sri: socially responsible investing this is a collection of the presentations on sri funds and...

SRI: Socially SRI: Socially Responsible InvestingResponsible Investing

This is a collection of the presentations on SRI funds and

forums from the 9:30 class in Fall 2008 for Business 356 (Business

Ethics)

Eric GrieserBrian Kooienga

Alex KronBJ Sullivan

•Canada based Investment Firm

•Invests 2% in community

•About 30 years old

•Created by church research group

•Considers ethics and environment in addition to financial outlook

"...good product selection plus highly qualified and innovative management..."

POSITIVE SCREENS NEGATIVE SCREENS

International Labor Standards

Environmental Impact

Employee Relations Gender and Cultural

Equity Policies

Military/Weapon Development

Alcohol and Tobacco Pornography and

Gambling Nuclear Power

-Balanced growth approach with capital appreciation

-Higher potential returns with fixed income securities

-Long term growth through foreign investing

-Canadian equity securities which comprise the Jantzi Social Index

-Income from a short term, low risk investment through Canadian government

-Income-producing Canadian Equity securities-Long term growth through undervalued securities of medium to large capitalization companies

Corporate VisionTo be the trusted leader and champion of socially responsible investing in Canada

Environmental, Social, Governance Policies

Common Industries

Banking Financial Oil and Gas Transportation Energy

Exclusions Military Tobacco Nuclear

Climate Change Biodiversity Human Rights Fight Sweatshop Conditions Good Governance

European Social Investment Forum was created in 2001 to cover socially responsible issues in Europe.

It is a not-for-profit entity funded by affiliate membership and public grants

Five original Social Investing Forum founding nations: France Germany Italy Netherlands UK

Board of Directors – appointed as board members from Social Investment Forums nationsDecide the main activities and strategic

initiatives of Eurosif Advisory Council – made up of member

affiliates who guide strategy

Mission: “Address Sustainability through Financial Markets”

LobbyingEuropean Commission and European Parliament

Research Legislation, policies, and practices for ethical

governance Initiatives

Goals to advance socially responsible investing Event/Communication

With member affiliates and board

Pay an annual fee Join with the subscription of the morally

responsible principles of Eurosif Member Affiliates include:

KPMG, Greenpeace, Fortis Investments, Pioneer Investments, etc.

Eurosif does not directly invest, but promotes socially responsible investment

Factors include:Corporate governance/board membersIntellectual propertyProcurement policy and practiceEnvironmental and social impact of productsCompliance with regulationsWorker’s RightsCommunity Involvement

Canadian company 6 different funds Must be Canadian in order to purchase

funds

Are the company’s practices environmentally sustainable?

Do they comply with relevant laws and industry regulations?

Is their workforce treated fairly? Do they have safe products? Are their corporate governance procedures

thorough and transparent?

Shareholders Community Customers Employees

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

Strong businesses Solid growth potential Reasonable stock price

SRI FundsAnalysis by Bob Forrest, Alex

Higbie, Laura Hund and Dan Sickle

A Fund Brief

Green Century chooses not to invest in companies with bad environmental and social records in:Waste disposalToxic emissionsEnvironmental fines and penaltiesProduct/service performanceWaste and emissions reductionsCorporate citizenshipRecyclingEmployee relations

Sector Allocation As of 30 June 2008

Automobiles & Components 0.25%

Materials 2.39%

Banks 5.17%

Media 2.69%

Capital Goods 4.05%

Pharmaceuticals & Biotech 8.50%

Commercial Services & Supplies 0.56%

Real Estate 0.64%

Consumer Durables & Apparel 1.39%

Renewables & Efficiency 0.64%

Consumer Services 1.52%

Retailing 3.78%

Diversified Financials 6.79%

Semiconductors 3.99%

Energy 6.35%

Software & Services 6.69%

Food & Beverage 5.23%

Technology Hardware 11.18%

Food & Staples Retail 3.09%

Telecom Services 5.94%

Healthcare Equipment & Service 4.98%

Transportation 2.48%

Healthy Living 0.09%

Utilities 1.23%

Household & Personal Products 5.03%

Cash & Equivalents 2.47%

Insurance 2.89%

Green Century opts not to invest in companies who receive great amounts of revenue from the following:TobaccoAlcoholGamblingNuclearFirearms

