SRI Socially Responsible Investing This is a collection

SRI: Socially Responsible Investing This is a collection of the presentations on SRI funds and forums from the 11: 00 class in Fall 2008 for Business 356 (Business Ethics)

Domini Social Investments The Way You Invest Matters Be part of the solution domini. com

Domini 1980 - Stockbroker 1989 - Begins work with Peter Kinder and Steve Lydenber on Domini 400 Social Index 1990 - Launches Domini 400 1991 - Created Domini Social Equity Fund domini. com

Domini Engaging companies on global warming, sweatshop labor, and product safety Bringing new voices to the table. Redefining corporate America’s bottom line. domini. com

Domini Each of Domini’s stock funds is actively managed according to an innovative strategy of strengths of Domini Social Investments Responsible for the development and application of the Funds’ social and environmental standards.

Cal. PERS California Public Employees’ Retirement System provides pension fund, healthcare and other retirement services for approximately 1. 5 million California public employees Calpers. ca. gov

Cal. PERS $235. 9 billion worth of stock, bonds, funds, private equity and real estate as of August 2008 Largest pension fund in the United States Provides benefits to all state government employees and, by contract, to local agency and school employees. 3 rd Largest purchaser of employee health benefits in the United States Wikipedia. org

Cal. PERS Calls for reform in executive compensation, especially Golden Parachutes Sued the NYSE over allegations that their specialists (floor workers) engage in practices which hurt investors Banned investment of its funds in nine companies that do business in Sudan until the government of that country halts ongoing genocide Wikipedia. org

Cal. PERS Accused of being politically motivated due to the fact Democrats control the board Removal of President Investment in CDOs Other Shareholder Activism Wikipedia. org

Eurosif A non-profit organization

Eurosif A member affiliates in 14 different countries Affiliates include pension funds, financial service providers, academic institutes, research associations and NGO's Started in 1901 Executive board made up of 5 members lead by Matt Christensen

Eurosif Assets totaling over 1. 665 trillion euros as of December 31, 2007 Equally 17. 5% of Europe's assets

Eurosif They have noticed what Europe’s growth is driven by: ◦ there’s an increasing demand from institutional investors. ◦ there’s a further mainstreaming of ESG considerations into traditional financial services. ◦ External pressures and finally a rising interest from individuals and specifically wealthy individuals.

Eurosif They segment the SRI into 2 different tangents Broad SRI and Core SRI Broad SRI is an estimated worth of 2. 154 trillion euro's and Core SRI is worth an estimated 5. 12 trillion euro's ◦ Broad SRI - represents the more mainstreaming of SRI and emphasizes the growing interest ◦ Core SRI - consists of extensive screening strategies systematically impacting portfolio construction and often implying a values-based approach.

PAX World High Yield Fund Korie Lebeda

PAX World High Yield Fund Description: ◦ ◦ ◦ Inception: Oct. 8, 1999 CEO is Joe Keefe, Lead Manager is Mary V. Austin Account Min. = $250 Reinvestment Min. = $50 “Seeks high current income and capital appreciation”

PAX World High Yield Fund Social Screens ◦ Tobacco= No investment ◦ Gambling, defense & weapons, alcohol, and animal testing= Restrictive investments ◦ Products & services, the environment, human rights, labor relations, employment & equity, and community= Positive investments

PAX World High Yield Fund Do’s (would do business with) ◦ Companies with similar social missions: Promote quality of life (environment & community) Encourage diversity Policies/practices with employees & human rights Examples: Levis Strauss, Blockbuster Don’ts (would not do business with) ◦ ◦ Marketers of irresponsible alcohol consumption Major manufacturers of weapons Casinos Companies that use animal testing Examples: Certain make-up and hair products

PAX World High Yield Fund Recommendation ◦ Based solely on Social Responsibility & Benefit Recommend to self: Yes Recommend to others: Yes $500, 000 settlement with SEC-cleared name of charges of violating investment guidelines Social Responsibility = big priority

Green Century Fund Environmentally responsible mutual funds founded by nonprofit advocacy organizations. The Balanced Fund invests in the stocks and bonds of companies with clean environmental records.

Origen + Philosophy Founded 1991 provide two mutual funds for those who wish to align their investments with their environmental values use shareholder advocacy to seek to place direct pressure on corporations to change their practices to protect the environment dedicate GCCM's profits to advocacy organizations who work for public policies that help create a sustainable economy.

