Thursday, March 21, 2013

Are Your Investments Aligned with Your Values?

Investments Matter

From recent annual reports of two mutual funds I was scanning the other night. You know, the ones we never read. What's your money doing to the world we share?? Investments matter.

Guns also debuted on the investment landscape in 2012 with the terrible incident in Newtown, Connecticut. While shootings in schools or other public places have long ignited horror and outrage, the shock wave rarely reached into the investment world. This time, however, it did, and almost immediately after the incident, some of the nation’s largest pension funds announced that they would divest or are considering divesting holdings in gun manufacturers. A lot of editorial debate has since been devoted to whether this would really affect the fortunes of gun manufacturers. We don’t think that is the crux of the matter. Pax chose, right from the start, not to invest in companies that manufacture weapons, and we remain committed to that choice—not because we think it will drive gun manufacturers’ stock prices down to the point where they disappear, but because we would rather not profit from the manufacture of guns, and we would rather not be owners of companies that siphon millions of dollars, through political contributions and gun purchase programs, to the National Rifle Association.
While fund managers, gun owners and activists of many stripes debate the wisdom of introducing this ultra-polarized political issue onto the landscape of fund management, the fact remains that the status quo is not neutral with respect to the place or type of guns in our society: those who own stocks of gun makers are profiting from the use of guns in our society, and the companies they own are deeply involved in the political landscape of gun ownership and control. Over the past seven years, corporations have contributed between $19.6 million and $52.6 million to the NRA’s Ring of Freedom program, and the NRA has fiercely resisted public policy attempts to place any limits on the type of guns that may be sold or owned in the United States, including assault weapons.
We are under no illusion that investments are somehow socially neutral. They have consequences. At Pax World, the focus of all our advocacy, directly with companies and also through public policy, is to make our economy and society more sustainable, which we believe will be good for investors along with everyone else.
                           Julie Fox Gorte, VP Sustainable Investing, Pax World Mutual Funds, Annual Report December 31, 2012 p.42
 Recent Divestments due to ESG Criteria: Ecolab & United Natural Foods
Ecolab was sold as a result of the company's proposed acquisition of Champion technologies, which followed the firm's 2011 acquisition of Nalco. These water treatment related acquisitions significantly increase Ecolab's exposure to the energy sector, as their products are used in oil and gas production. Prior to these acquisitions, Ecolab had virtually no exposure to the fossil fuel sector; their business was making and selling cleaning and sanitation solutions to the food service, consumer, and health care sectors. During our initial research on Ecolab, Portfolio 21 engaged the company in lengthy discussions to ensure that it met our raw material guidelines; specifically that it was dedicated to formulating non-toxic substances with the least impact on human and environmental health. With Ecolab's recent acquisition, Portfolio 21 does not anticipate that these same standards will be met. We believe that Ecolab's risk profile has shifted with its increased emphasis on the fossil fuel sector and that the company will likely face more stringent chemical regulations and increased litigation.

We sold our shares in United Natural Foods, Inc. (UNFI), the largest distributor of natural foods in the U.S. On the evening of December 10, 2012  workers at the company's Washington distribution center went on strike, citing 50 unfair labor practice violations. On December 13, UNFI published a press release, stating that "It is pleased that members of Teamsters Local 117 have voted to end the strike and return to work." UNFI also stated that it looked forward to continuing negotiations; however, when the in its communications led us to sell the stock during the first days of 2013. union workers returned, 72 of the 163 warehouse workers who went on strike had been fired. In solidarity, the strike resumed that evening. Portfolio 21 wrote to the company seeking additional information on the specific steps it was taking to improve its employee relations and did not receive a response. The company's poor treatment of its workers and lack of transparency
       Portfolio 21  Global Equity Fund Semi-Annual Report, December 31, 2012, pp3-4.