This includes any company who receives 2% or more of their revenues from military weapons

TIAA-CREFA national financial services organization and provider of retirement servicesIntroduced the TIAA-CREF Social Choice Equity Fund on July 1, 1999

Social Choice Equity FundFounded to produce a “favorable long- term

total return…while also giving special consideration to certain social criteria”

Includes domestic and international investments

Net assets of $602 millionLargest socially screened portfolio nationally

and internationally

Screening Process Invests 80 percent of net assets in equity

securitiesInvestments screened by KLD Research and

Analytics Broad Market Social IndexCompanies struggling in a particular area are

compared to industry peers

KLD Index ScreeningFund Supports:

Safe/Useful productsGood employee

relationsHuman rightsDiversity in the

workplaceCorporate

philanthropic activitiesEnvironmental

performance

Fund Declines:Manufacturing/

Selling of alcohol or tobacco

Revenues in gambling

Manufacturing/Selling of firearms or ammunition

Involvement in nuclear power plants

Northern Trust Global Sustainability Index Fund

Northern Trust CorporationInvestment ManagementBased in ChicagoAssets in custody: over $4.1 trillion

Sustainability Index Fund Mission

The Fund seeks long-term performance by investing in companies selected for their projected investment and social returns.

Factors for ConsiderationThe Funds include stocks from 24

different markets for firms that promote:EnvironmentalSocialGovernmental responsibility

“Sin stocks”

Norwegian Pension Fund

Fund BackgroundManaged by Norway’s Ministry of FinanceInternational assets managed by Norges

Bank Investment ManagementIt is a continuation of the former Petroleum

Fund, established in 1990Became the Norwegian Pension in Fund in

2006

InvestmentStrategy: 60% in equities and 40% in fixed

income instrumentsActuality: 51.8% in equities and 48.2% in

fixed income instrumentsAt the end of Q2 in 2008, fund was

approximately $158 billion

Negative Screening for InvestmentSerious or systematic human rights violationsSerious violations of individuals’ rights in

situations of war or conflictSevere environmental damagesGross corruptionOther particularly serious violations of

fundamental ethical norms

Ethics Powerpoint“Section 1Katt,Moore,&Thomas”

CalPERS (California Public Employees’ Retirement

System)

ByBen Katt

CalPERS (The Basics)Fund for California state employees to provide

healthcare and retirement benefitsLargest Public Fund in the United States

Started in 1932 by state legislation Nearly $236 billion in assets 1.6 million members

Benefits based on: Length of Employment Age Highest Attained Salary

Employees make monthly contributions, receive pension for life

Decisions influenced by socially responsible investments starting in the year 2000

CalPERS PhilosophyMission Statement

“Our mission is to advance the financial and health security for all who participate in the System. We will fulfill this mission by creating and maintaining an environment that produces responsiveness to all those we serve.”

Social Responsibility Investments starting in 2000Investments in companies that provide affordable

housing, create jobs, clean up inner city slumsInvest within the state, i.e. CA Real EstateDropped investments in countries that restricted free

press, labor unions, and democracy in general ( criticized for dropping good companies in bad countries)

Dropped companies such as the tobacco industry

CalPERS Focus ListAnnual list generated to identify the worst

performing companies in the CalPERS portfolioProcess includes:

1. A quantitative screen2. A qualitative review3. An engagement process

Once identified CalPERS uses their size to reform the company’s governance practices with an emphasis on accountability, transparency, independence, and discipline to attempt to increase shareholder valueCalPERS generally uses shareholder proposals as a tool

to reform poor performanceTypically successful in creating value for

underperforming companies by encouraging change and improvement.