Negative screens Nuclear weapons and nuclear energy Tobacco Fossil fuel Animal testing (for non-medical purposes) Factory farming Genetically modified organisms ("GMOs") Agricultural pesticides

Positive screens Alternative energy Eco-friendly products Green technology Organic / natural food supply Water solutions Sustainable development Community investment

Companies engaged

Location: Vancouver, British Columbia CEO – Kerry Ho Net Assets: $143. 75 million

Company Mission To help Canadian investors build wealth through enhanced investment returns. Before they invest, Inhance Investment listens to company management, researches economic trends, and crunches the numbers. The thing that separates them from other businesses is that they incorporate environmental, social, and governance criteria into their analysis. ◦ They look at how companies behave, and solely invest in those that have compelling growth prospects, and progressive and sustainable business practices needing to keep growing in the future.

Mottos and Slogans “We listen to what a company says, then we analyze what it does. ” We call it return on responsibility. ”

Social Screens Employee relations Diversity Environmental commitments Community relations Corporate governance and citizenship Human rights Sustainable products.

Partners

Chikyu Ondanka Boushi Kanrenkabu Fund By: Ty Johnston

Ownership Nicknamed “Chikyuryoku” is started by Shinko ITM and teamed with KLD Research and Analytics to create an index fund for socially responsible investors in Japan. Chikyuryoku fund is translated as “Global Warming Prevention Equity Fund” The fund is associated with the GC 100 Index started by KLD.

Origin The Chikyuryoku Fund began on June 5, 2006 with its launch coming on June 30, 2006. Saw a promising market with the rise of the GC 100 Index Original investors in Japan are very environmentally concerned and wanted to prepare for new energy systems

The Market Investors saw a very profitable market available through the GC 100 Index and the Chikyuryoku Fund. More stable market to invest in than other volatile markets like the renewable energies. Fund has become successful due to equalweighted strategies to accommodate big and small companies to have an level playing field in the market. 10 million invested over the next three decades

Social Benefit Growing group of Japanese Investors concerned with environmental issues and global warming Clean energy market to depend less on fossil fuels. The index has a diverse group of companies leading the way in today’s technology Profitable Fund with a conscious effort on cleaning up the environment and protecting global warming efforts.

KLD RESEARCH & ANALYTICS, INC “the leading authority on social research and indexes for institutional investors. ”

Mission Provide global research and index products to facilitate the integration of environmental, social and governance factors into the investment process. Define by services, accountability standards that enable investors, managers and fiduciaries to influence corporate behavior through their investment decisions and share ownership. Effect through this influence, greater corporate accountability and, ultimately, a more just and sustainable world.

Socially Responsible Charitable giving Innovative giving Non-US charitable Support for education Support for housing Volunteer programs Labor rights Retirement benefits Health & safety

Controversial Business Decisions Companies Involved With & Owned By: Abortion Adult Entertainment Alcohol Contraceptives Firearms Gambling Military Nuclear Power Tobacco

Reasoning Economic Outcome Making Unethical Companies, Ethical Helping Society

Background Information • Teachers Insurance and Annuity Association – College Retirement Equities Fund • Founded: 1918, lead by Henry S. Pritchett • Headquarters: New York City • Current CEO: Roger W. Ferguson, Jr. • Targets those in the academic, medical, cultural and research fields

Additional Information • Minimum Account: $2, 500 initial; $50 automatic investment • Minimum IRA: $2, 000 initial; $50 automatic investment • 86 th Largest corporation according to Forbes top 500. • $420 Billion in assets as of June 30, 2008 • Meets the needs of nearly 3. 4 million individuals and 15, 000 institutions • Operates on a nonprofit basis • Does outside screening through an independent social investment research firm

Restricted Investments Alcohol Restricted investment (by fund policy and by practice). Considers retailers that derive less than 15% of revenue from alcoholic beverages. Military/Weapons Restricted investment (by fund policy and by practice). Considers firm with less than 2% in sales, less than $50 M in contracts, less than $10 M nuclear arms. Environment Proactive investment (by fund policy and by practice). Clean energy, beneficial management systems, pollution prevention and recycling. Gambling Restricted investment (by fund policy and by practice). Excludes firms whose primary business is providing gambling products or casino management services. Nuclear Restricted investment (by fund policy and by practice). No investment in utility companies that own interests in nuclear power plants. Other Restricted investment (by fund policy and by practice). Excludes firms with revenue from the manufacture of firearms, ammunition or more than 15% in sales. Pornography Restricted investment (by fund policy and by practice). No investment in firms that derive vast majority of revenue from distribution or sale of pornography Tobacco Restricted investment (by fund policy and by practice). Considers retailers that derive less than 15% of revenue from tobacco products. Information from Social Investment Forum

