Here’s a newsflash from the world of socially responsible investing: Calvert Funds, one of the oldest, biggest and most influential fund groups that specializes in social investing, may buy shares in companies that make weapons and nuclear power.
Yes, you read that right. Calvert will poll its shareholders on its website in December to see what they think of nuclear power, which, to some environmentalists, represents a reasonable way to slow down global warming. And its board has already lifted a once-rigid screen against any company that makes weapons.
This is good news because the SRI industry is rethinking its old ways. (The Pax World fund is already moving in this direction.) I’m a big fan of socially responsible investing. (Disclosure: some of my money is invested in the Calvert Foundation, some in Domini’s mutual fund groups). SRI funds do a lot of good with their shareholder advocacy. And I especially admire their work in community investing, which I wrote about in Fortune last year, after Hurricane Katrina.
But let’s be real: the so-called screens that eliminate entire industries–typically weapons, nuclear power, tobacco, alcohol and gambling–are pretty silly, with the possible exception of tobacco. They reflect the SRI industry’s roots in 1960s activism (not that there’s anything wrong with that) and liberal religion (also a good thing) but they don’t reflect the complexities of business today. Whatever you think of the Iraq War, do you really believe that weapons are by definition a bad thing in a post 9-11 world? The screens are even a bit hypocritical–wine and beer are served at the SRI industry’s big annual convention each fall but the funds won’t buy any liquor companies? Barbara Krumsiek, CEO of Calvert, told me today over lunch that her board has discussed the weapons issue for a couple of years. One board member asked her: “If you’re going to support peacekeeping missions, what are those peacekeepers supposed to be carrying?” Another wanted to know how we are supposted to protect noncombatants, like nurses, who are dispatched to war zones.
By modifying or eliminating the screens, the SRI industry could shed its hippie image and expand its appeal to more mainstream investors. SRI investing makes a lot of sense–it is fundamentally a way to steer your money towards better companies and to urge them, as a shareholder, to improve their practices. In the long run, it is also smart investing, because the most sustainable companies are going to be the most successful ones. Yes, I know, the social funds have for the last couple of years lagged the overall market–that’s what happens when you avoid oil companies when prices spike–but in the long run, they should perform as well as the market or better.
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I think it is reasonable to conmitnue to exclude nuclear power until the waste problem is truly solved in a responsible way AND the companies themsleves or their insureres are willing to accept the risk without government subsidy. The government insuracne issue is sort of the test of REAL in many other business contexts so why is it not a reasonable test in this case as well.
Should this be called the Major Barbara conundrum? I don’t quite remember the plot of Bernard Shaw’s play but I do recall that one character extolled the virtues of making weapons; effectively saying they were responsible for peace and happiness (as well as considerable wealth).
The problem with SRI as you rightly point out is how do you define socially responsible? Inuits might regard seal hunting as socially responsible in that it keeps their society healthy – but I am not sure an ex-Beatle would agree.
Kind regards
H
Why do you think that investment in nuclear power is not socially responsible?
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