CalPERS Focus List ContinuedThe list serves as an embarrassment for the

companies on the listPoor PerformanceBad Corporate GovernanceEncourages change and improvement

The 2008 ListCheesecake Factory Inc.La-Z-Boy Inc.Hilb Rogal & Hobbs Co.Invacare CorpStandard Pacific Corp.

Ariel Investments

ByJoe Moore

Ariel Investments (The Basics)Founded by John W. Rogers Jr. and his family in

Chicago in 1983 as Ariel Mutual Funds.Changed name in April to Ariel Investments

Nearly 100 employees.20% of employees let go on August 14th 2008

Mainly invest in small and mid-cap stocks striving for long term gain “as a tortoise” not quick returns.

Over $8 billion in total assets (June 2008)Ariel Fund lost 23% in the previous year ending

August 19th 2008 and Ariel Appreciation Fund has lost 14% (total loss nearly $1 billion.)

Ariel InvestmentsMission:

In earnest pursuit of excellent performance and outstanding client service, patience is our over-arching virtue. By taking a long-term view, we are able to build our firm around these core values:

FocusBy purchasing stocks that are undervalued, and patiently waiting for the market to recognize their true worth, we believe we can achieve long-term capital appreciation. Given our commitment to patience, it makes perfect sense that we have adopted the tortoise, the victor in Aesop’s timeless fable, as our symbol, and the fable’s moral – slow & steady wins the race – as our creed.

Independent ThinkingWe are a team of independent thinkers, industry watchers and disciplined decision makers. We operate under the premise that financial success is achieved not by chasing the crowd, but by following our own convictions.

TeamworkAt Ariel, teamwork is how we get the job done. Everyone has the opportunity to put his or her best ideas forward, and leverage his or her expertise to create the best possible solutions for shareholders. Our employees share in the rewards and responsibilities of ownership in the firm. Everyone at Ariel is an owner – from our receptionists to our president. Moreover, by investing our own savings, profit sharing and retirement dollars in both our firm and the Funds, our personal financial success is squarely aligned with our clients and shareholders.

Focused specifically on: Small & Mid-cap funds American Focused Quality

Leaders in industries Need to have honesty and integrity throughout the management Build relationship with competitors and peers in the marketplace

who have bought the stock so they know independent prospective about the management

BIA associates who help them identify what is important Sustainable competitive advantage Above market returns over long periods of time

Expertise Only invest in industries that they think they know more about than

other people Value

Buy companies at 40% discount to intrinsic value… Buy company for $.60 when it is valued at $1. Buy when they are not favored

Highly unpopular stocks are bought

Ariel Investments

Ariel InvestmentsMy evaluation:

Company is solid in the evaluation of the “social” benefit of the company.

They do many background checks and other ways of identifying the companies that they will and won’t deal with.

I would not buy into this investment firm based on the fact that they are to specific on what qualifies a company to be able to be invested in, they will not buy a company if they feel that it is valued at the right price and not underpriced, and their history (now).

I do not feel it would be economical to suggest others to purchase into this investment firm, especially given the amount of money they have currently lost (nearly 12.5% of their total assets. Also have recently had other major corporations pull their money out of Ariel.

WaltersWaltersSection 1Section 1

Tim Walters, Chris Schuler, Sabrina Linden and Steven Timperio

Mennonite Mutual AidMennonite Mutual AidRoots in the Anabaptist Church“Church communities putting faith into

action by sharing resources with each other”Attempt to maximize investment returns

subject to the principles of socially responsible investing.

Offices in Goshan, Indiana

Stewardship InvestingStewardship InvestingUses set of core values to determine which

companies they will invest withSearch for “Ideal Corporate Behavior”

Respect Basic Human RightsCultural DiversityPeace and freedom from violenceCommunity InvolvementLong term environmental Health

Stewardship Investing Stewardship Investing Won’t do business with companies they

believe don’t meet these core valuesAlcohol, tobacco, gamblingCareful consideration to animal testingAbortion specific productsMilitary and weapons

Community FirstCommunity FirstHave a background of communities

supporting each otherSupportive and involved with community

Dedicate 1% of portfolio to community investments

Also have proactive approaches to human rights, equity and employment, labor relations, product and service related investments

