Shared-Vision -

To Have and to Have Not

admin — Sat, 23 Aug 2008 18:37:58 -0500

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Investing in public health for all

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Your baby is sick. He lies tiny in a large hospital bed with an intravenous tube feeding him the medicine he needs. Though you’ve been consumed by worry since his fever started, he is going to be fine.

In another part of the world, another baby is also sick. His mother cuddles him, her worry mounting to terror. She has no medicine. Though a remedy may exist, there may be no local producer or supplier. Or the price may simply be beyond this mother’s ability to pay.

Across our global village, this drama plays out every day. Some people recover from illnesses that are well known and treatable. Others get the same bug and die. Lucky ones contract illnesses that afflict wealthy populations and have thus attracted medical research. Unlucky ones contract illnesses that afflict only the poor, and therefore fixing them isn’t economically viable.

The question, as we come to grips with the “village” aspect of our world, is why we continue to tolerate such fundamental unfairness. (Perhaps we have been overtrained on inequity. I am of a generation that grew up with regular admonishments about perpetually starving children in India. Yes, we learned to appreciate our food. But did we learn to share it?)

The answers are not easy. Private companies invest in drug treatments as they invest in new entertainment technology or new communications services: they put capital at risk, develop new products, and seek to make a return. The difference is that medical products hold potential returns far beyond financial; human lives hang in the balance. The ethics of which illnesses are targeted for research, the way drugs are marketed and priced, and the way drug companies conduct themselves vis-à-vis government policy, are far different from those in industries less invested in human suffering and survival.

Access to Medicine Foundation offers a navigational path through this tricky landscape. Based in the Netherlands, the three-year-old foundation partnered with a variety of development agencies, as well as socially responsible investment organizations, to produce the Access to Medicine Index. The index evaluates and ranks pharmaceutical companies’ performance on issues such as equitable pricing of drugs, lobbying governments, drug donations, research into neglected diseases, and commitment to providing access. The first index was published in June. You can browse through an interactive web version at atmindex.org .

The index provides impartial, independent assessments of the way companies handle the prickly issues between the haves and the have-nots. It provides, for the first time, a standardized set of metrics to help us shift from simply appreciating what we have (“eat everything on your plate!”) to ensuring everyone has a fair chance to share it.

The foundation carried its work a step further by inviting major international investors to sign a pledge supporting both the index and pharmaceutical company transparency. Twelve international investors with assets totalling well over US$1 trillion have signed. They believe a company that is proactive on these issues is a better investment bet. Meanwhile, you can be sure the companies—especially those that scored poorly—are having to think differently about which side their bread is buttered on.

You may have investments in pharmaceutical companies, and you may feel committed to seeing medical care reach people—all people—who need it. Now you can put the two together, and choose to invest in those that help advance public health around the globe. We know one of the things that makes us feel the most wealthy is good health. Even better is having the tools to share it.

Nina Winham is principal of New Climate Strategies (newclimate.ca), helping clients build value through sustainability practices and positive change. She’s never understood how eating too much would help anyone else.

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Something to Purr About

admin — Tue, 29 Jul 2008 16:52:17 -0500

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Macro returns from micro loans

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by Nina winham

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You wouldn’t know it, but I’m a fat cat international money lender. I just got a notice saying my loan recipient has made a payment. She’s on track—about 50 per cent repaid now—and every payment on time. Business must be going well. Good thing; I’d hate to have to go over there and collect.

My syndicate of 16 other lenders (you didn’t think I floated this loan all myself?) are folks like me: hard-nosed investors looking for an excellent return. Of course, I’m not as fat a cat as one member of my group. Larry, over in Mill Creek, Wash., has made 136 loans, all over the world. Charcoal sales, fruit and vegetables, food production, retail, cereals, plastics, a bakery. This guy is definitely looking for a deal. He must have made some decent dough. And now, he’s just sitting back and reaping the benefits.

