Quakers and the market

As a religious body, Quakers have a long heritage of viewing the outward manifestation of inward faith as a crucial component of Christianity rightly understood. “Quakerism is not just a set of beliefs or a statement of faith; it is a practical, ethical, and functional religious approach to life,” says Wilmer Cooper, for instance, in A Living Faith: An Historical and Comparative Study of Quaker Beliefs. “That is to say, it is a religious faith to be lived out and not just professed and talked about.” If we can begin to see economics as the study of human action, then given this Quaker perspective it seems clear that the practical application of Quaker faith can benefit from greater exploration of such a discipline.

Early Friends certainly viewed themselves as active economic agents within the larger society. “The early Friends were a people of great integrity, courage and independence of mind and in the second and third generations were among those people who would have gone into the universities and from there into law, the Church and the higher professions,” writes Arthur Raistrick in Quakers in Science and Industry. Business, though, proved a better fit. “Their Quaker beliefs, their refusal of the oath, their plainness of speech and dress and their whole attitude to life prevented this, and they were left with little but the ‘innocent’ domestic trades.” Indeed, as he points out, the Quaker ‘Advices on Trade’ were unique among religious groups of the time.

This economic activity and outlook had a profound impact upon the Society of Friends. First, as Cooper suggests, their “concern for honesty and truth-telling in their public life and in their business dealings” led to success in business. Second, the interaction of their faith upon their business dealings impelled them toward the promotion of the welfare of their employees and the population at large, as Raistrick notes. Finally, their acumen in business affairs had ripple effects on their social concerns. In The Quakers: Money and Morals, James Walvin argues that the successful drive toward abolition among Friends arose from an “insistence that the organisation be conducted on business lines: methodically, systematically, with careful recording of their transactions and finances.”

Many Quakers today, however, are arguably far less inclined to see the value of studying the economy, the marketplace, and our interactions in those arenas. Mark Cary’s research suggests that unprogrammed Friends, for example, view business activity in almost entirely negative terms. Jack Powelson sees these views arising from a focus on greed and consumerism as inherent byproducts of capitalism rather than as personal characteristics meriting personal attention.

John Punshon takes the further step of suggesting that such attitudes likely arise from modern Quakers too often operate as a “sustained class and not a sustaining class.” He worries that “The link between the production of wealth which the community can use for socially productive purposes, and the good ideas about what those purposes are, has been severed.”

If Punshon, Powelson, and the historical activity of early Friends have anything to say to Quakers today about the connection between economic understanding and the living out if Christian faith, it is that to ignore or reject the reality in which we find ourselves is to unnaturally isolate ourselves from the practical, ethical, and functional aspects of the religious tradition to which we claim to adhere.

SRI faces tough questions about group investments

[Palmeri, Christopher. "The Golden State's Not-So-Golden Goose," BusinessWeek, 11 July 2008.]

The latest news about California's socially responsible state pension funds is troubling, to say the least:

"A recent report from the California State Teachers' Retirement System (CalSTRS), revealed that the $170 billion fund, the nation's third-largest, would have been $1 billion richer if it had stayed in tobacco stocks. Meanwhile, investments in California real estate are proving particularly painful for the nation's largest fund, the $230 billion California Public Employees' Retirement System (CalPERS). Among other bad deals, it faces a loss of nearly $1 billion on one land investment alone.

"The performance of the Double Bottom Line plan illustrates the potential drawbacks of socially responsible investing."

In some ways, it seems the SRI field is caught in a Catch-22. There are few moral dilemmas if an individual chooses to invest his or her funds in a manner that may expose them to additional risk but may be more consistent with their values. But individuals taking such action can only hope to have a very small impact on any one company, much less the overall economy.

On the other hand, major group investments have the potential to achieve greater change in the marketplace, but this usually involves a small number of individuals making ethical decisions for a very large number of others. In a political situation, these decisions can be particularly prone to abuse. As Palmeri notes, "Politicians on the campaign trail can generate fast headlines by announcing bold investment initiatives, but the bottom-line consequences of such actions take years to show up."