Portfolio 21Portfolio 21

Mission StatementWe designed Portfolio 21 to address the

ecological risks and opportunities of the investment process in the 21st century

Evaluation CriteriaEvaluation CriteriaBusiness Models: Lean

Manufacturing/Regional Distribution CentersImpacts of Products/Services: Product

Life Cycle Analysis, Recycling ProgramsInvestments: Research and Development of

ecologically superior products

Evaluation Criteria Cont.Evaluation Criteria Cont.Leadership: Views ecological sustainability

as opportunity. Support environmental legislation and regulation

Environmental Management: Internal Controls on environmental impacts and liabilities, 3rd party evaluation of EMS

Environmental Risks and Liabilities: Strategic planning to reduce greenhouse gas emissions

Selective InvestmentsSelective InvestmentsAlcohol – No screeningSmoking – No InvestmentGambling – Restricted investmentWeapons/Defense – Restricted InvestmentAnimal Testing – Restricted InvestmentProducts/Services – positive investmentEnvironment – positive investment

Future SustainabilityFuture SustainabilityThe goal is to support companies who

provide the essential functions of meeting human needs without diminishing nature’s ability to support our economy in the future.

American Trust AllegianceAmerican Trust AllegianceAmerican Trust is an independent trust

company chartered in 1991 in New Hampshire.

Provides investment management and trust services for individuals and institutions.

Manages two socially responsible mutual funds.

American Trust AllegianceAmerican Trust AllegianceAmerican Trust Energy Alternatives Fund

(ATEAX)Focuses on companies leading the transition

from carbon based energy to renewable energy.

Investments in this fund include foreign securities and many smaller companies, both of which are high risk.

American Trust AllegianceAmerican Trust AllegianceAmerican Trust Allegiance Fund (ATAFX)

Established in March 1997.Broadly diversified growth fund with a large cap.Screens out alcohol, tobacco, pharmaceuticals and

gaming stocks.Invests in small and medium capitalization companies

and may avoid investments for social reasons when it is otherwise disadvantageous to do so.

American Trust AllegianceAmerican Trust AllegianceIn addition to its two socially responsible

mutual funds, ATA also works individually with clients on personal socially responsible portfolios.

Also provides services such as Trusteeships and securities analysis.

Drew ThomasSRI Project

Disciplined Value Investing

Socially Responsible Investing

Low Shareholder Expenses

Portfolio Manager Ownership

Guiding Principles

ValueSustainabilityFocusPatienceAlignment

Investment Approach

Q u ic k T ime ™ a n d aT IF F (U n c o mp re s s e d ) d e c o mp re s s o r

a re n e e d e d to s e e th is p ic tu re .















R R R R P P P P

Socially Responsible Mutual Fund Charts: Screening & Advocacy

*http://www.socialinvest.org/resources/mfpc/screening.cfm

Investing in Socially Responsible Funds

Cara Persichetti

The Way You Invest Matters: Be Part of the Solution

"triple bottom line“: Not only "investors," they are also concerned citizens. the state of the natural environment, how corporations

treat their workers, and the communities in which they operate

Domini Social Equity Fund, Domini European Social Equity Fund, Domini European Pacasia Social Equity Fund, Domini Pacasia Social Equity Fund, and Domini Social Bond Fund

Domini 400 Social Index*,SM an index of 400 primarily large-cap U.S. corporations

Ecosystems Renewable and Alternative Energy Sources Eco-Efficiency and Resource Conservation Recycling, Safer Technologies, and Lifecycle Design Pollution Control and Abatement Long-Term Environmental Sustainability

Employees Continuous Improvement in Health and Safety Fair and Just Compensation and Benefit Programs Commitments to Diversity in the Workplace Empowerment and Investments in Training Solidarity with Unionized Workforce

Investors Accounting, Credibility, and Business Ethics Openness in Communications Commitment to Diversity of Representation Relationships with Controlling Owners

Suppliers Labor Practices and Other Human Rights Quality, Environment, and Other Issues Diversity Within the Supply Chain Empowerment and Viability

Societal Objectives

exclude from our funds companies with mixed records where negatives substantially outweigh the positives.

evaluate these companies case-by-case, looking for signs of improvement and positive trends.

sufficient information is usually available to make judgments and themes that represent goals we believe are reasonably achievable.

