PART 2/2) [1]
The Domini Social Equity Fund [2] is an SRI fund which invests
mostly in large transnationals including McDonalds, Coca Cola, Pepsi
Cola, and Enron (controversial dealings in India etc) [3].

Trillium Asset Management [4] is a social investment fund which
links into a Shareholder Activism Center [5] listing 142 corporations,
and resolutions that shareholders can vote on (and anyone can
support).

For example, two resolutions to Coca Cola address the way directors
are elected, and request that use of genetically modified (GM) foods in
Coca Cola products be terminated.

The database of corporations can also be searched according to a
number of criteria:
- corporate governance
- energy & environment
- equality
- global corporate accountability
- global finance
- international health and tobacco
- militarism & violence.

The research is supported by the Interfaith Center on Corporate Social
Responsibility (ICCR).

Another SRI mutual fund, SocialFund, lists 75 different social funds
(in the US) [6] with details of what areas funds are screened for:
- shareholder activism
- community investment
- environment
- human rights
- employment
- services/products
- weapons
- animal testing
- nuclear power
- alcohol, tobacco and gambling

Pax World Funds [7] is said to be the first mutual fund (since 1971) to
adopt SRI standards for its investments. Minimum investment is as
low as US$250. (Compare this to Trillium Asset Management
minimum investment of US$600,000).

Pax World Funds state that they invest in companies that produce
quality of life products and services in health care, technology,
housing, food, education, pollution control, utilities, and leisure-time
activities.

They avoid investments in companies that make defence or weapons-
related products, or that derive revenue from the manufacture of
tobacco, alcohol, or gambling products. Companies must also pass
rigorous financial, environmental and social screens.

The Calvert Social Index Fund avoids investing in companies that:
- are major polluters or have consistent environmental compliance
problems
- are primarily engaged in nuclear power
- have a record of employment discrimination, aggressive anti-union
activities or provide unsafe workplaces
- are significantly engaged in the manufacture of weapons, tobacco,
alcohol, or are involved in gambling operations.

One could question the criteria '*primarily* engaged in nuclear
power'. If nuclear power is not the way to go then why invest in a
company that has any involvement in the nuclear industry ?

Pfizer Inc. is one of the two largest beneficiaries of the Calvert Social
Index Fund [8] (the other being Cysco Systems Inc). According to the
Shareholder Activism Center, Pfizer has just settled a class action suit
for US$5.1m after is was charged with a dual pricing system - one
price for favoured customers, and another for the rest, which meant
overly priced medicines for elderly and unemployed people not
covered by medical insurance, for example.

The Calvert New Africa Fund 'seeks to catalyse economic
empowerment and improve the quality of life for the people of Africa'
by investing in companies that:
- make progress towards black economic empowerment
- have positive employee relations in Africa
- demonstrate positive leadership in areas like the environment and
treatment of employees

The Calvert New Africa Fund includes in its top 10 equity holdings
the corporations De Beers, and Anglo American - which sounds a
little like Old Africa - but one should not jump to conclusions.

How should ethical investing be used to achieve the best results ?

For example, a corporation may rate highly by most criteria (eg
environment, transparency) but poorly on another (eg. low wages in
developing countries). Does this mean it should be boycotted ?

If a corporation that is doing well (eg. BP Amoco, investment in
renewables, 'Beyond Petroleum') suddenly commits a grave error (eg.
drilling for oil in the Alaskan Arctic), should it be boycotted, and if so,
for how long ? Until it changes its practice ? Union Carbide (now
owned by Dow Chemical) reviewed its safety procedures to avoid any
repeat of the Bhopal tragedy. But is this enough ? Should a boycott
penalty period be recommended in such cases ? (eg 5 years,
10 years ?).

The SAM Funds (Swiss-based) use a formula to weigh up the pros and
cons and come up with a sustainability rating [9].

SocialFund provides a gateway to Folio [10], a registered stockbroker,
which allows you to customise your own portfolios and avoid fund
managers altogether. For a fee of US$295/an you can buy and sell as
many times as you wish with up to three portfolios, and trading in up
to 50 stocks in each portfolio. The Folio service is not about SRI, but
does provide optional tools to screen for tobacco, defence industry
stocks etc.

The Investor Responsibility Research Center provides numerous
information services (fee-based) relating to SRI including an
emissions index, spill index, and compliance index [11].

The Responsible Shopper website [12] gives social responsibility
ratings to a number of different corporations, as well as comparisons
of corporations in different industry sectors. Coop America gives
information on a number of current boycotts [13]. In both cases, the
database is far from comprehensive and has a US focus. The Social
Investment Forum also provides information and links on SRI [14].

