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The
following article is the first of a series of exclusive
articles for Mind Like Water on socially responsible
investing (SRI) and
financial planning. The author,
Jim Horlacher, MBA, is a
professional member of First
Affirmative Financial Network (FAFN), a
nationwide network of investment professionals
specializing in socially and environmentally responsible
investing. FAFN, LLC is a registered investment advisor
with the Securities & Exchange.
This
is a story about a new company and an old
company. Both often
are considered for investment by both
individuals and institutional
investment managers. The old company, which we will call OC,
is currently a potentially
responsible party for 73 Environmental
Protection Agency Superfund sites
involving hazardous waste, and by the end of 1995 they
had accrued $210 million for potential future remediation
liabilities. OC also is
one of the leading manufacturers of pesticides in the United
States. Recent scientific studies have
linked chronic exposure to certain pesticide residues to
increased instances of breast cancer and other health
problems attributable to hormonal imbalances. OC faces
ongoing controversy concerning a number of its products.
They manufacture a bovine growth hormone that causes
cows to produce more milk. Although the Federal
Drug Administration has declared
the hormone safe for animals and humans, consumer groups allege that
use of the hormone leads to
increased incidences of
mastitis (infections of the udder)
in cows. They claim that
treatment of mastitis using antibiotics
results in residues
that are passed on to
consumers, where they can
affect immune systems and allegedly increase
the risk of breast and colon cancer. OC also
manufactures an artificial sweetener based on
aspartame, which came
under fire from the Journal of Neuropathology as a possible
cause of brain cancer. Finally,
OC is a defendant in ongoing lawsuits related to
the health effects of its now discontinued IUD's used by
women for birth control.
Heard
enough? Want to invest in this company?
Most investors that
take into account social and environmental
issues would tend to screen this company OUT of their
portfolios.
The
new company, which we will call NC,
participates in some of the
same businesses as OC but has a much different
story. NC recently refocused
its activities toward "sustainability"
through the development of life sciences products.
They now have a goal to move beyond
environmental compliance towards an ultimate goal of
"zero effect."
Further, NC has pledged to engage in a
dialogue with stakeholders and receive counsel from
people with diverse points of view. NC's 1997
environmental report talks about a "triple bottom line -
environmental, economic and social," whose
management team responsibilities include Water, World
Hunger, Sustainability Indicators, Full Cost Accounting,
Eco-efficiency and Education.
Products such as new waste
water treatment systems, new
biodegradable plastic, and
nutritious DHA oil produced from algae are
all part of NC's Life Sciences Division. NC has even
created a new executive position of Director of Social
Responsibility. Their 1997 diversity report acknowledged
insufficient work force diversity and committed the
company to dramatically increase female and minority
representation in leadership positions. A significant
range of work/life benefits have been introduced, which
include spousal benefits for employees in same-sex
partnerships. In
1996, a stock option plan was extended
to an additional 27,000 rank-and-file employees.
Heard
enough? Want to invest
in this company? Most investors
that take into account social and environmental
issues would pass this company through their first set of
screens and go ahead and invest in it if its financial
prospects also looked good.
OC's
real name is Monsanto. NC's
real name is Monsanto.
Sorry, you can't invest in NC without also
investing in OC. SRI,
going forward, will have to have a different look to it.
For some time I have been
talking about the day when objectionable
companies would start to clean up their
acts. Now that it's happening, one could argue that
these companies should be
rewarded for doing so by no longer being automatically excluded from
SRI portfolios. While
the jury is still out on Monsanto, I think it's an
interesting case study and
one worth watching. Many companies
have made enormous strides in their
attitude towards employees
and the environment, and some of these
companies are on the verge of gaining widespread
social acceptance.
What's
a socially responsible investor to do?
It's always been up to
each individual investor as to what they feel
comfortable investing in. Moral complexity has always
existed, but the future promises even more complexity as
companies get bigger and bigger,
with some business departments
that pass social muster and some departments
that may not. In the past it was easy to
make decisions about companies like Exxon and Phillip
Morris. They
were screened out of most portfolios that
took into account social
and environmental issues. Going
forward with a clear idea of what's important to you and
the willingness to engage in a new paradigm should
serve you well. A good social investment advisor can
help sort out the issues, but in the end it's your money and
ultimately your decision. As always, follow the golden rule
of SRI: "Invest in the future you want to live in."
James
C. Horlacher, MBA, July 2000
First
Affirmative Financial Network
5960
Dearborn, Suite 107
Shawnee Mission, KS 66202
Toll Free: (800) 341-0528
Phone:
(913)
432-4958
Fax: (913) 432-8951
E-mail:
TreeHuggerJim@aol.com
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