Positive Investments Community Relations Proactive investment (by fund policy and by practice). Charitable giving, innovative giving, support for education, housing and employee volunteering. Employment/Equity Proactive investment (by fund policy and by practice). Employee & executive diversity, health & safety, retirement benefits, and work/life benefits. Environment Proactive investment (by fund policy and by practice). Clean energy, beneficial management systems, pollution prevention and recycling. Human Rights Proactive investment (by fund policy and by practice). Considered in social screens. Labor Relations Proactive investment (by fund policy and by practice). U. S. workforce labor rights and relations with indigenous peoples. Other Proactive investment (by fund policy and by practice). Corporate governance considered with executive pay, transparency, and accountability. Products/Services Proactive investment (by fund policy and by practice). R&D, innovation, quality and products that benefit the economically disadvantaged. Information from Social Investment Forum

Concluding Points • TIAA-CREF offers it’s clients only positive investments. • Does not profit from customers and surplus is returned to it’s participants • Conducts social screening before looking at financial benefit • Screening process consist of three stages • Stage One: Automatically eliminates companies that fall under restricted investments. • Stage Two: compares companies in the categories of positive investments • Stage Three: Takes the top performers and takes a final look.

THE EPIPHANY FAITH AND FAMILY VALUES 100 FUND. Are you ready for an Epiphany

The Epiphany Faith and Family Values 100 Fund is comprised of the top 100 companies that meet their stringent guidelines based on the teachings of the Catholic Church. This philosophy is based on the U. S. Conference of Catholic Bishops and its sound investment guidelines.

Their factors for investments are; they will not invest in any company that gives money to planned parenthood or embryonic stem cell research. Any company that manufactures contraceptives are also off the list. A corp. that produces pornographic material or has significant human rights or environmental abuses are out too.

Top 5 holdings. Exxon Mobil (wait what? ) Lowe’s Mc. Graw Hill Linear Technology Sysco

From Social. Invest. org Alcohol Restricted investment Abortion Specific Products No investment Animal Testing Investments NOT SCREENED for this concern Community Relations Investments NOT SCREENED for this concern Military/Weapons Restricted investment Employment/Equity Proactive investment Environment Proactive investment Gambling Restricted investment Human Rights Proactive investment Labor Relations Proactive investment Tobacco Restricted investment

Size and Yield 74 billion average market cap 2. 09% average yield.

LKCM Aquinas Founded 1979 Based in Fort Worth, Texas Luther King Capital Management

LKCM Aquinas Named after St. Thomas Aquinas. Provides investment management services to religious organizations, employee-benefit plans, endowments, foundations, common trust funds, investment companies and high net-worth individuals. LKCM is committed to selecting securities based on sound fundamental investing principles and most importantly, Catholic values.

Investment Philosophy The investment guidelines set forth by the United States Conference of Catholic Bishops in 2003 serve as a guide in the selection of securities. Funds are managed with the philosophy that investors should not sacrifice investment performance for their Catholic values. LKCM utilizes screening services such as the Interfaith Center on Corporate Responsibilities and the Investor Responsibility Research Center.

Size and Worth Category: Equity Large Cap Fund Minimum Account: $5, 000 Minimum IRA: $5, 000 Assets: $10 Million Fund Return: 6. 04% year to date

Socially Responsible Investing Based on Catholic stances for controversial issues. Use screening criteria for the following: - Shareholder Activism - Community Investment - Environment - Human Rights - Employment - Products and Services

Citizens Income more recently known as Sentinel Government Securities Fund

Citizens Income/Sentinel Government Securities Fund Merged together on April 4 th, 2008 Sentinel Government Securities Fund Inception date: 9 -2 -1986 Citizens Income inception date: June, 1992 Category: Fixed Income Bond Min Account=$2, 500(acc to Citizens Income) Min IRA=$1, 000(acc to Citizens Income)

Sentinel’s Philosophy: ◦ Consistency- investment-centric culture in everything they do ◦ Vision- pursuit of investment excellence and dedicated to strategies research teams for investment ◦ Insight- united by the common belief that well defined, repeatable investment processes grounded in fundamental research have the potential to deliver solid, consistent results over time.