Others in my syndicate (doesn’t that sound racy?) are more like me: a few loans in progress, not committing too much too fast. A police officer in Pennsylvania, a surgeon in Quebec. A retired couple in Texas. A pastor, an accountant. We’ve scoured the Earth looking for options for our hard-earned cash. We’ve all landed on this one business in Phnom Penh, Cambodia. For some reason, we all feel Sok Sarann is a good bet for giving us the kind of value we really want in an investment.

OK, you’ve guessed it, right? Even if I hadn’t told you this loan is for only $700 and that the business is a (single) motorcycle taxi, you’d have seen through my fat cat schtick. Sok Sarann is actually a widow with four children who sells chickens at the market in Cambodia. The motorcycle loan means one of her kids can operate a taxi service and bring in additional money for the family. My portion of the loan is a mere $25, but that is enough to invest in ways that still provide a healthy payback. And here’s where I do get hard-nosed: I want solid, real value. I want investments that will last. And I’m getting it all by helping Sok Sarann.

This is all made possible by Kiva (kiva.org ), a microfinance organization that allows you and I to be lenders. For $25, you can help a real entrepreneur somewhere in the world edge their way out of poverty. (They offer gift certificates, too!) For the socially responsible investor, it’s a great place to put some money. It doesn’t pay a financial return (you get your original principal back when your loan is repaid, to withdraw or re-lend), but it pays in other ways.

Fundamental to socially responsible investing is to understand the real human impact of the choices we make with our money, rather than focusing solely on our personal accumulation of cash. I’ve read my loan recipient’s story and seen her picture; I’ll get updates about her progress over time. I’ll know the real results of my loan. And she will know about me.

I want to invest in a world with less disparity and more resilience. A world with a better chance that my own children will not be thrown into hardship because others have desperately few options for taking care of theirs. A world where we measure our personal wealth based on our collective well-being. Those are the returns I want.

Kiva, with a new loan made every 34 seconds this week, is successfully building these returns. Read about the people working to build a better future (a seamstress in Ghana, an agricultural collective in Samoa, a clothing retailer in Peru, a maker of woven mats in Vietnam) to gain a sense of hope and momentum. Read the comments from lenders about why they lend, to feel even more hopeful. We do, after all, have a lot of money stashed in our part of the world. Lending it out one-to-one to make positive change is a great way to reap “fat cat” returns, of the richest kind. Purr!

Nina Winham is principal of New Climate Strategies (newclimate.ca), helping clients build value through sustainability practices and positive change. Although allergic to cats, she is inspired both by loan recipients and by lenders at Kiva.

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From Socks to Stocks

admin — Wed, 30 Jul 2008 12:46:37 -0500

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by NINA WINHAM, photo by GILA VON MEISSNER STRUMPFKUNST.DE

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When I was about 20, I learned to darn socks. I’d read about it, and I’d seen my mother do it a few times. The craft of it appealed to me: you weave new cloth where the old has given out. (The thrift, too, although even my student budget allowed for new socks.) But mostly, I was just curious about this basic old art.

Then I graduated and got a job. I had more money and less time. Socks with holes were a problem: too good to throw away, but a nuisance to repair when it was so easy and cheap to buy new ones.

In fact, we’ve seen all manner of repair fall out of vogue. It’s easier to buy a new toaster than fix one; so much more rewarding to get a shiny new thing than to get that old one working again. And it usually costs less to buy new than to repair. No wonder we have a serious addiction to landfills!

Thankfully, savvy investors are now rethinking this buy-and-dump mentality. If something was good before, why fix it? If it held quality, offered service, and rendered value, surely it can again. (This would be painfully obvious to our grandparents. But in our era of cheap energy and global goodies, we’re in remedial mode here.)

