General Assembly 2009 Event 4035
Presenters: Joseph F. Keefe, President and Chief Executive Officer of the Pax World Management Corporation; Art Stevens of the Calvert Foundation, and Tim Brennan, Treasurer and Chief Financial Officer of the Unitarian Universalist Association (UUA).
Joseph F. Keefe, whose firm specializes in sustainable investing, offered advice to workshop attendees about what investors can do and what role sustainable investing can play in addressing the twin crises of finance and sustainability—in the short-term and in the long-term.
Keefe established the backdrops of the financial crisis and the sustainability crisis. He affirmed that the current financial situation represents a triumph of short-term over long-term thinking and investment, aided by lax oversight and fueled by debt.
Keefe defined the crisis of sustainability as humans “knowingly altering the fundamental processes of the planet on a global scale,” leading to unalterable changes. With resources strained to the breaking point, the disparity between rich and poor is on the rise, aided by cheap production and fueled by debt.
For Keefe, the only way out is a “sustainable revolution,” which would produce wealth and reduce consumption. This is the challenge of sustainable investing. It implies, he said, a new conception of wealth that does not tolerate poverty, injustice, or environmental degradation.
He defined sustainable investing as the full integration of environmental, social, and governance (ESG) factors into investment analysis and decision making. Keefe shared several cases establishing strong correlation between ESG—or sustainable performance—and financial performance.
Keefe then discussed socially responsible investing (SRI). This type of investing is based on values, often religious in origin, and is usually defined by what it doesn't invest in: for example, no gambling or alcohol for a Muslim investor or no contraceptives for a Catholic investor. SRI is based on moral values, so an investor who feels homosexuality is morally wrong can reject a company that offers benefits to domestic partners. Such values, says Keefe, are subjective and make poor investment guidelines.
Sustainable investing is informed by certain values, but focuses on capturing returns associated with ESG factors.
Keefe offered a hypothetical situation: Let's say you inherit $5,000. Your broker recommends two stocks, but you can only invest in one. The two companies seem identical by the numbers, so you look deeper. One company has been named to Fortune’s Best 100 companies, has women on its board, submits pay packages to shareholders for approval (“say on pay”), and is reducing its greenhouse gas emissions. The other was fined for polluting, has an all-male board, and is being sued by several African American employees for discriminatory hiring practices. Which, he asked, would you choose?
In choosing the first company, you are saying that its ESG record is relevant. Therefore, Keefe advised, looking at financial performance and ESG is a smarter way to invest.
So how can sustainable investing change the world? If investors buy only sustainable stock, Keefe says, it puts pressure on companies to be better: to act in the public interest, serve all stakeholders (not just shareholders), and pursue long-term wealth strategies.
Keefe extolled such shareholder activism. But, he said, investors need the help of government action and regulation. With the Obama administration in Washington, he said, some needed reforms are on the way.
Art Stevens noted that, as a nation, we are redefining our relationship with money. Ironically, the changes seem revolutionary but are actually a return to old-fashioned values.
Community investing, he explained, allows you to select where your money goes. Stevens' firm, the Calvert Foundation, is like a mutual fund for investments of this type. He recommended a database managed by the Social Investment Forum for a list of organizations that provide individuals who the market didn't deem worthy of credit access to credit.
Tim Brennan said the UUA is involved with the Social Investment Forum as well as the Calvert Foundation and Boston Community Capital. He said the reason for the UUA's large portfolio of community development financial institutions (CDFIs) is their low default rate. The UUA’s policy is to invest 1 percent annually in CDFIs, Brennan says.
Brennan explained that if a congregation invests $2,000 to $10,000 for up to three years, the UUA will make a matching investment. He advised congregations to see the Social Investment Forum site for a list of acceptable investments.
Reported by Toby Haber; edited by Dana Dwinell-Yardley.