Author Jon Entine has weighed in on the dangers of mixing SRI and public pension funds. You can read his contribution to the book Corporate Retirement Security here.

The California situation offers a cautionary tale that indicates it is perhaps worth considering whether there still is a place for SRI among very large and diverse bodies or if SRI is indeed best practiced among individuals, families, and groups with relatively homogeneous values.

Investors need to speak up

[Anne Moore Odell, "Mainstream Fund Managers Vary Widely on Social Responsibility," SocialFunds.com, 1 July 2008.]

A new report from RI Metrics indicates that lack of communication is the primary difficulty preventing fund managers from implementing comprehensive and consistent SRI guidelines:

"the number one problem for the managers studied by RImetrics is the 'lack of clear, strong signals from their asset owner clients.' Sixty percent of asset managers didn't consult clients in the development of their SRI policies. This leads to policies that don't accurately reflect clients' priorities, RImetrics reports."

MicroPlace

In a recent article, columnist Subashini Ganesan notes that "according to Coinstar (a national business that distributes and maintains coin-counting vending machines), the American household has an average of $99 in spare change lying around the house!

"While you might want to lavish yourself, there is another way to use your 'small change' to drive big changes, globally. In fact, globally, $100 is often all it takes for a poor person to work themselves out of poverty. And MicroPlace, a subsidiary of eBay, has created a powerful tool for us to aid the world’s working poor while still receiving modest interest on our investments."

You might recall the previous post on microfinance and the discussion of Kiva in particular. NextBillion writer Rob Katz took some time to outline the differences between the two organizations last October. Here's an excerpt:

"As P2P Lending News explains, [t]he big difference between MicroPlace and Kiva...is that loans will be securitized (and therefore potentially trade-able), and lenders will earn interest. Unlike Kiva, lenders on MicroPlace invest in microfinance by purchasing securities. Funds generated by these sales are then invested in microfinance institutions around the world. MFIs, in turn, solicit clients, make loans and collect payments - they do their normal day-to-day business.

"Once client payments are in, the institutional investors receive their loan (plus interest) who can then pay back their investors - people who purchased those original securities. It's not as simple a model as Kiva's, but its differences are very important.

"First of all, Kiva is a non-profit. As Matt and Jessica Flannery have explained, it's very difficult to become a SEC-registered broker/dealer - even more difficult when you're running Kiva from your living room on the nights and weekends. MicroPlace, on the other hand, had the institutional and financial backing of EBay, allowing it to go through the complex regulatory application process and to put up the necessary money for the SEC to sign off. Upshot: Kiva wanted to be for-profit, but had to stay a NGO because it was a regulatory nightmare to register with the SEC. As a result, lenders on Kiva only receive their loans back - without interest. MicroPlace, as a broker/dealer, can pay interest to lenders - thanks to its ability to navigate the aforementioned regulatory maze.

"Secondly, MicroPlace adds a level of intermediation that Kiva doesn't have. With Kiva, lenders provide capital to MFIs, who then lend to clients. MicroPlace is a market for microfinance securities, not just requests for loans. Sure, it takes away some of the intimacy, but for the microfinance industry, it's a big step. Securitizing loans helps diversify risk, and allows microfinance investors to reach into the second and third tier MFIs that are having a hard time raising non-donor money."

Quaker Quotes VIII

In his book Signs of Salvation Quaker author Ben Richmond calls us to "a faith in God that implies rejection of the sway of mammon over our lives."

This can be taken in a couple of ways. One is to see mammon itself as evil, but another is to see the love of mammon as evil and instead look for ways to use the resources at our disposal toward positive ends and achieve the "freedom from anxiety" mentioned by Richard Foster.

Along these lines, John Schneider echoes William Penn when he writes in his 2002 book The Good of Affluence that "Christians ought to have a view of modern capitalism that is 'world affirmative' and 'world formative' rather than mainly negative and prone to strategies of separation and withdrawal."

