New Success in Socially Responsible Investing
by Donald E. Skinner
At the UU Congregation of Princeton, New Jersey, the path to socially responsible investing started two years ago with a simple question: "How are our endowment funds invested?"
The answer: general mutual funds.
"We realized we had investments in companies like Phillip Morris that, in thinking about it, we were not very comfortable with," said Peter Macholdt, who last year was named chair of a committee to look at alternatives.
Ten months later the congregation voted nearly unanimously to invest in socially responsible funds that didn't derive income from military-related activities or the manufacture or sale of tobacco products, nor from firms that harm the environment or treat employees unfairly.
The UU Church of Berkeley, Kensington, California, has gone so far as to change its bylaws, mandating socially responsible investing. Now it has more than $1 million invested in socially responsible companies.
Socially responsible investing is riding a new wave of interest at the UUA, in our congregations, and in other religious communities, spurred by the desire to make a difference in a world where companies so often fail to act responsibly. The UUA Board of Trustees has created a Committee on Socially Responsible Investing. An SRI Web site has been developed at www.uua.org/finance/sri.
Religious people have tried to improve the marketplace all through history. John Wesley argued against buying tea because it supported the same ship owners who profited from slavery. In the 1950s and '60s there was religious opposition to companies that produced armaments for Vietnam. In the 1980s South Africa's reluctance to give up apartheid prompted boycotts and shareholder challenges of companies that invested in that nation.
"Negative screening," that is, not investing in companies one didn't agree with, has long been a popular tactic. But now a new tool has taken hold: Many religious bodies are using their investments to try to change policies by confronting corporations at their annual stockholder meetings.
The Interfaith Center for Corporate Responsibility (www.iccr.org) helps organize and monitor such efforts. The 30-year-old ICCR has 275 religious-group members, including the UUA.
"We've seen tremendous growth in not only the number of religious groups involved but the number of companies being challenged by organizations who put their values and their portfolio on the table at the same time," says Tim Smith, former executive director of the ICCR, now senior vice president at Walden Asset Management (www.waldenassetmgmt.com), which specializes in socially responsible investing.
"Corporations have a tremendous impact on our lives and the environment," says Smith. "Religious communities are creatively addressing this new reality. This is not about just saying the right thing. It's about changing company policy and practice."
Stephanie Leighton, vice president and director of equity research for Trillium Asset Management (www.trilliuminvest.com), another company that focuses on socially responsible investing, is a member of Unity Church UU, North Easton, Massachusetts. "As a denomination I think we're promoting socially responsible investing very aggressively, especially in the last year or two. The more investors who do this, the more corporations will respond."
The UUA succeeded with one such initiative this year when it sponsored a shareholder resolution to encourage Home Depot, one of the continent's 10 largest retailers to prohibit employment discrimination based on sexual orientation.
The UUA was also among investors who filed a resolution asking Exxon Mobil Corporation to do the same thing. That measure hasn't succeeded yet, but it did gather enough votes so it can be brought up again next year.
"If you really want corporations to change," says James R. Gunning, chair of the UUA's new socially responsible investment committee, "you've got to stay in the kitchen, take the heat, and give as good as you get. We are absolutely prepared to do that."
The Rev. Ralph Mero, director of the UUA's Office of Church Staff Finances, gets frequent inquiries about socially responsible investing. He recommends that congregations invest at least part of their endowments in the UUA's pooled investment program, which operates under strict SRI principles. SRI mutual funds are an alternative.
"It used to be that if you had funds invested in a socially responsible manner it was a nice thing to do, but you weren't going to make as much money," Mero says. "That's changed. During the past five years socially responsible mutual funds have performed equal to comparable funds which did not have social screens." As of 1999 more than $2 trillion was invested in the U.S. in a socially responsible manner, up 82 percent from two years earlier, says the nonprofit Social Investment Forum.
At Princeton, the vote to invest responsibly has created a positive mood in the congregation, says Macholdt. "People feel good about this. I think there's a sense we're better citizens because of it. And now there's also a feeling we should be doing more. People feel this was a good first step."
'This is not about just saying the right thing. It's about changing company policy.'