A speaker at Vancouver’s recent 30 Days of Sustainability took my darned socks to a whole new level. Storm Cunningham is the author of two books about the “renewal economy”—where economic growth is based on renewing natural, built, and social environments. In this economy, smart investment dollars rejuvenate existing assets instead of building new, from historic buildings to lost rivers, and from dysfunctional ecosystems to entire neighbourhoods forsaken by mainstream investors, yet rich in renewal potential.

One example is the Noisette Project, a sustainable redevelopment in South Carolina. When a navy base closed, the City of North Charleston had the opportunity to allow public access to its waterfront for the first time in 100 years. Environmental restoration improved quality of life, which attracted developers, who in turn pulled neighbourhoods out of their post-industrial slump. As inherent environmental and heritage values have been resurrected, social value has been restored. A new landscape and lifestyle is coming to life by making use of what was already in place.

Cunningham’s stories offer ideas to the socially responsible investor in all of us. He said true sustainability must be built at the middle and end of the life cycle of goods. It’s not about developing new “green” products; it’s about doing more with what we already have. (Can’t you hear your grandma talking? Time to tackle that drawer of holey socks!)

Maintenance, conservation, and reinvestment are where Cunningham sees the engines of future growth, especially as our world becomes more resource-constrained. And if you are investing in things that are new, make sure they’re built to last. We’ve seen a generation of products—especially in our built environment—made of flimsy materials with little craftsmanship, which will not be worthy of reinvestment by our kids. It’s time to stop going for quick, cheap, disposable. Put your dollars into solid, durable, and well-made instead.

“You are what you save,” says an ING Direct billboard I’ve seen around town. Sure, the slogan is about cash in your account. But it made me think about healthy rivers, historic buildings, neighbourhoods rich with stories, family heirlooms. New is nice, and sometimes it’s a good investment. But learning to save—to reinvest, restore, revitalize, remember—is most certainly one path to true wealth.

Nina Winham is principal of New Climate Strategies (newclimate.ca), helping clients message and manage change, and build value through sustainability practices. She reduces her use of landfill by making sock puppets.

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Roast Chicken, Kind Words

admin — Sat, 31 May 2008 15:31:43 -0500

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by NINA WINHAM

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The day we moved into our house on the Eastside of Vancouver, our next-door neighbour brought us a whole roasted chicken and a loaf of fresh bread. A widow who has lived in her home for nearly 50 years, she has routinely dropped off baked goods, cherries from her tree, and birthday presents for my daughter, and we routinely trade friendly banter over the back fence.

She is a lovely neighbour and a generous person. And, whether she knows it or not, she’s also protecting her own interests by building herself into our lives and those of others on our street.

It’s called “social capital.” In the abstract world of sustainability theory, it’s one of several types of capital we need to build and preserve. Social capital refers to the relational fabric of our society: families, communities, unions, businesses, schools, and volunteer organizations. There’s also natural capital, the life-giving abundance of the ecosystem around us; human capital, which is health, skills, and knowledge; and, of course, the ones that hog the headlines: financial and manufactured capital. (For more, dive in at forum forthefuture.org; search for “five capitals.”)

Somehow, we’ve learned to spend most of our time fretting about financial and manufactured capital. From housing starts to home-reno shows, from chasing a pay increase to chasing a sale on the other end of town, we invest a lot of our time into the idea that our wealth resides in bank accounts and possessions. It’s true that money can buy a lot of comfort and opportunity, and not having enough for necessities is crushing. But that housewarming roast chicken can buy you a lot of security, too.

Heat Wave, a fascinating book by Eric Klinenberg about the 1995 Chicago heat wave, shows the power of social capital. For one week, temperatures soared. Train tracks warped. Road surfaces buckled. And people died—more than 700 that week than usual, by some estimates. It’s interesting to note who died. Elderly women—more sensitive to heat but generally better at maintaining social relationships—died at half the rate of elderly men. Latinos, living in vibrant neighbourhoods with strong community relationships, were almost unrepresented in the death count, despite making up one quarter of the city’s population. In contrast, African-Americans isolated in neighbourhoods abandoned by business and residents alike were much more likely to die alone in their apartments. In the face of disaster, people with higher social capital were more likely to survive.