CFA releases ESG guidelines

The Chartered Financial Analyst Institute, a "global, not-for-profit association of investment professionals," recently released a manual for investors on environmental, social, and governance factors, or ESG (I discuss ESG in this earlier post). The manual includes a list of key ESG issues along with organizations, principles and research central to the ESG movement.

Here is an excerpt:

"This manual aims to help investment professionals identify and properly evaluate the risks and opportunities ESG issues present for Investors in public Companies and in the process clarify the relatively sparse and inconsistent information provided in current financial statements."

The manual "focuses on the legislative and regulatory, legal, reputational, and operational ESG risks and opportunities Shareowners will need to consider to fully understand the Companies in which they invest."

SRI jitters

In an earlier post, I discussed the question of whether SRI is more or less a fad that may quickly fade if the market turns sour. It seems that others are beginning to ask this question, particularly in light of the decision by the board of Calstrs, the California State Teachers' Retirement System, to reconsider its exclusion of tobacco stocks:

"Unlike some socially responsible funds that banned tobacco companies for health-related reasons, Calstrs said it divested in 2000 because numerous lawsuits against the industry and the specter of government regulation made the stocks too risky. It now says those risks have diminished.

"Calstrs also indicated that missing out on a 'market weighting' in tobacco stocks these past several years cost the fund more than $1 billion in lost investment returns.

"Calstrs wouldn't be the first pension fund to reverse a ban on tobacco shares. The Florida Retirement System voted in 2001 to overturn a similar ban after divesting from tobacco stocks in 1997. Still, Calstrs's decision 'will be watched closely,' said Amy Borrus, deputy director at the Council of Institutional Investors. 'At a time when pension funds are under tremendous pressure to boost returns, they are rethinking the costs of divesting from a whole class of shares.'"

In a recent article in the New York Sun, columnist Liz Peek wrote that "The reality is that the performance of these funds is skewed by their relative exposure to various industry groups. Good works today simply don't measure up to oil prices of more than $130 a barrel. Investors may (and possibly should) choose to support firms they consider highly ethical, but they may well have to accept lower returns to do so."

Not all are quick to suggest that SRI is either financially unsustainable or likely to experience an exodus, though.

"Research by Julie Hudson, analyst at UBS, suggests the SRI sector could shrink in the short term as 'firms under pressure may go into survival mode, de-emphasising anything that is not relevant to immediate survival'. Hudson counters this with a long-term view that SRI issues such as climate change, resource constraints, food scarcity, the energy challenge, and corporate control are driven by politics, public opinion, and consumer behaviour rather than market volatility.

"Hudson said: 'SRI investors don’t abandon their values in a downturn. When markets are volatile and visibility is clouded, all investors cast around for other inputs to help them understand companies better.'"

Short break

Hello and thanks for stopping by! I will be away from a computer for a couple of weeks, but will return to updating the blog as soon as I get back.

Best Buy launches recycling program in response to shareholder proposal

[Liedtke, Michael. "Best Buy testing free e-waste recycling program," San Francisco Gate, 2 June 2008.]

Here's an interesting story on how shareholder engagement can impact corporate policy without even bringing a resolution to vote:

"Under pressure to help dispose some of the electronic waste it helped create, Best Buy Co. is testing a free program that will offer consumers a convenient way to ensure millions of obsolescent TVs, old computers and other unwanted gadgets don't poison the nation's dumps.

"The trial announced Monday covers 117 Best Buy stores scattered across eight states that will collect a wide variety of electronic detritus at no charge, even if the Richfield, Minn.-based retailer didn't originally sell the merchandise.

"The pilot stores are in Best Buy's Northern California, Minneapolis and Baltimore markets, as well as parts of North Dakota, South Dakota, Iowa, Wisconsin, Virginia and Washington, D.C.

"Depending on how the test goes, the nation's largest electronics retailer may expand the recycling program to all of its 922 stores in the United States. As it is, Best Buy's test is believed to be the most extensive free electronics recycling program to be offered by a major retailer so far.

"Best Buy agreed to set up the recycling trial after a social responsibility group, As You Sow, submitted a proposal that would have asked the company's shareholders to endorse an electronics recycling program. As You Sow withdrew the proposal after Best Buy indicated it was already exploring ways to expand its existing recycling programs."

