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Response to Paul Hawken’s “Is Your Money Where Your Heart Is?”We were disappointed with the errors in Paul Hawken's article “Is Your Money Where Your Heart Is?” (October). Pax World Funds was not contacted about the article prior to its release, and we would like to set some of the facts straight. Pax World has never owned General Motors. In the past, we held Hughes Electronics (consumers know it as DirecTV) which later was listed as a tracking stock of GM. Last year, Hughes was acquired by News Corp and has since been spun off as DirecTV. In the article, the author's approach is to isolate one aspect of socially responsible investing (SRI) and analyze it. Pax World and the other SRI mutual funds named in the article utilize screening AND advocacy AND community investing. These are irrevocably intertwined strategies – to examine one without the others is like critiquing a house's architectural style when all you see is the basement. He condemns Pax World's investment in Chesapeake Energy because Chesapeake has only white men on the board of directors. However, he omits the fact that we WITHHELD our vote for every director candidate because of their lack of diversity. Mr. Hawken also states that SRI portfolios use the Dow Jones Industrial Average as a performance benchmark. This is false. The Securities and Exchange Commission requires all mutual funds to compare their performance to a relevant benchmark, in order to help investors conduct apples-to-apples comparisons. Mutual funds have different strategies, and it would be meaningless to compare a bond fund or a conservative balanced fund to the DJIA. All annual reports must name the fund's benchmark and show performance comparisons. We agree with Mr. Hawken that the SRI industry is not perfect. SRI practitioners have been discussing our definition and our message for years. This is not an easy task, because SRI is driven by the diverse values of its members. Our values are not better than yours; neither are Mr. Hawken's. We encourage your readers to do their own research, analyze SRI's integrated strategies of screening, advocacy, and community investing, and then decide for themselves. Sincerely, Pax World Funds Editor's Note: Pax is correct in its assertions. The Pax World Balanced Fund held a General Motors tracking stock (GM "H" class) for Hughes Electronics as of June 2003. We regret this error. Dear Tim (Tim Smith, president, Social Investment Forum), I read your comments quoted on the SocialFunds.com site (http://www.socialfunds.com/news/article.cgi?sfArticleId=1572 ) about Eurosif transparency guidelines. I want to suggest that only the North American SIF industry believes it is transparent. In our work, we couldn't find one investor who believed that, including large institutional investors (foundations) who have considerable assets in the funds you refer to. I continue to see people in the industry attack our report and me personally, but at NCI, we continue to get letters and emails from investors who overwhelmingly support our conclusions. I believe there is a significant misalignment between what the industry believes and what its customers (or just as importantly, ex-customers) believe. On Friday I met a philanthropist who moved over $100 million from so-called SRI investments to self-management because of the issues of transparency, criteria, and screening practices. In your statement you say the “same bases are covered,” but there is not any explanation on the websites of the funds you refer to as to why or how a particular company was chosen. The screening process is completely black box and although Eurosif doesn't address this, it is time someone did. Under Eurosif Research Process guidelines, #3e, “Do companies have the opportunity to see their profile or analyses?” still does not address why investors cannot see the company profile and analyses. In Alisa Gravitz's and others' comments, there has been this straw man that NCI is calling for utopic or perfect guidelines and companies. That is of course a projection onto our work, something we have never called for. What we are seeking is transparency for the investors so that they can understand why a given company is included. Without that, SRI will be standard-less in practice even if it believes it has standards behind closed doors. Eurosif is to be congratulated on their initiative. It is an important and timely move. It doesn't seem appropriate for the North American industry to say we don't need such guidelines when clearly the industry has none. Once again, as in so many areas of social justice and environment regulation, Europe is setting the bar higher than the U.S. One would hope that at least in this one area, socially responsible investing, the U.S. could at least match the Europeans. Sincerely, Paul Hawken WHAT IS SOCIALLY RESPONSIBLE INVESTING? During a period of seemingly unending corporate scandals, and with growing numbers of citizens concerned about the environment, globalization, and other social issues, the investment approach known as socially responsible investing (SRI) is on the rise. The SRI industry now totals some $2 trillion in assets under management, accounting for nearly $1 in every $9 invested in U.S. markets, according to the Social Investment Forum. A Harris Interactive Investor Confidence Survey commissioned by the Calvert Group in November, 2003, found that:
