I see an email entitled Is Your Money Where Your Heart Is? The Truth About SRI Mutual Funds by Paul Hawken. I know Paul. A smart and courageous fellow. I respect him and his work. So I begin to read it.

As I am going through it I am stunned. “This is sad,” I say to myself. “This is not the Paul Hawken I know.” Then I get to the second to last paragraph where in the midst of many other points he writes “that portion of the industry that wants to maintain credibility must break off from the pretenders and create an association with real standards, enforceability, and transparency.” Finally, I relax and exhale. He is coming back down to reality a little bit, but this obvious solution to his main criticism—that not all social funds today share the same values as the original ones—is buried in a pile of other thoughts.

Being one of the founders of the Calvert Social Investment Fund, I, of course, was pleased to read a couple of sentences later in that paragraph: “In the US, there are funds that make a real contribution to corporate reform and accountability; Portfolio 21, Calvert, Domini, Citizens, Walden, and Women’s Equity are rightfully considered leaders. But they are a minority.” But these are the only sentences in the article recognizing that SRI is making a positive contribution.

In my judgment, Paul has done something that must be named and rejected if our values are to be perpetuated in mainstream society, not just in the perpetuation of socially responsible investing (SRI).

In criticizing SRI he created a simple and unrealistic polarity, the equivalent of “for our troops-against our troops” or “against the UN controlling America-for the UN controlling America.” I know of no one for the latter in either case. Paul created the dichotomy of “for greed-against greed.” He then placed SRI in the “for greed” camp. This Madison Avenue sales technique currently being used so effectively by Rush Limbaugh, Bill O’Reilly, and the Republican Party works well in a sound-bite media world where you have the ability to sustain it as the context for the conversation. Given this simple, unrealistic choice, many will not see through the ruse and all good people, which is how all people see themselves, will obviously choose to be on your side because it is the only reasonable option.

There are two other aspects to this technique: 1) give a very positive name to your side and a very negative name to the other side, i.e. “pro-life — killing babies”, and 2) speaking respectfully and lovingly about the people you oppose so the listeners conclude that you must be a compassionate person and, therefore, would not be misleading them. During the 9/11 Hearings, Attorney General Ashcroft could not have been more kind toward Janet Reno, the former Attorney General, while pointing out that she created “a wall,” a phrase he continually repeated, between the FBI and the CIA. This smart sales tactic has just allowed very immature people to remain in charge of the last remaining super power on the planet.

This technique can comfortably be used by less mature people, people who believe the end justifies the means. However, more mature people accurately see the process as the end. They cannot do this or fail if they try because their lack of inner integrity is visible, i.e. Al Gore and John Kerry pandering to the political middle rather than accepting the responsibility to successfully sell the truth.

To perpetuate our more mature values, like Mahatma Gandhi, Martin Luther King, Jr., Nelson Mandela, etc., we must live them well instead of joining in this manipulative game. Mahatma Gandhi said, and I am paraphrasing from memory here, “There are two kinds of politicians: those who tell you what you want to hear and those who tell you the truth in a way that has you say, ‘Thank you.’”

If George Soros and his new Phoenix Group try to regain power using the-end-justifies-the-means methods, they will fail just as Paul is failing using it to critique our community. We have no choice but to go deeper, not cheaper, to regain respect and leadership. Our values will not allow us to be successful any other way — thank God!

SRI had a far more modest goal than ending greed. It was to prove that we could make as much profit investing in publicly traded companies moving in the direction of reducing rather than increasing greed: the only two options available there. It has also nurtured investment in private companies and non-profits that aggressively give priority to the common good over greed. While Paul advocates this approach, he does not mention the fact that the progressive SRI community is leading it today.

Therefore, the realistic question to ask SRI mutual funds is not “are you for or against greed?” The realistic question to ask any individual or group in our society is “are you moving things in a more mature direction as best you can where you are able to make a difference?” None of us are dictators who can change the way people behave in a free market society. Using the latter question can lead to a dialogue about how well any group is doing and what they can do better. A mature, mutually respectful co-creative conversation can take place. That is very different from deciding whether or not a group is in the greed camp or not. And it leads us in the direction of identifying actions we can take that will move things in a positive direction from where we are…which is exactly what the progressive SRI firms are doing.

Over the last twenty-two years the SRI community has successfully created a new asset class in the profession investment community, called “socially responsible investment,” that has proven that investors do not sacrifice financial return when investing in companies that have healthier, more mature relationships with their employees, the community, and the environment. This is a very significant achievement for the good of all! The consistently larger percentage of investment in socially responsible investment funds and portfolios, over $2 trillion in a recent evaluation by the Social Investment Forum, reveals that the public is discovering that they no longer have to trade one off against the other. They can have both.