The trick with these different forms of capital is keeping them in balance (such as not eliminating all our natural capital—forests, fish stocks, and healthy watersheds—for quick financial gains). But since we haven’t been trained to think about wealth in any terms other than “money” or “things,” seeing the real value in building social capital is subtle.

As an investor, you can harness your financial capital for the task. Choose funds that invest in international community development projects, or credit union term deposits that support local community-building initiatives.

You can also shift the way you think about wealth and investing. Work a little less. Spend more time talking over the back fence. Look after your neighbours. Volunteer. Those, too, are investments that pay off. I have no idea what my neighbour’s bank account looks like, but I know she is wealthy in the ways that count. And, unlike money in the bank, the more she builds that wealth, the more we all gain.

Nina Winham is principal of New Climate Strategies (newclimate.ca), a consultancy helping clients build value through sustainability practices and creating positive change. She aspires to a 50-year track record as a good neighbour.

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To the Board, Ladies!

admin — Wed, 30 Apr 2008 23:18:40 -0500

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Feminine touch turns investments to gold

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It’s like entering a boxing ring with one hand tied behind your back. Nah, too hostile.

It’s like… leaving half the ingredients out of a recipe. Or asking 10 people for opinions and only listening to five. Hmm. It’s like…

Oh, forget it. These stats don’t need any spicing up. Here’s the scoop: if your company has no women on its board of directors, it’s likely to perform worse than those that do. Yep, it’s that simple. More women on the board correlates to better financial outcomes.

The study was done by Catalyst (catalystwomen
.org), an organization that works to expand business opportunities for women. Looking at Fortune 500 companies, it compared the 25 per cent with the highest number of women directors to the 25 per cent with the lowest.

Here’s where the numbers speak for themselves. On average, the companies with the higher number of women had a 53 per cent higher return on equity. And a 42 per cent higher return on sales. And a 66 per cent higher return on invested capital. No matter what industry you look at—from health care to consumer staples to industrials—it’s a consistent story.

You’d think companies would take one look and start hunting for a little gender diversity. But here’s a sad number from a 2006 Stats Canada report: only nine per cent of directors at Canadian publicly traded companies are women. (And only 13 per cent of senior officer positions are held by women. Sheesh.)
Makes you wonder whether your investments are doing as well as they might, doesn’t it?

Dermot Foley wonders. But he doesn’t just muse about it like a columnist who can’t find a simile. The VP of strategic analysis at Inhance Investment Management, Dermot actually takes action. If a company Inhance holds shares in doesn’t have women on the board, Dermot will put forward a shareholder resolution to nudge them into action. (It works. What CEO wants a big discussion at a shareholders’ meeting about something that makes him look like a dinosaur and suggests less-than-average financial outcomes?) The most recent example was in January, when a mining company got a “nudge” letter from Dermot. The result? They’re now actively recruiting women for executive positions. If they’re successful, Inhance will withdraw the resolution. If not, it will go to all of the shareholders to be voted on.

Dermot points out that just over half of university graduates these days are women. If a company doesn’t have women right through the top of its ranks, it’s clearly not combing the entire field for talent—and that’s likely to impair performance in the long run.

“If you can attract the talent—and retain it—you’ll be the better company. You’ll create more value,” he says. “There’s this mythology out there that these heavy industries are ‘men’s industries.’ Well, a huge amount of the work that’s done in every industry has nothing to do with picks and shovels. Not that women can’t do that [thanks, Dermot!], but every company needs financial analysis, and legal and regulatory compliance, and many of the people graduating university in those professions are women.”

Dermot says more diversity on a board—gender, cultural, etc.—leads to better thinking.

“Canada is changing. The world is changing. To have a variety of perspectives on complex problems is extremely important. At the end of the day, the back-and-forth discussion between different perspectives is how you come to a much more optimal decision.”