Faith and Practice

In earlier post, I mentioned the importance of Faith and Practice to Friends. According to Britain Yearly Meeting, Faith and Practice "is an attempt to express Truth through the vital personal and corporate experience of Friends. It is largely composed of extracts from Friends' writings: a fitting way of expressing the breadth of Quaker theology." Most also include a brief history of the Society of Friends and the roots of their own branch of that society, as well as the organizational structure and business practice of the meeting.

Many of these texts are available online and are searchable. Here is a listing:

- Australia Yearly Meeting
- Baltimore Yearly Meeting
- Britain Yearly Meeting
- Canadian Yearly Meeting
- Central and Southern Africa Yearly Meeting
- Evangelical Friends Church Southwest
- Illinois Yearly Meeting
- Intermountain Yearly Meeting
- Iowa Yearly Meeting
- Mid America Yearly Meeting
- New York Yearly Meeting
- North Carolina Yearly Meeting
- North Carolina Yearly Meeting (Conservative)
- North Pacific Yearly Meeting
- Northwest Yearly Meeting
- Ohio Valley Yearly Meeting
- Ohio Yearly Meeting
- Pacific Yearly Meeting
- Philadelphia Yearly Meeting
- Southeastern Yearly Meeting
- Western Yearly Meeting
- Wilmington Yearly Meeting

Investing in vice

Since 2002, at least one counter trend to the SRI movement has been the Vice Fund. This fund seeks to track down rewarding investments in four sectors - alcohol, tobacco, gambling and defense. In a recent interview, co-Portfolio Manager Charles Norton talks about the fund's outlook and strategy:

"We’re focused on four sectors that have exhibited unvarying demand regardless of economic activity and that have key fundamental strengths that help explain why they’ve been around for hundreds of years. The inherent demand of people to smoke, drink and gamble and of nations to arm themselves is clearly strong and long-lasting. The businesses are typically quite profitable, combining low production costs with tremendous pricing power, especially in tobacco and alcohol.

"It’s also important that governments tend to be large beneficiaries of these businesses, through the collection of billions of dollars in tax revenue. That essentially makes the government a partner, with the financial incentive not only to see that the business stays around, but that it also does well."

The existence and success of the Vice Fund ("the Vice Fund has earned an annualized 20.2% over the past five years," according to the above article, "vs. 11.3% for the S&P 500") should give SR investors at least some pause. It is consistent with Alicia Munnell's comments in Pension Fund Politics on the economics of SRI when she observes that "boycotting a stock is unlikely to have any impact on its price, because the demand for a company’s stock is almost perfectly elastic. In other words, a relatively small change in quantity demanded for a stock – which has been shown to be the case with social investing since it accounts for an extremely tiny portion of total assets – does not significantly alter the price of that stock or the success of the targeted company." Indeed, "Boycotting tobacco stocks may result in a temporary fall in the stock price, but as long as some buyers remain, they can swoop in, purchase the stock, and make money."

Now, this is not to say that SRI has zero impact on the market, but it does suggest that investors should be aware of the limitations of screening alone. Even major divestments such as South Africa achieved debatable impacts on targeted companies. If you see screening as less a matter of corporate change and more one of integrity, then it becomes easier to reconcile oneself to the outcome. As mentioned in previous posts on more active engagement, there may be more effective means to shift the marketplace.

Socially responsible...government

[Kostigen, Thomas M. "Everything You Know About Water Conservation Is Wrong," Discover, 28 May 2008.]

The above article on water conservation provides an interesting jumping off point for a discussion of business and government social responsibility and the role of investors and citizens.

"Proper management and use of the world’s virtual water already save almost 5 percent of the water used annually in global agricultural production, according to Unesco. This follows a simple logic: Places with less water gain access to foods with high water requirements by importing them from areas with high rainfall or substantial water supplies. This allows water-scarce regions to use their own water resources more efficiently for other purposes—and create water savings. For instance, areas of southern China that have more water and are better equipped to grow certain water-intensive agricultural products can send them to northern China. This frees up northern water supplies for other uses, such as drinking and sanitation. Jordan saves 60 to 90 percent of its domestic water supply by importing water-intensive products."