Now, let me give you some examples of where we are trying to build the industry Paul wants us to be in: building companies that give priority to the good of all rather than a few called the shareholders.

As you know, some of us at Calvert have created a separate tax exempt organization, the Calvert Foundation, that offers Community Investment Notes where investors can invest $1,000 or more, choose an interest rate between 0 & 3%, and we then invest the capital in other non-profits that have created microloan funds, low income housing funds, community development venture funds, etc. All of these are focused on ending poverty by making loans to individuals and groups in poor communities around the world. The Foundation now has over $120 million under management in that program with close to $2 million of new capital coming in each month. Also, the Social Investment Forum, our industry's association, has established a policy of encouraging all socially responsible mutual funds and managed accounts to place at least 1% in such investments. In other words, we, as an industry, have once again created a new asset class in the professional investment community that did not exist before: “community investing”…investment to end poverty.

Many people do not know it but some of Calvert's social funds also have from the beginning had the ability to do private placements with a small percentage of our portfolio (less than 2%), which is a lot of capital when you have nearly $3 billion under management. That is, rather than investing in large corporations whose securities are traded on exchanges, we will invest directly in small, entrepreneurial companies that are going to give us a very big social bang for our buck as well as a reasonable return. So we have many investments in small companies that are developing technologies to bring fresh water to villages around the world, solar technologies to those villages to provide electricity, etc. Some other socially responsible mutual funds make similar investments.

My point is simply this. There are many SRI mutual funds and firms that are doing all they can to push the envelope to move things in a more mature direction as best we can where we are able to make a difference.

But let me go even further than Paul wants to push us. I was one of the early pioneers in this industry. I was at the home of a wealthy person one night when he told me that he could only invest in bad companies, “because all corporations do bad things,” and give the profits away. I grew up in an Austrian-Hungarian ethnic neighborhood in Omaha, Nebraska and knew there were good people, like my dad who ran a very legitimate meat market, and other people who had a pizza parlor that was a front for many unsavory activities…and everything in between.

It was a result of that evening, in 1975, that Robert Swann and I, founders and directors of the Institute for Community Economics, Inc., pulled together a group that over the next year and a half wrote the first, comprehensive set of social screens. Wayne Silby, one of the founders of the Calvert Group, was a member of that group; later he invited me to join him to launch the first such fund with the full panoply of social screens within the Calvert family of funds.

In those days we were a bunch of hippies standing outside the corporate offices and making a list of the things we thought they could do better: they could do better on human rights, taking care of the environment, their employees, the community, etc. Our social screens were a list of things they could do better. That is still the way it is today.

It is time to demand that they prioritize the list!

To bring attention to this I have been a part of a group that three years ago created a new organization called “Spirit in Business, Inc.” It is an international non-profit organization of business leaders inviting their peers to become “spiritually responsible investors and business people.” What is the difference between “socially responsible business” and “spiritually responsible business”? The difference is that the latter asks business people to prioritize the list…and to have the common good be the highest priority.

Currently, as Paul correctly pointed out, the highest priority of business is the good of the few, called the shareholders, at the expense of the many, and usually referred to, as Paul does, as “the highest rate of financial return.” This is a legal, immoral contract with society that Congress never voted for that was created by and is supported by the courts. We need to take actions that will expose this to the public's eye in the same way that socially responsible investment exposed to the public's eye that you can make as much profit being socially responsible.

Enron fooled many in the SRI community because it boldly lied and had all believe they were a socially responsible company when they were greedy thieves. What is most important are not the items on a list that we can check off but the highest priority of the company. We have learned, by the way, that one of the best ways to discover this is a company’s lobbying behavior. What they tell the public is often very different from what they argue for in Washington, D.C. Are they arguing for a level playing field for all competitors or special rights for themselves?

So it is time to launch spiritually responsible investment as distinct from socially responsible investment to emphatically make this point. I am currently trying to make that happen…and will gladly celebrate anyone else who succeeds in launching such a fund before our team.

Finally, there is one other action we should take as an industry. We need to make a distinction between the socially and environmental actions companies can take in the short term that will save or make money and those they can take in the long term that will save or make money. Now, someone might ask, “Why do you frame both of these in terms of making money?” Because you see, it is the law.