Those corporations using futures studies tools such as 'environmental
scanning' are likely aware of the rapid growth of SRI of somewhere
between 35-45%/an, and are no doubt attempting to position
themselves to avoid damage from the changing investment geography,
while some are aiming to benefit from it. The rapid growth might be
expected to continue as the SRI movement targets metapoints [15]
such as pension funds/mutual funds.

If a million socially concerned people around the planet each had the
equivalent of EUR10,000 (Euros) to invest in SRI, the resultant
EUR10b would most likely have a significant impact on markets and
corporate behaviour.

Conversely, we need to consider that any money we currently hold in
banks, pension funds and other conventional investment funds, is
quite possibly propping up an ecologically unsustainable and socially
unjust/irresponsible status quo.
*
[1] see 'Socially responsible investment (Part 1/2)' in Global Futures
Bulletin #118 15 Oct 2000.
[2] Domini Social Equity Fund <www.domini.com>
[3] A database on 3,000 transnational corporations, parent companies
and subsidiaries can be found at <www.transnationale.org> (the site
appears to have some glitches). The Investor Responsibility Research
Center has a wide variety of information available for a service fee
<www.irrc.org>. Mark Latham of Corporate Monitor is attempting to
get corporations to agree to professional independent voting advice
(Shareowners' Alternative Voting Information - SAVI)
<www.corpmon.com>.
[4] Trillium Asset Management <www.trilliuminvest.com>
[5] Shareholder Activism Center
<www.socialfunds.com/funds/chart.cgi?sfChartId=Social+Issues>
[6] Ethical investment funds in the US
<www.socialfunds.com/funds/chart.cgi?sfChartId=Social+Issues>
[7] Pax World Funds <www.paxfund.com>
[8] Calvert Social Index Fund
<www.calvertgroup.com/investor/exec/profiles.asp?fund=933>
[9] SAM Sustainable Performance Group <www.sam-group.com>
[10] Folio <www.moneycentral.msn.com/articles
/invest/careful/5466.asp>
[11] Investor Responsibility Research Center (IRRC)
<www.irrc.com>
[12] Responsible Shopper website <www.responsibleshopper.org>
[13] Coop America boycott website
<www.coopamerica.org/boycotts/boycott_grid.htm>
[14] Social Investment Forum <www.socialinvest.org>
[15] metapoints - points of maximum leverage or opportunity. See
'Metapoints', Global Futures Bulletin #22 15 Oct 1996.
*
{30. corporate citizenship; 29. new economics}
*
*
*
SD/SRI - ONE STOP SHOP
With online trading and discount brokering services, transaction fees
can now be as little as US$20 or US$0.02 per share. It is conceivable
that if such services were based in a developing country, the brokering
fee could be reduced even further, allowing for small investments by
first time investors.

One suggestion is for a direct 'One Stop Shop' brokering service
specialising in sustainable development/socially responsible
investment (SD/SRI).

The SD/SRI One Stop Shop could provide the opportunity to invest in
SRI mutual funds and individual corporations listed in stockmarkets
around the world (not just the US stock market !) as well as other
corporations, cooperatives and projects, including microcredit and
community-based projects, not listed.

It could provide corporate profiles, share price history etc. It could
also have a 'stop loss' function, or 'urgent notice' e-mail service, (and
even, for a fee, an automated mobile phone alert service - though
concerns about how automatic 'stop loss' selling can trigger
stockmarket crashes continue).

It would list stocks according to a variety of criteria, including those
working toward sustainable industry and renewable energies - a
criterion not commonly listed.

Stocks could be purchased using creditcard or debitcard.

This service could also provide regular e-mail updates on new SRI
stocks, or corporations that have been delisted (eg due to infringement
of the criteria).

Ideally this service would also facilitate investments in
- community investment
- women in business
- ventures (eg sustainable development) not listed on the stock
exchange.
- microcredit programs in developing countries, (including special
targeting to women).

Advantages:
- get people's savings out of banks and directly into productive
SD and ethical investment.
- encourage people to save/invest more
- capital formation for transition to sustainable systems
- investments could be channeled to ventures and companies
anywhere in the world - ie possibly enhance appropriate Foreign
Direct Investment.
- could give more impetus to the SRI movement
- could possibly direct investments to small companies not yet listed
on the stock exchanges.
- could help finance investment proposals that are not as yet
capitalised.

Disadvantages:
- could possibly be destabilising and non-productive if investors have
a short term speculative mentality.

Institutional investors generally aim for the longterm (but gradually
less so). While a low brokering fee can allow for more small
investors, a proportional fee (ie tax/share) can moderate speculation.
*
{30. corporate citizenship; 29. new economics}
*
*
*
SRI AND MICROCREDIT
The Grameen Bank in Bangladesh [1] is the most well-known
microcredit service. However, its website does not provide online
investment opportunities.