What is striking about this paragraph (and the entire article) is the almost complete absence of any discussion of subsidies and trade restrictions. Perhaps too often, by focusing on the social responsibility of corporations, we miss out on the impact the government has on corporate behavior and the world economy. Agriculture is an excellent example of this.

As far back as Adam Smith and David Ricardo, economists have been making the case that it makes sense for areas with an advantage in one industry to supply the needs of another area, and vice versa. This is called the principle of comparative advantage. And, it is how markets would tend to operate if left to their own devices. These signals become distorted, however, when policymakers subsidize the production of a good or prevent the importation of another good into a region.

In the U.S., this means producing crops like sugar and rice in volumes that would be inexplicable in an unregulated setting. "The single largest check in 2003 ($69 million) went to Arkansas’s Riceland Foods," writes William Shughart in a recent column. We produce so much, in fact, that the rice industry even promotes its programs to dump excess rice on the world market. There are numerous resources on the role of subsidies and trade restrictions in agriculture - Wikipedia has a good entry on the total amounts, for instance, and the Environmental Working Group breaks down those totals to show how many of the richest agricultural producers receive the greatest aid.

These are important considerations in weighing the matter of water conservation in the U.S. and around the world. And they speak to the overlap between SRI and public policy. This is an important reminder that while SRI advocates should not lose their focus on corporate behavior, it is just as vital to maintain a broader perspective on the sometimes behind-the-scenes influences that play into the decisions companies make.

Quaker Quotes VII

"True godliness don't turn [people] out of the world but enables them to live better in it and excites their endeavours to mend it... Christians should keep the helm and guide the vessel to its port; not meanly steal out at the stern of the world and leave those that are in it without a pilot to be driven by the fury of evil times upon the rock or sand of ruin."

- William Penn, No Cross, No Crown

Is SRI a fad?

[Drucker, Vanessa. "Full throttle," Fund Strategy, 19 May 2008.]

This recent article by Vanessa Drucker raises an interesting question about the growth of SRI in recent years and the likelihood of its continued success:

"There is little doubt that environmental awareness is a long-term secular trend. However, a substantial component of today's heightened focus is directly tied to the price of oil and any looming energy crisis. The price of oil and other commodities has skyrocketed over the past quarter, driven by a confluence of forces. Although light sweet crude has crossed $120 a barrel, recall that, not so long ago, in mid-January 2007 it was only trading at $50. Mean reversion could bring the price skidding down again.

"Another scenario could easily dampen the ethical consumer's spending pattern, if a recession takes hold. 'Are organic foods luxury items?' asks Thomas, who adds that so far this year, the organic trend has not slowed, even in America. The stocks of the companies trade at higher price-to-earnings valuations than those of non-organic rivals, and those lofty prices will increase the risks of compression in volatile markets. Meanwhile, competition is thriving along the supply chain, as new entrants squeeze margins.

"The rise and fall of the dotcom stocks left behind bad scars and memories. Some may wonder if the fashion for environmental investing echoes the hype and exuberance of that era."

There is certainly some reason to expect that as long as SRI funds and SR-driven corporations do well that investors will support them. As well, there are equally strong reasons to expect that if investors are doing well they may be more likely to accept greater risk than would otherwise be the case in order to give a "moral boost" to their portfolio. But Drucker's questions about the long-term viability of some aspects of SRI are worth consideration. First, are SR-driven corporations truly unique in the marketplace and if the qualities that make them successful can be copied, won't other companies do the same? And second, is SRI essentially a luxury good that could lose its appeal in a less than thriving economy?

Both questions have to do with balancing money and morals. In the case of the first question, many SRI advocates would be happy to see more companies adopt SR policies, even if it means greater competition for existing SR companies. This development would hardly hamper SRI, however, as the pool of available investments would expand under such a scenario.