Sure, it just makes sense. But you gotta love it when—plain and simple—the numbers tell the story.

Nina Winham is principal of New Climate Strategies (newclimate.ca), a consultancy that helps clients build value from progressive change. She tends to add a few extra ingredients to every recipe.

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Cleaning Up with SRI

admin — Mon, 31 Mar 2008 13:24:51 -0500

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Tidy one corner of your house, er, portfolio

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Time for a confession: I’m bad at housecleaning. But lately I’ve realized why. I get overwhelmed because I expect myself to clean everything at once. (This would explain why I never try.) But a sink here, a floor there—that I can do. It’s my own all-or-nothing attitude that defeats me and leaves me with a messy house. (Well, more often a well-cleaned house produced by a seriously disgruntled partner.)
Ready for the logic leap? I’ve just found out housecleaning is kind of like socially responsible investing. (No, I’m not making this up.)
At a recent SharedVISION event, investment advisor Mike Higgins of the Pinch Group debunked five “Myths about Socially Responsible Investing.” If you weren’t there, you missed some amazing fair-trade chocolate, and Mike’s comments, which I’ll share:

Myth #1: You have to sacrifice performance when you invest in a socially responsible manner. The quick answer: studies haven’t shown that you’ll increase your returns with SRI, but they have established that you won’t lose out. To read more, see sristudies.org.

Myth #2: Socially responsible investing is more expensive than traditional investing. Most investment advisors who provide SRI advice also offer traditional investment advice for their clients—and they charge the same either way. And a survey by Corporate Knights magazine found that management expense charges on SRI funds were only 0.06 per cent higher than those on average Canadian funds, despite the extra research done for SRI funds.

Myth #3: Socially responsible investing is too limiting; there aren’t enough choices. There are now more than 70 SRI funds in Canada, covering all the major asset classes. That may not be as many as the choices of toothpaste in the drugstore, but how much choice does one investor need?

Myth #4: Socially responsible investing screens aren’t “serious” enough; there are still bad companies in the portfolio. Many funds screen out bad actors, then choose to include at least one “best of sector” company—even if the industry has questionable practices overall. That means diversification is achieved and a dialogue can be opened with the one company that is leading the way towards change. But if you’re still not keen on the best-of-sector approach, you can always pick your stocks individually and make sure you love every company you own. Socially responsible investing is as involved—and personalized—as you want it to be.

Myth #5: Socially responsible investing is only for tree-huggers or activists. Serious investing is about making money, not feeling good. Well, that would mean women over the age of 35 with kids are the most active tree-huggers (I admit to having a bit of a thing for that little fig tree in my yard), as that’s the No. 1 demographic for socially responsible investment. And, as Mike pointed out, addressing issues such as climate change, the impact of AIDS on Africa, or rising instability due to the unequal distribution of resources isn’t just a question of feeling good; all these affect business—and your investments.

How does this relate to housecleaning, you ask? One of Mike’s final tips was that you don’t have to get into socially responsible investing all at once. If you want to start slow, just put a portion of your investments into SRI. It doesn’t have to be all or nothing, and it doesn’t make you less of a socially responsible investor. And I can vouch for the satisfaction of one sparkling clean refrigerator, even if there are still dust bunnies lurking under the couch.

Nina Winham is principal of New Climate Strategies (newclimate.ca), a consultancy that advises clients how to engage in, and build value from, progressive change. She cooks great food to thank the people in her life who excel at cleaning.

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We Love the Bad Boys

admin — Fri, 29 Feb 2008 18:04:39 -0600

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But do we reallyw ant to invest in them?

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by NINA WINHAM

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Why, oh why, do we love them so? The racy girls with a curled lip and just the right put-down. The bad boys with the dangerous look; the guys who are all flash and sizzle, who make you want to leap into that slick car and fling your rational self out the window in a dowdy heap of sensible shoes and plans for tomorrow.