Joe Keefe is Senior Advisor for Strategic Social Policy at the Calvert Group (www.calvert.com), and a member of the Board of Directors of the Social Investment Forum (www.socialinvest.com). To whom it may concern, This is an important dialogue to have on SRI as easy answers are difficult to come by. As executive director of Eurosif (the European Social Investment Forum), I have the task of explaining SRI across different perspectives as well as different countries. Eurosif has recently launched a Retail Transparency Guideline that may be of some interest to Mr. Hawken and others. Our goal with the Guidelines is to provide a tool for asset managers to better communicate how their funds are demonstrating SRI through both their policies/processes and their actions. For more information, please feel free to view the Guideline at this link: http://www.eurosif.org/pub2/2activ/initvs/transp/index.shtml Regards,
Matt Christensen THE SOCIAL INVESTMENT FORUM and its members respect Mr. Hawken for the role he has played for some time now in terms of leadership efforts in catalyzing the movement toward sustainability. We have every reason to believe that Mr. Hawken and the entire socially responsible investment (SRI) industry are in full agreement on the importance of improving corporate social responsibility, encouraging sustainability, and steering investments to low-income communities around the world that are overlooked by traditional financial institutions. We all seek to encourage more responsible behavior and more positive impact on the part of major corporations. It is for these reasons that SIF — and SRI industry leaders in general — were disappointed that Mr. Hawken’s article and report on SRI contain so many errors and misunderstandings. For your benefit, the following talking points address the gravest misrepresentations and omissions in the article: (more...) Social Investment Forum “Talking Points” WE ARE DISAPPOINTED but not surprised that the Social Investment Forum (SIF) has begun to engage in a one-way conversation with its membership, taking a defensive posture in response to the Natural Capital Institute’s (NCI) recent report on SRI, which is now available at a new website. In addition to shedding light on what we found to be questionable industry practices, we intended for our report be the provocateur of a constructive, engaging and respectful dialogue aimed at improving and reforming those practices. In that spirit, NCI would like to add some of our own comments and corrections to SIF’s “talking points,” released yesterday to its membership, as well as to SIF’s initial response to our article that appeared in the October 2004 issue of the Dragonfly Media publications. In both of its issuances, SIF sidestepped or misconstrued most of the findings and recommendations of the full report upon which the Dragonfly article (“Is Your Money Where Your Heart Is?”) was based. With regard to several of the points raised by SIF, our comments follow. (more...) Paul Hawken and Hilary Mandel on behalf of the Natural Capital Institute SOCIAL INVESTMENT FORUM Vice President Alisa Gravitz said, "Hawken is correct that there are no rigid standards dictated for SRI funds to follow in the United States. However, this is a strength, not a weakness, of this field. SRI funds offer a wide range of options for investors in order to meet diverse ethical and investing criteria." Gravitz added, "Hawken is also correct in noting that there are leaders amongst SRI funds, but he failed to note in his piece that these leaders are all part of the SRI trade organization in the US, the Social Investment Forum (SIF). SIF members are setting the standards in screening, advancing corporate governance, pursuing social and environmental corporate responsibility, and advocating for greater disclosures in their own industry, as well as in Corporate America." (more...) Source: Social Investment Forum press release AS HAWKEN SUGGESTS, the SRI industry would do well to start formulating clear, measurable ecological and social attainment goals and start judging themselves more by what they accomplish related to these goals. However, this in itself is not sufficient. Even the greenest of shoe companies will still be a shoe company that makes money by selling shoes. We are fooling ourselves if we expect even the most progressive old-concept product and service companies, the mainstay of most SRI portfolios, to jump to the forefront of solving the world's problems. What