Social Responsible Investing (according to Citizens Income) No Investment Alcohol Gambling Tobacco Positive Investment Product/Services Environment Employment/Equality Labor Relations Human Rights Restricted Investment Defense/Weapon Animal Testing

Citizens Income more recently known as Sentinel Government Securities Fund

Citizens Income/Sentinel Government Securities Fund Merged together on April 4 th, 2008 Sentinel Government Securities Fund Inception date: 9 -2 -1986 Citizens Income inception date: June, 1992 Category: Fixed Income Bond Min Account=$2, 500(acc to Citizens Income) Min IRA=$1, 000(acc to Citizens Income)

Sentinel’s Philosophy: ◦ Consistency- investment-centric culture in everything they do ◦ Vision- pursuit of investment excellence and dedicated to strategies research teams for investment ◦ Insight- united by the common belief that well defined, repeatable investment processes grounded in fundamental research have the potential to deliver solid, consistent results over time.

Social Responsible Investing (according to Citizens Income) No Investment Alcohol Gambling Tobacco Positive Investment Product/Services Environment Employment/Equality Labor Relations Human Rights Restricted Investment Defense/Weapon Animal Testing

Meritas SRI Fund http: //www. meritas. ca/Asset/iu_images/Meritas_English_Colour. jp g

History of Meritas Owned and managed by Gary Hawton, CFA Based in Cambridge, Ontario, Canada ◦ Founded in 2000 by Hawton Specializes in SRI funds ◦ Focuses on Screening, Shareholder Advocacy, & Community Investments

Screening Negatively Screens for: ◦ ◦ Military & weapons contracting Alcohol & Tobacco manufacturing Pornography & Gambling Nuclear power ◦ ◦ International labor standards Environmental impact Employee relations Gender and cultural equity policies Positively Screens for:

What Meritas is Looking For… Respect the dignity and value of all people. Build a world at peace and free from violence. Internalize a concern for justice in a global society. Exhibit responsible management practices. Support and involve communities. Practice environmental stewardship.

Shareholder Advocacy Guarantees shareholders strong involvement in picking socially conscious funds Posts voting criteria on-line for each firm up for investing ◦ Allows both investors and company being invested in ability to see what will happen ◦ Gives investors ability to provide input, suggestions

Community Investing Meritas takes 2% of assets in each portfolio and donates to community ◦ Domestic and international donations Meritas feels impact on investors’ portfolios is small, but impact on social responsibility and communities affected is extremely large

The Ethical Funds Company http: //www. newcommunitycu. com/assets/img/Ethical%20 Funds%20 Logo. JPG

History of Ethical Funds The Ethical Growth Fund founded in 1986 In 1992, the Ethical Funds Company was created and took over the Ethical Growth Fund and created other funds Shared ownership: 50% Provincial Credit Union and 50% Desjardins Group Ethical Funds is a Canadian Investment Company ◦ A majority of investments are made to Canadian based companies

Screening Negatively Screens for: ◦ ◦ ◦ Military and weapons Tobacco Nuclear power facilities Uranium mining Countries supporting racial inequality Positively Screens for: ◦ Environment Regulation of emissions, sustainability ◦ Stakeholder relations ◦ Human rights and security ◦ Good labor practices

What Ethical Funds is looking for… Companies that are financially sound A concern for sustainability and the environment, having little “adverse impact” Contribution to the local community in positive manner through ethics, governance, and accountability Respect for human rights ◦ Fair labor practices, reducing poverty, safe work environment, peaceful conflict resolution

Shareholder Relations Many funds to choose from ◦ Growth, year goal, index, equity, dividend Evaluation through financial analysis High standard of investment in terms of companies that fit the screens Choose sustainable companies resulting in less risk Low $500 minimum Philanthropy and donates to charitable funds

Calvert SRI Funds http: //www. unificompanies. com/images/Calvert_color_tag. gif

History of Calvert Formed in 1976 by D. Wayne Silby and John G. Guffery, Jr Started SRI in 1982 Based in in Washington D. C. Specializes in SRI funds ◦ Focuses on Screening, Shareholder Advocacy Manages over $14 billion in assets ◦ Wide range of funds (i. e. Alternative Energy)

Screening Negatively Screens for: ◦ Military & weapons contracting ◦ Alcohol & Tobacco manufacturing ◦ Pornography & Gambling Positively Screens for: ◦ International labor standards ◦ Human rights Treatment of indigenous people ◦ Environmental impact/ Energy Conservation and Alternative energy ◦ Employee relations ◦ Gender and cultural equity policies