Oh yes… we love them. (Or we would, if given the chance!) But beneath our pulsating lust, we know they’re a fleeting infatuation. When it comes time to get serious, we seek out a gentler, steadier partner. One who’s more predictable, more caring. One who’s clear on values. The thought of the risky adventure may set our hearts racing—but we know what’s good for us in the long term.

Kind of like a winning investment strategy. (OK, maybe that wasn’t the first thing you thought of. Come back from that open highway…) If you’re lucky, you might make a lot of money quickly on some racy stocks. But (just look at the tech boom), you might get burned. Meanwhile, here’s the secret we’ve known all along: over the long term, the good guys win.

Socially responsible investing (SRI) means choosing investments based on more than just their financials. Sure, it’s great to see those black and white numbers sizzle on the chart, zooming along. It seems so simple and clear. But they only tell part of the story. Add in environmental performance, governance, community relations, and the treatment of employees, and you’re getting a much better picture of a long-term partner. One who’s clear on values; who’s steadier, more predictable.

The nice thing is, even the black and white digits prove the value of socially responsible investing. In any given quarter, the indexes that follow SRI portfolios may do a little worse or a little better than traditional market indexes. But follow them over time, and you will find they steadily outperform the mainstream market. The Jantzi Social Index, for example (developed by Michael Jantzi, Canada’s pre-eminent SRI researcher and analyst), has outperformed two general Toronto Stock Exchange indexes by four per cent and seven per cent respectively since being launched in 2000. U.S. index results are similar.

In the early days of socially responsible investing, analysts warned against limiting the universe of potential stocks in your portfolio (never mind that this is exactly what financial advisors do, based on your investment goals). It wouldn’t work, they said; you would pay a price. After all, the fundamental idea of portfolio theory is that you minimize risk by drawing from a large pool to diversify what you hold. But the steady, respectable performance of SRI indexes has proven that there are plenty of good actors to choose from: enough to maintain diversification, give good returns, and make you happy for the long term—financially and otherwise.

And there’s more good news. As more investors choose companies based on their full performance (social, environmental, and financial), there’s more capital under SRI management. And that means—guess what?—more companies are cleaning up their act to appeal to those investors. So you get to shift the norm of corporate behaviour—and you get solid returns.

So what about that guy in the sexy car? Put him on a racing bike and feed him organic. Tell him you love it when he shows his sensitive side. Maybe those long-term values aren’t so dowdy after all.

Nina Winham is principal of New Climate Strategies (newclimate.ca), a consultancy working to engage consumers and employees in social change. She thinks the SkyTrain is way sexier than any car.

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From Sin to Savvy

admin — Thu, 31 Jan 2008 14:11:29 -0600

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Socially responsible investing goes mainstream

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by NINA WINHAM

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It was 1980. I was a Canadian kid who’d just arrived at an American college. I was young—and not just in years. My campus peers were aware and political, and I soon found myself caught up in one of the activist causes of the day: divestment from South Africa.

Now, my own investments included nothing more than what my parents had plunked down for tuition. And I’d never heard the word “divestment” before (or “disinvestment,” for you grammarians). But I caught on: if you don’t agree with what’s happening in the world, pull the plug on the money that’s supporting it.

By the mid-’80s, spurred on by student protests, dozens of U.S. universities were dumping investments in companies benefiting from South Africa’s apartheid system. The flight of capital from the country contributed to the end of legalized racism and the advent of full suffrage for all South Africans.

It was one of the first highly visible wins for the practice now known as “socially responsible investing.” But the concept started long before, and it’s come a long way since.

“Mission-based investing” began with Quaker abolitionists, who pulled their support from companies engaged in the slave trade. Later, temperance activists touted abstinence from alcohol, and from booze-related investments. This grew to a church-led movement against “sin stocks”: companies peddling alcohol, tobacco, or gambling.

