Making money, doing good(Archive)

Boston GlobeMaking money, doing goodBy David McFaddenGlobe Correspondent,August 5, 2001The hub of the socially responsible investment (SRI) movement is right here in the Hub. With a variety of equity, international, and money market funds dedicated to the concept of investing based on principle, Boston on the East Coast (and San Francisco on the West) are centers for those who want their investment dollars to do no wrong while still turning a profit.Trillium Asset Management, the largest independent firm in the country to specialize solely in socially responsible investing, has been based in the city since 1982. Formerly called Franklin Research and Development, it was founded by Joan Bavaria, one of the pioneers of the modern social investing movement.A Massachusetts native, she is Trillium’s president and CEO and cofounder of the Social Investment Forum and of CERES, a coalition of investors and activists that works toward increasing corporate environmental reporting and accountability.”I think the political climate in Boston is conducive to intellectual challenges of the status quo,” wrote Bavaria in an e-mail from the firm’s San Francisco office. ”There are a lot of schools and nonprofits that promote progressive thinking.”Socially responsible investing firms screen out companies with poor workplace diversity, labor conditions, or environmental records, among other criteria, from their client’s portfolios.”We screen companies for both their financial attractiveness and their social attractiveness,” says Shelley Alpern, director of social research and advocacy for Trillium.The history of social investing can be traced to the turn of the century when Christian religious denominations would apply social screens to what they termed sin stocks.
Gambling, alcohol, and tobacco industries were rejected. By the 1970s, the movement broadened to check off other industries such as nuclear power and military contracting.According to the Social Investment Forum, a nonprofit group, funds using a screen or another social investment tactic ballooned from $40 billion in assets in 1984 to over $2 trillion across the country in 1999, the most recent data collected. But since many SRI firms invested heavily in the mid-to-late 1990s in the now sluggish high-tech stocks, it remains to be seen how the 2001 totals will add up now that the bull market has faded.In general, though, being a socially responsible investor does not translate as self-sacrifice. The Domini Social Index 400, a yardstick of stock performance created by the Cambridge-based Kinder, Lydenburg, Domini firm and molded along the lines of the Standard & Poor’s 500, has shown that values investing can be a winning strategy. In fact, the screened Domini index has outperformed the S&P three years out of the last four, according to the independent financial company Morningstar.”Our proposals to companies are always motivated by the belief that making progress on social and environmental issues is going to help their bottom line,” says Alpern.Ignoring a human rights issue like egregious sweatshop conditions can blow up in a company’s face when the problem mushrooms into a scandal. A few hundred thousand dollars on preventive measures can be well worth it.Shareholder advocacy is a concept that Trillium believes is necessary in working for change.Having ownership in a company means having a voice in that company. Shareholder resolutions are an effective way for concerned shareholders to file a proposal to management that addresses problems. Company management listens to shareholders more than it does to outsiders, said Simon Billenness, Trillium’s senior research analyst.”Companies that respond to shareholder pressure as an early warning sign often nip potential problems in the bud,” said Billenness. With companies in industries that historically have poor environmental records, like the oil industry, Trillium will invest in what it considers the most likely of those companies to be responsive to shareholder activism, according to Billenness.Roughly half of the firm’s clients put money into community investment concerns, such as loan funds and credit unions. The Boston office provides investor dollars to Boston Community Capital, an organization that provides capital to disadvantaged areas and ventures statewide that typically have difficulty getting approved for loans.Tony Palomba of the Agape Foundation, a family charitable trust based in Boston, said he wants to ”invest in a way that is consistent with my beliefs. I think it’s important to look at the root causes of problems and the impact that investment dollars can have in solving those problems.”Trillium focuses on international issues as well as national ones. Recently, it has worked on resolutions with the oil industry regarding human rights in Nigeria and on workers’ rights in developing countries.Billenness was the co-author of the 1996 Massachusetts Burma Law, which was patterned after the selective purchasing laws of the 1980s that prodded South Africa into becoming a democracy. Written with state Representative Byron Rushing of Boston, it placed restrictions on state trade with companies doing business with the military regime of Myanmar, or Burma as it’s still referred to outside that country.Apple Computers, ARCO, Hewlett-Packard, Levi Strauss & Co. and other multinational corporations pulled out of Burma after Massachusetts became the first state to pass a law restricting trade with Burma.Although the US Supreme Court, in overruling it last year, said the law intruded on the federal government’s right to set foreign policy, Billenness and other advocates continue to press companies that do business with Burma. The ruling still allows other states and cities to develop their own selective purchasing laws. ”It took time for South Africa to respond, but eventually they had to answer to international pressure,” said Billenness. Both Alpern and Billenness state that there is often an automatic support by Wall Street managers and big institutional shareholders to the corporations they are invested in.”Our role is to push the companies the next few yards, adding our weight with the others – consumers, the media, the state Legislature, Congress – that are pressing [them] to improve,” said Billenness.This story ran on page 1 of the Boston Globe’s City Weekly section on 8/5/2001.© Copyright 2001 Globe Newspaper Company.