The second question is more troubling for the future of SRI. If SRI is indeed a luxury good that can be eliminated in tougher economic times, and if SR companies are buoyed in part by this investment, then SRI could face significant problems should the market take a turn for the worse. That being said, such a series of events would likely only impact the size and scope of SRI, not its continued existence altogether. As mentioned earlier, the tradition has roots that are centuries old, and the ethical commitment associated with its practice runs deeper than the bursting of a market bubble.

What Drucker's suggestion does point out, and this is also something touched upon earlier, is the importance of making sure that one's investments are not tied wholly to the latest fad, but consist of a diverse enough blend to minimize the impact of any one sector's turbulence.

A bit more on the testimonies

In earlier posts, I discussed both Quaker involvement in abolition and the meaning of Quaker testimonies. The two are connected. Early Quaker concern over the slave trade grew out of a strong desire to carry out their inward faith in outward practice. Indeed, Friends meetings to this day publish guidelines for members entitled Faith and Practice. For Quakers, the two are seen as inseparable.

These outward expressions of inner conviction came to be known as testimonies. Thus, Quakers in the eighteenth century practiced a testimony against slavery. Another commonly known testimony of that era – and one still carried on today by some Friends – was the testimony of plainness. That translated into plain speech – addressing important members of society with "thee" and "thou" instead of the more respectful you – and plain dress – modest colors with little if any decoration.

While the most strict of these requirements have faded away with time, today most Friends still hold to a number of key testimonies – simplicity, peace, integrity, and equality. Though these particular terms may be relatively new within Quakerism, one can certainly find in the history of Quakers the seeds of their later development.

The modern testimony of equality, for instance, is rooted in the manner that Friends approached the issue of slavery. The testimony of simplicity carries on, though often in different forms, the testimony of plainness. The practice of early Friends setting one price for goods – rather than haggling as was common – is carried forth in the testimony of integrity. And finally, the modern testimony of peace is well-rooted in Quaker tradition. In the same era as Friends spoke out against slavery they sought to avoid dealings that would violate their concern for peace. Minutes from 1776, for example, note that "We affectionately desire, that Friends may be careful to avoid engaging in any trade or business tending to promote war."

Faith and the bottom line

[Baass Sowa, Carol. "Socially responsible investing coming into its own," Today's Catholic, 23 May 2008.]

In this recent article from Today's Catholic, Interfaith Center on Corporate Responsibility executive director Laura Berry discusses the connection between her Catholic faith and her work on SRI issues:

"When Laura Berry, now executive director of the Interfaith Center on Corporate Responsibility (ICCR), worked on Wall Street as a portfolio manager, institutional clients with justice goals were routinely shuttled her way. 'I was actually enthusiastic about investing this way,' says Berry, who grew up Catholic, with a strong sense of social justice. 'Many of the more traditional investment managers at the time,' she notes, 'thought it was: 'You go to church on Sunday and you worry about investing your money Monday through Friday.' I didn't see it that way.'

"'More and more, powerful institutional investors are starting to look backwards at some of the things that faith investors have been talking about for a long time,' she says. A recent study by the Association of British Insurers on governance issues discovered that good corporate governance adds around 36 basis points to portfolio returns per month. Other studies are revealing similar results, with a U.S. study on governance, done in the wake of ENRON and WorldCom, when companies could no longer opt out of certain governance rules, has indicated gains in investment returns of around 70 basis points when good governance practices are followed.

"Berry is confident that as science gets more sophisticated in measuring such things, it will confirm what faith-based investors have been saying all along — that companies can act morally and still be successful. 'The Creator set us up that when we did good, things would work better,' she says.

"'When you think about just about any faith tradition, not just our own, they say things like: Love the Creator, love each other, take care of the globe.' She notes that we as Catholics don’t need science to prove to us this is the right way to do things; it is part of our social justice tradition.

"'I try to remind myself it’s not my time, it’s God’s time,' she says of the gains made by socially responsible investing. 'I’m here for a reason,' she adds. 'I’ll be doing this as long as I’m doing it and, hopefully, somebody will pick it up after I am gone.'"