Early efforts in socially responsible investing were mostly aimed at one thing: expressing your views by pulling your money out. It’s a big stick, and it works—but it’s heavy to wield. Many argued for keeping money in, and working for change inside a company’s ownership structure. Shareholder activism (see last month’s column) was added to the toolbox.

As awareness developed, some investors wanted to do more than screen out the bad; they wanted to proactively buy stock in “good” companies. This caused a couple decades of soul-searching about how companies should behave, and how to balance shareholder wealth against the broader common good. Usually, this was framed as a trade-off—until a breakthrough in 2006.

Proponents of socially responsible investing have long argued that a better-managed company is a better place to park your cash: it’s less likely to face lawsuits (employment, environment, or consumer complaint), more likely to have happy employees who build value, and less likely to lose time dealing with unhappy neighbours and PO’d customers. In our personal lives, we recognize the value of reputation and integrity. Same thing in the corporate realm: better behaviour, better long-term results.

Dismissed and subjected to “prove-it-to-me” attitudes for a number of years, this idea finally went mainstream after the UN gathered 20 major global institutional investors (our own Canada Pension Plan among them) to develop the UN Principles for Responsible Investment. These recognize that good performance on environmental, social, and governance scales does have an impact on financial performance—a stamp of approval that leaves little room for the critics. If you’ve already switched to socially responsible investing yourself, you’re in good company: the UNPRI now has more than 270 signatories, with US$10 trillion in assets.

In the life of social movements, it was amazing to see South Africa mend its egregious ways. But to have the UN endorse an activist concept and take it mainstream? It’s not what my classmates imagined, back in the days of big hair and legwarmers. Thank heavens the styles have changed—and socially responsible investing is here to stay.

Nina Winham is principal of New Climate Strategies, a consultancy focusing on sustainability, communications, and business strategy (newclimate.ca). Although she saw her fair share of big hair and legwarmers, she lived out her college days in hippie-retro jeans.

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Who Let the Dogs Out?

admin — Thu, 03 Jan 2008 16:24:44 -0600

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Some investment strategies come with a change-the-world bite

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by NINA WINHAM

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You open the morning paper. You read a story about a company that’s steamrolling a little community somewhere in your own backyard, or halfway around the world. You get pissed off at corporate ignorance, greed, and clout. You get fired up. You plan the choice words you’re going to write in a letter to the company’s CEO.
Then you get distracted. It’s time to make lunches/go to work/help the kids with homework. You put the paper down. You never write the letter.
It’s frustrating, watching big companies do bad things. But don’t get mad. Get invested.
You probably know about socially responsible investing, where you buy stock in companies based on the way they handle social, environmental, and governance issues, as well as their financial performance. The way you (or your mutual fund advisor) pick stocks today helps build the world we’ll live in tomorrow.
But there’s more. When you choose socially responsible investing, you unleash a bunch of social change watchdogs. And unlike most of us who can’t squeeze “lobby corporate CEOs” onto our to-do lists, they do get around to writing those letters.
It’s called shareholder advocacy, one of the principal tools in the socially responsible investment world. It means the owners of those mega-companies (which is all of us, if we own stock) take an active role in what the company is up to. Sometimes, just requesting action on an issue can work. If it doesn’t, there are shareholder resolutions: socially responsible shareholders file a resolution that has to be voted on by all owners. Along the way, the media gets wind of the situation, the public is educated, and the company must make a very visible decision to mend its ways—or publicly declare that it won’t live up to standards that some of its owners expect.
Socially responsible shareholder resolutions are used to address all sorts of practices, from corporate governance to climate change, from pollution to labour practices. Ultimately, they protect the bottom line, too; it’s becoming clearer on this small planet that bad behaviour today tends to result in poor financial performance down the line.
PepsiCo has been the target of a number of shareholder campaigns over the past few years. One targeted its practices concerning community water supplies near a bottling plant in India. Another was aimed at having the company use more recycled plastic in its bottles. Yet another was part of a large movement to have multinational companies assess the impact of HIV/AIDS on their bottom line—a way to raise the profile of the disease and its impact on communities around the world.
The result? PepsiCo is now a leader on an increasing number of social responsibility fronts; visit their corporate web page (pepsico.com) for a sample. The company is advocating for a U.S. program to reduce greenhouse gas emissions, has aggressive conservation and efficiency programs in place, and runs mentoring programs aimed at increasing minority hiring. Quite simply, Pepsi has realized at least some of its owners really care about this stuff—and they’ll raise a ruckus if the company shows it doesn’t.
Your investment company makes money from you. When you choose socially responsible investing, some of that money gets turned into action: it funds watchdogs with an international bark and a media-savvy bite. You get financial returns—and the satisfaction of knowing the letter’s already in the mail.
Nina Winham is principal of New Climate Strategies, a consultancy focusing on sustainability, communications, and business strategy (newclimate.ca ). She loves writing letters, but has a hard time remembering to take them to the mailbox.