Grameen Trust Replication Programs [2] have invested in over 62
microcredit schemes around the world.

The Sarona Fund [3], a Mennonite micro-enterprise fund, and Accion
International [4], are two investment funds which provide microcredit
to community development initiatives in the developing world. In
1998, an urgent Sarona Fund loan of US$55,000 to cocoa cooperatives
in Cameroon to buy seed, led to a US$1.7m harvest.

With assets of US$19.5m, Accion International focuses on
microlending for education, women and agriculture in Latin America.
Accion is itself an umbrella organisation for a network of
microfinance institutions which has loaned over US$2.2b to more than
1.6 million people in developing countries, with a default rate only
slightly over 2%.
*
[1] Grameen Bank <www.grameen-info.org>
[2] The Peoples' Fund <www.peoplesfund.org>
[3] Sarona Fund <www.saronafund.com>
[4] Accion International <www.accion.org>
*
{1. development issues, theory and paradigms; 29. new economics}
*
*
*
SRI AND WEAPONS PRODUCTION/EXPORT
One could argue that SRI screening out the defence industry is
inappropriate, if not hypocritical, since these same investors rely on
military forces to maintain global and social order. Somebody needs
to produce fighter aircraft, warships, missile systems, and automatic
weapons to equip armed forces. UN peacekeeping operations, for
example, could not function without military helicopters, tanks,
assault weapons and armoured vehicles.

A response to this argument:
The military-industrial complex is driving militarism. By screening
out investment in the weapons industry, major weapons producing and
exporting countries such as the US, France, UK, Germany and Italy
would come under pressure to reduce their production and to look for
ways to convince Russia and China to likewise reduce arms
production and exports. Together they could develop an agreed global
regime of limited *government* production of weapons (not weapons
for profit) with a view to furthering cutbacks in weapons production.

In the current situation, these countries, along with other weapons
exporters, benefit from the arms exports and in building up their own
defence forces, in terms of enhanced power in the existing world
order. They also, of course, benefit financially from arms exports.

The global conventional arms trade peaked in 1987 at US$60b/an
($1987) and was about US$32b/an ($1996) in 1996 [1].

(see 'World military expenditure / arms exports' in forthcoming Global
Futures Bulletin #120, 15 Nov 2000).
*
[1] 1987 data - 'The cost of war' Global Futures Bulletin #36 15 May
1997; 1996 data 'Major arms suppliers to the world 1992-1999' Arms
Trade News, Sept 2000, p4 Council for a Liveable World (original
source US Congressional Research Service)
<www.clw.org/cat/atn0900.pdf>
*
{30. corporate citizenship; 2. peace and conflict resolution}
*
*
*
CALENDAR
8-12 Jan 2001 World Congress on Environmental Law, San Jose
Costa Rica <www.greenchannel.com/iceac>
*
*
________________________________________________________
********************************************************
The Global Futures Bulletin is produced by the Institute for Global
Futures Research (IGFR) twice monthly. Readers are welcome to
submit material such as succinct letters, articles and other useful
information. Indicate whether you would like your name attached to
the submitted material. All communications should be directed to the
Editor, e-mail <igfr@igfr.org>. Copyright (c) 2000 Institute for
Global Futures Research (IGFR). All rights reserved.
________________________________________________________


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Author: JohnQuixote Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1419 of 2247
Subject: Re: Some articles on SRI... Date: 12/6/2000 7:58 PM
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Just in case the TMF staff are feeling particularly persnickety, here's the reprint permission from the publisher.

Cheers!
John Quixote


****************************************************
Dear John,

Thanks for asking permission to repost, which we are able to give in
this case regarding articles on SRI (GFB#118 and GFB#119). Please
include references (journal name, number and date).

Including our contact address <igfr@igfr.org> would be appreciated
but is not necessary.

Please let us know on which list you intend to repost. Permission will
be required for any future postings.

Regards,
Sonya Bentham, Admin
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PO Box 263E, Earlville, Qld 4870, Australia.
E-mail: <igfr@igfr.org>.
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Author: TMFEscrime Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1423 of 2247
Subject: Re: Some articles on SRI... Date: 12/11/2000 5:07 PM
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Heh. Heh. Heh... you said "persnickety".

Besides I don't think TMF folks read this board much.

:)

TMFEscrime



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Author: fivepigs Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1424 of 2247
Subject: Re: Some articles on SRI... Date: 12/11/2000 11:46 PM
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Besides I don't think TMF folks read this board much.

Given the burgeoning inflow of cash to SR Mutual Funds, and the dubious performance of TMF stock picks...perhaps a well-placed link to this board could be your Random Act of Kindness for today.

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