Quaker Quotes VI

"Simplicity sets us free to receive the provision of God as a gift that is not ours to keep and can be freely shared with others. Once we recognize that the Bible denounces the materialist and the ascetic with equal vigor, we are prepared to turn our attention to the framing of a Christian understanding of simplicity.

"If what we have we receive as a gift, and if what we have is being cared for by God, and if what we have is available to others, then we will possess freedom from anxiety. This is the inward reality of simplicity."

- Richard J. Foster, Celebration of Discipline: The Path to Spiritual Growth

What is SRI? Part V: Microfinance

A recent development gaining a lot of attention both within and beyond the SRI community is microfinance or microcredit. Offering small loans or grants to people in developing countries can free them to engage in entrepreneurial activity and allow economic vitality that is rooted in local knowledge to emerge from the ground up.

Microlending is also a great way for anyone interested in SRI to become involved with minimal financial commitments. Through organizations such as Kiva, for instance, instance, you can help someone across the world meet their goals of buying an animal, expanding a fruit stand, or something else very concrete – and you can do so for as little as $25.

Right Sharing of World Resources is another option for those interested in a program with a Quaker background and focus. RSWR is "a program of the Religious Society of Friends supporting grassroots projects for economic development and offering educational materials for the study of the lives of the poor, the lives of the rich, and the spiritual meaning of both."

REC issues guide to filing shareholder resolutions

The Responsible Endowments Coalition (REC) has just finished a new guide to filing shareholder resolutions that should be helpful to educational institutions as well as individuals, congregations and other groups. Here's a short excerpt:

"Shareholder resolutions allow investors to express their views and concerns about issues affecting a corporation and influence future business decisions by challenging management in a public forum.

"Filing a shareholder resolution requires little more than sending a letter to a company, but a basic understanding of how resolutions work and their potential impact is necessary for maximum effectiveness.

"To be eligible to submit a shareholder resolution, a shareholder must own either $2,000 worth or 1% of the shares outstanding in the company, whichever is less, for at least one year prior to submitting the resolution, and must continue to meet this minimum threshold through the date of the annual meeting.

"Note that a shareholder who own shares through a mutual fund cannot submit shareholder resolutions because the mutual fund itself is the shareholder of the company. However, shareholders in a mutual fund can influence the proxy votes taken by the mutual fund."

To learn more about REC or their guide to resolutions, contact info@endowmentethics.org.

SRI funds see cash inflow

[David Bogoslaw, "Socially Responsible Funds Hang Tough," BusinessWeek, 15 May 2008.]

This recent article from BusinessWeek highlights the staying power of SRI along with some of the risk questions coming up in recent posts:

"SRI managers said they don't think the market downturn has caused investors to waver in their commitment to socially responsible investing.

"In fact, some SRI managers are seeing net inflows of cash into their funds since the year began. All eight of Pax World's sustainable investment funds are showing net inflows year-to-date, including five funds launched within the past nine months, says Joe Keefe, chief executive of the Portsmouth [N.H.]-based investment firm. 'That surprises us because I've read that many fund companies are at net outflows because of the markets,' he says. 'It speaks to the fact that sustainable investing -- green investing, call it what you want -- is a very hot space right now.'

"Heightened fears about the economy and corporate profits and valuations may even be helping to attract some investors to SRI funds. One of the draws is active ownership, where shareholders can use their stakes and voting power to force changes in companies' ESG practices. 'A lot more clients in times like these, when they have concerns, want to feel a little closer to their investments. They want to know more [about] what's going on with the management of their companies,' says Reynders.

"Chris Brown, Pax World's chief investment strategist, sees a lot of money coming in from deferred compensation plans from various states. 'Municipal employees are demanding to have some kind of SRI/ESG fund in their menu,' he says. 'All the governance problems that have come up and all the environmental issues have driven tremendous demand for our products.'

"What's more, Keefe at Pax World thinks investing in socially responsible companies is a smarter long-term strategy because companies that meet higher ESG standards tend to be better positioned for long-term performance and carry lower risk."