Levels of impact 1(lowest)-5(highest)

Societal Evaluations

KLD Research & Analytics, Inc

Andrew Strick

About KLDYear Founded: 1988

Location: Boston, Massachusetts

Founder: Peter Kinder (co-founder)

MissionTo provide global research and index products to facilitate

the integration of environmental, social and governance factors into the investment process;

To define, by means of our products and services, accountability standards that enable investors, managers and fiduciaries to influence corporate behavior through their investment decisions and share ownership; and

To effect, through this influence, greater corporate

accountability and, ultimately, a more just and sustainable world.

ClientsNot listed on websiteDoes give a performance comparison

Screens5 sources of information

CompanyResearch partnersMediaPublic documentsGovernment and NGO

7 qualitative issue areasEnvironmentCommunityCorporate governanceDiversityEmployee relationsHuman rightsProduct quality and

safety

RecommendationsWould I buy or recommend KLD Research & Analytics,

Inc.?

NOReasons

Lack of informationNo definitions“Window dressing”

SourcesMission & About KLDhttp://www.kld.com/about/index.html

KLD Foundinghttp://www.kld.com/about/BoardOfDirectors.html

Screenshttp://www.kld.com/research/methodology.html

Performance Comparisonhttp://www.kld.com/newsletter/archive/press/pdf/

200808_Index_Performance.pdf

Calvert Socially Responsible Investing

Courtney Hanson

Calvert Socially Responsible InvestingBackground: Calvert Group

founded in 1976 is headquartered in suburban Washington, D.C

400,000 investors in Calvert with over $14 Billion in assets.

Double Diligence research process approach emphasizes rigorous fundamental research and a thorough assessment of corporate integrity.

Core belief - corporations and mutual funds should be governed and managed for the benefit of their shareholders.

Equity Portfolio

3 share classesClass A inception 8/24/98 (4.75%)

Minimum Initial investment $1,000Class B 3/31/98

Subsequent investment $250Class C 3/1/94The portfolio invests primarily in the common stocks

of U.S. Large-cap companies. Atlanta Capital Management Company analyses and

identifies high-quality, growth stocks that are favorable prices.

Funds seek to invest in companies that…Good environmental compliance and performance

recordsSafe and healthy work environmentsResponsible corporate citizens abroad as well as at

homeRespect the rights of indigenous peoplesProduce products that enhance the health or quality

of lifeParticipate in PhilanthropyHave sound business ethics policies and practices

And companies that don’t…

Have recent significant environment finesHave human right problemsAbuse of animalsManufacture tobacco productsSignificantly involved in the manufacture of

alcoholic beveragesDirect involvement in gambling operations

Top companies in fund as of 6/30/08

FMC Technologies IncCisco Sys IncCVS Caremark corp.Medtronic IncNovartis agQuestar corp.Microsoft corp.

Pax World Balanced SRI FundErika Nickel

OverviewInception: August 10, 1971Type of Fund: Balanced FundMinimum Investment:

$250 Individual $500,000 institutional

Returns for Current Year: -8.65%Yields of Current Year: 1.83%

ObjectivesFinancial Stance:

Seek long-term growth of capitalTarget forward thinking companies with

sustainable businessMaintain sectors that will increase quicker

than the GDP

Societal ConcernsStances:

Protect the environment, further equality, encourage sustainable development and promote peace

Restrict: Animal Testing, Alcohol, Militant Fighting and

Weapons, Gambling & TobaccoSeek Out:

Investments with proactive stances on community investment, community relations, environmental issues, human rights and labor relations

Investment AdviseYesIs socially responsibleWill bounce back from the market falls