Calvert in Action Original board member Muhammad Yunus won 2006 Nobel Peace Prize First out of South Africa First back in (1982 and 1994) As of 2006, had donated $25. 4 million to community investments Sudan partnership with Save Darfur and Sudan Divestment taskforce The Calvert Social Index ◦ Market index of 468 of the largest socially responsible companies ◦ Commonly used by other funds as a benchmark for their performance

Socially Responsible Investment Funds By: Seth Sinovic, Maurice Brewer, Tess Reddin

American Hospital Association Investment Funds (AHA)

AHA Facts Started: October 1988 for internal use Went public in 2004 Account Minimums: Individual: $1, 000 Institutions: $1, 000 Typically holds 40 -60 stocks in a fund Standardized Returns for 1 year: 11% on investments for N shares and I shares (sinception +3%), 14% for Domini 400 (sinception +1. 7%)

AHA Wants to Improve: Environmental sustainability Corporate governance Human rights Product safety Community relations Employee relations

AHA is Against: Tobacco Gambling Weaponry Alcohol Abortion Nuclear power

Portfolio 21 companies seek to prosper in the 21 st Century by recognizing environmental sustainability as a fundamental human challenge and a tremendous business opportunity.

Portfolio 21 Philosophy Climate Destabilization= Economic and Investment Destabilization Inception Date Retail Shares September 30, 1999 Institutional Shares March 30, 2007 Account Minimums for Global Equity Mutual Fund Individual IRAs $5000 $1000 Portfolio 21’s institutional shares $1, 000 minimum

Investment Criteria Uses “The Natural Step” and “Global Footprint Network” to help set evaluation criteria 3 areas of evaluation - Biotechnology Rejects companies that engage in biopiracy, non-transparency (no labeling), human genetic engineering, and agricultural genetic engineering - Nuclear Will not invest in companies that generate a significant proportion (more than 5%) of revenues from nuclear energy business - Globalization, Human Rights & Social Justice No investments in companies that have significant business in countries that are state sponsors of terrorism and/or where significant human rights violations or significant labor rights violations occur in company-owned facilities

Rejected Companies Oracle Has not enforced sustainability measures in the companies that it has acquired. Misses market opportunities by not promoting the potential environmental benefits of its products Deere & Company Does not direct any funds to the development of non agricultural biofuels UPS Less than 1% of fleet vehicles powered by alternative fuels Others include Bank of America, Lehman Brothers, Goldman Sachs, Wachovia

What is a Sovereign Wealth Fund ? A Sovereign Wealth Fund (SWF) is a stateowned investment fund composed of financial assets such as stocks, bonds, real estate, or other financial instruments funded by foreign exchange assets. SWFs are typically created when governments have budgetary surpluses and have little or no international debt.

The Government Pension Fund of Norway The Petroleum Fund was established in 1990 after a decision by the legislature assembly to counter the effects of the forthcoming decline in income and to smooth out the disrupting effects of highly fluctuating oil prices. The fund changed name in January 2006 from its previous name The Petroleum Fund of Norway. It is the largest pension fund in Europe and the second largest in the world with a value of NOK 2. 019 billion

The Government Pension Fund of Norway Investments have to be in line with the ethical guidelines based on sector and company behavior. The companies that the Fund invests in are closely monitored by a Council of Ethics. If companies are operating in conflict with the guidelines the Fund will consider withdrawal. Several Companies have already been excluded including: ◦ ◦ ◦ Singapore Technologies, Singapore BAE Systems, UK Boeing, US Honeywell, US Wal-Mart Stores Inc, US L-3 Communications, US

Ethical Guidelines The Council of Ethics was established in 2004. The role of the Council on Ethics is to provide evaluation on whether or not investment in specified companies is inconsistent with the established ethical guidelines.

Ethical Guidelines and Screens The Government Pension Fund – Global is an instrument for ensuring that a reasonable portion of the country’s petroleum wealth benefits future generations The Government Pension Fund – Global should not make investments which constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damages. Investment Screens: ◦ Serious or systematic human rights violations, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation ◦ Serious violations of individuals’ rights in situations of war or conflict ◦ Severe environmental damages ◦ Gross corruption ◦ Other particularly serious violations of fundamental ethical norms ◦ companies from the investment universe that either themselves, or through entities they control, produce weapons that through normal use may violate fundamental humanitarian principles