values-driven investors really want to invest in today are companies that make money specifically by accomplishing ecological and social goals. Unfortunately, the stocks of these companies are not easily found or purchased. For Hawken's goals to be accomplished, I suggest that the SRI industry will need to focus much more on financing the growth of "new-values" for-profit corporations to the point where they can issue publicly tradable stocks. Then, socially oriented investors will finally have a real choice. (more...) Mark Winstein I WELCOME THE GROWING global debate over SRI, since higher ethical standards and performance on broader social and environmental criteria will determine the future of capitalism itself. Indeed this re-shaping of capitalism and corporations to conserve the environment while serving human needs and aspirations for equity justice, health, education, and the rights of all — will also affect humanity's survival on this small planet. This is why I called for the UN Global Compact to spin off from the UN — to protect the UN's reputation from corporate backsliders. (more...) Hazel Henderson Read Hazel Henderson's complete response, Corporate Social Responsibility: Walking the Talk THANK YOU SO VERY MUCH for the article you featured with Paul Hawken. I've been a follower/fan of his intellect for many years, and this subject really shined the light on Pax Funds, etc. that I have wanted to invest in. It was a great service that this was written and I will pass the word to others. DragonflyMedia is new to me. (I linked to this story from tomPaine.com.) I will keep reading! Best Regards, THANK YOU FOR PUTTING Paul Hawken's article on Dragonfly. I believe he is one of the most brilliant, creative and socially responsible thinkers/doers of our time. I have my investments in a fund that I chose, not first and foremost for the monetary return for me, but because I believed that they were doing what they claimed: Socially Responsible Investing. I am happy to see that I chose well: Calvert. Hawken's point that these companies can make any claims they wish and we have no way to scrutinize them or hold them accountable seems fairly typical of how corporations operate in the US and the world. It is incredibly frustrating that the people who we depend upon to protect us from the lies and deceitful practices perpetrated for profit are themselves on the take: Congress! There seems no way we can protect ourselves because these same Congressmen are bought and owned by the corporations — so that we have an unelected plutocracy: government by and for the corporations! It doesn't seem like there's anyway out... Even when we TRY to use OUR money responsibly! Lianda Ludwig, PAUL HAWKEN HAS BEEN one of my favorite thinkers and writers for many years. This is just one more example of his critical thinking that is carefully ignored by most businesses. I believe that his ideas are mostly practical and could be put into practice except for the greed factor and the robber barons who have gained control of our economy. It doesn't help to blame anyone. But it might help to be active, interested and willing to change our own patterns. It's good to have someone who is willing to do the homework and make sure that the information is out there for those who are willing to work for change. Nora Ingram I HAVE GREAT RESPECT for Paul Hawken but found his comments on social investment misleading. True, the SRI community has a long way to go. I liken social investing to John Kerry; not perfect but when viewed in comparison to the alternative, a clear step in the right direction. Social investing is a grassroots movement of dedicated and passionate activists. Challenging the most powerful businesses in the world, and a unjust system that created them, is no easy task. We're determined to achieve a corporate paradigm shift towards accountability, sustainability, justice and equity. The article implies SRI funds should be "conscientious objectors" avoiding irresponsible companies. But not being part of the problem isn't enough. We need to solve problems with active protest. Using a technique called shareholder activism mutual funds buy companies they want to change and then actively negotiate and vote to enact change. Last year a SRI conference was held at Squaw Valley. Raising objections to the offensive name, social investors brought together tribe leaders, hotel management, public officials and previous land owners to discuss renaming the area. This was a historic first discussion. I find active protest more effective than avoidance alone. Pax fund brochures prominently mention shareholder activism. They fight to change questionable companies. Why was this relevant point omitted from the article? Mr. Hawken, we are allies. With an open heart I invite you to visit our community. We wish to learn and grow together. In cooperation, Return to the SRI Discussion Index Page |
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