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Do You Know Where Your Money Is?

admin — Tue, 04 Dec 2007 12:56:18 -0600

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Responsible investing that’ll impress your kids

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by NINA WINHAM

Content

It came for your 10-year-old on her birthday: a $500 cheque from Grandma with a note saying “Invest it wisely!” So off you go to your financial advisor, where you and your little investor consider mutual funds. She learns about how the fund will buy stock in various companies, and how to make choices to help the money grow. You’re aglow with the educational moment: teaching her good fiscal management, sound judgment, responsibility for the future…

Then your kid (a budding animal rights activist) asks, “Mom, how do they pick which companies to give my money to? What if they test chemicals on animals?”

Got a quick answer? If you’re like most of us, this question might make a train wreck of your excellent educational moment. Because let’s face it: mutual funds are an out-of-sight, out-of-mind way of convenience investing. A welcome convenience in our busy world, for sure, but one that makes it harder to give your socially conscious child the answers to her burning questions.

In our economy, capital is raised to build buildings, expand operations, produce goods, and deliver services. Companies big and small rely on shareholder equity to grow and change—equity that tracks back to your kid’s mutual fund holding. Where the money goes, our economy—and society—grows.

When you buy stock directly, you come face to face with the company you’re buying into (well, not literally, but work with me here). You consider its line of business, its track record, and the market for its goods and services. But with a mutual fund, you’re buying a manager. That person does the legwork and makes choices for you, and is bound only by the general nature of the fund (high-growth, Canadian, high-tech, etc.). It’s a way to buy stocks and pay minimal attention to the specific companies you hold—a relief for those of us without the time or savvy to manage a stock portfolio.

But it’s also a step removed from really knowing what your money is doing out there in the world. Your manager’s only instructions may be to make the most money they can. But what if you don’t like the way they do it?

You’d probably think twice about returning to a restaurant where the owner was publicly abusing his staff. You’d consider boycotting a company caught using seven-year-olds in its factories. And if a company in your backyard were dumping chemicals in a salmon stream, you wouldn’t want this to be part of “business as usual.” At the same time, wouldn’t you want to reward a company that’s got it all together, with well-treated employees, strong environmental programs, and a thoughtful approach to human rights in other countries? If it was that easy, of course you would.

These days, we have a lot of choices to bring that same mindfulness to our investing. Mutual funds with ethical screens (programs used to meet particular selection criteria) abound. When you buy these funds, you step up to the counter and place your order: “I’d like to grow my money. And, I’d like to build a better world. I know my money has power—and I’ll be in charge of that power, thank you very much.”

But don’t expect applause from your kid when you tell her she can buy a fund that’s screened for testing on animals. It’ll make so much sense, she’ll think we always did it this way.
Nina Winham is principal of New Climate Strategies (newclimate.ca), a consultancy focusing on sustainability, communications, and business strategy. Her four-year-old holds no mutual funds so far, but is already very good at asking questions.

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