You may remember that three years ago I created a group of investors to buy Ben & Jerry’s Homemade. One night, into the early morning hours, some members of the Ben & Jerry’s board and my team were on the 60th floor of a building on Wall Street with sets of lawyers from two of the biggest merger and acquisition firms in the world and investment bankers from one of the biggest investment banking firms in the world, trying to figure out how my group could buy the company. $38 a share was the most I could pay and maintain control of the company and there was a $40 a share offer on the table. It became abundantly clear that if our offer were accepted, the minority shareholders would sue and win the case because in publicly traded companies “the financial interests of the shareholders are paramount.”

The courageous board of directors of Ben & Jerry’s agreed to sell the company to my group anyway in the hope that we could argue to the judge in court that most of the investors were Vermonters with small amounts of capital in the company and they wanted to make sure the company stayed in Vermont. We were hoping that the judge would set a precedent by finding in our favor and establish the standard that socially responsible issues can be factors in determining who buys a company, not just the price. Unfortunately, a competing bid came in before we could paper the transaction and get it signed that made the gap between our offer and their offer so large that we knew the judge would not find in our favor. That killed the deal.

My point is this: the law in the world of publicly traded companies is for exactly what Paul is against: giving priority to “the highest rate of return.” I do not like this at all! In fact, I believe that it is an immoral contract with society that must be changed by legislation. It is naturally assumed in society that we are to give priority to the good of all in what we do, that is, no killing, stealing, slight of hand, etc., and to perceive our self-interests as a secondary priority. Publicly traded, for-profit companies often see it as their job to push against this as much as they can…and judges are obligated to support them in doing it.

I have brought these ideas up to the CEOs and Chairs of Fortune 500 companies and their ultimate response is something like, “It’s my job.” In other words, it is the law that is the fundamental problem. The law should state that the highest priority of a company is the common good and, therefore, socially and environmentally responsible issues are important in determining who buys a company…or any action of a company.

Fortunately, we can begin creating corporations legally structured in this way without the need to change any laws and that is something else we now need to begin doing. I have learned that Paul is in the process of creating a fund to invest in such businesses and I welcome him into our community even though he may be in the illusion that he is starting a new, more mature community. My call is for spiritually and socially responsible investment bankers to unite!!! We are all going in the same direction.

As Buckminster Fuller once said, “You never change things by fighting the existing reality. To change things, build a new model that makes the existing model obsolete.” I can imagine Gandhi saying the same thing. This is the loving process that brings about the loving end. We will not get these laws changed with this Congress or anytime soon. And we don't need to. We can build the new corporate model now and let the public choose which they prefer to support. Humm, I think there is a place in enough people’s portfolios to support such an emerging industry. It is simply a shift in priorities, not an anti-profit campaign.

What I think is even more important to do immediately is that all of us in the spiritually and socially responsible investment and business community need to consistently, especially whenever we are talking to the press, make a sharp distinction between the long term and the short term. We can then point out that there are many socially and environmentally responsible things companies can do in the short term that will save and make money. This means that those companies that are not doing them are not meeting their financial fiduciary responsibility. In this way, we will be using this immature law to get all companies into the SRI camp. Call it “honest judo.” However, if we continue to not separate these short term actions from the long term actions that cost money in the short term, companies will continue to point to the latter and say that that is what we mean by socially and environmentally responsible actions. They will then continue to argue that it is not within their fiduciary responsibility to be able to spend the shareholders capital in “costly short term actions that have a speculative possibility of a better long term return on investment.”

So, Paul, let’s join forces with our colleagues in the industry and do what we can that is not self-destructive. Let’s successfully push the envelope in a more mature direction and do it in a way that will invite more and more people to freely join with us. The creation, over the last twenty-five years, of the two new asset classes in the professional investment community of “socially responsible investment” and “community investment” are two good examples. The emergence of “spiritually responsible investment,” which is what I think you are really advocating, is another one and I am glad you will be joining us here.

Let’s also be watchful to not set up simple and unreal good-bad dichotomies that make us look like good guys while making potential partners into bad guys because they are not doing what it is not possible for them to do. Let’s not participate in a game where it is not possible for us to win. Let’s strive to be good politicians and realistic socially and spiritually responsible investors. Let’s strive to be Buckminster Fuller and Mahatma Gandhi. If we want to be successful at what we do, our level of maturity does not give us another option.

Paul, we all slide into making the mistake I think you made here. So much of the media world around us today is operating at that level of maturity it is hard not to slide into doing it also. I know this is not you, and welcome you into our community. Many of us also made impassioned entrances!

Terry

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