Investing in Bangladesh factories–for a profit

bangladesh-garment-workersOliver Niedermaier is selling a “capitalist solution to one of capitalism’s worst problems” — the unsafe, exploitative, polluting factories in the global south. That’s the topic of my latest story for Guardian Sustainable Business.

Here’s how it begins:

After more than a decade of corporate investment in social responsibility programs, codes of conduct, teams of inspectors and public reporting – all of it intended to improve the working conditions of factories in poor countries – anyone paying attention knows the system isn’t working very well. The Tazreen factory fire and Rana Plaza building collapse in Bangladesh were poignant symbols of its failure.

Maybe it has failed because Western clothing brands and retailers – Nike, Gap, Walmart and the rest – have been behaving like regulators by writing rules and meting out punishment. At least, so argues Oliver Niedermaier, the founder and CEO of Tau Invesment Management. He advocates that businesses should instead try acting like capitalists, using markets and the potential of investment gains to reform their global supply chains.

Tau plans to raise $1bn to turn around factories in poor countries, beginning with the garment industry. Tau promises to deliver “improved transparency, greater dignity for workers, cleaner environments for communities, and enhanced performance and value for stakeholders”.

As the story goes on to say, this is an intriguing–but very much untested–idea. Can Tau raise the money? Will brands partner with the company, a newcomer to supply-chain issues? Most important, can factories in places like Bangladesh that adhere to the highest standards compete effective with those who do not?

I don’t have answers. But I do know that a new approach to the problem is desperately needed.

How to read a sustainability report

voices_gunther2It’s no exaggeration to say that a new corporate sustainability report is published nearly every day of the year. After all, most of the Fortune 500 now generate reports, many of which read like paeans to exemplary business behavior. If companies behaved as well as they are portrayed in these reports, the world would be a much, much better place.

Still, CSR or sustainability reports can be a useful starting point for looking at a company and its impact. In my latest story for the environmental website Ensia, I offer a guide to reading these reports. Here’s how it begins:

Corporate sustainability reports have been around since … well, it’s hard to say.  The first report may have been published by “companies in the chemical industry with serious image problems” in the 1980s, or by Ben & Jerry’s in 1989 or Shell in 1997. No matter — since then, more than 10,000 companies have published more than 50,000 reports, according to CorporateRegister.com, which maintains a searchable database of reports.

But who really reads them? As a reporter who covers business and sustainability, I do. Maybe you do, too — as an employee, investor, researcher or activist.

Here, then, are five tips to help you make sense of the next report that lands on your desk or arrives via email.

You’ll have to read the Ensia story to learn more but the key word to remember is context. The best corporate reports put their data in context, by comparing it with prior years or previous goals or industry peers or even the needs of the earth. Few reports meet this standard, alas.

Thanks to Steve Lydenberg and Bill Baue for their help with this story.

Illustration courtesy of Ensia

Are your investments tied to genocide?

SP1119147That’s a refugee camp in Sudan. If you are an investor in mutual funds, it’s possible–perhaps even likely–that you own a small share of one of a number of foreign oil companies that are doing business with the government of Sudan, and thereby helping to finance a genocidal, outlaw government that is directly and indirectly responsible for the deaths of millions of people, and the displacement of many more.

I’m returning to the subject of “genocide-free” investing with a column this week at Guardian Sustainable Business, about the puzzling and troubling refusal of a mutual fund managed by ING US to even consider divesting in holdings in foreign oil companies that do business in Sudan. US oil companies are prohibited by law from operating there, but US-based mutual funds are free to invest in Chinese, Indian and Malaysian oil companies that help finance the Sudanese authorities.

Despite the best efforts of an advocacy group called Investors Against Genocide, big US mutual fund companies including Fidelity, Vanguard, JP Morgan Chase and Franklin Templeton continue to invest those foreign oil companies. It’s not because they are unaware of the issue. I’ve covered the topic of “genocide-free” investing since 2007, beginning with a story for Fortune.com headlined Fidelity’s Sudan Problem, and followed a few months later by another called Warren Buffett and Darfur. By then, Harvard, Yale and Stanford had divested their holdings in PetroChina and Sinopec, demonstrating that divestment is both possible and practical. In 2009, as an investor in mutual funds managed by Fidelity and Vanguard, I voted for divestment (and blogged about it here).

A few mutual fund companies–notably T. Rowe Price and TIAA-CREF–have agreed to purge their holdings of the Asian oil companies, but most have resisted. Among the most egregious is ING US, whose own shareholders voted for divestment. If nothing else, this is a reminder that we’re a long way from achieving “shareholder democracy” in corporate America.

Here’s how my story for Guardian Sustainable Business begins:

Call me old school but, in my view, companies should be accountable to their owners.

They should also try to stay away from repressive governments like the one in Sudan, where millions of people have been killed in a long-running genocide.

So when, as part of a campaign to stop the flow of money to Sudan, investors voted to ask a mutual fund managed by ING US to sell its holdings in companies that “contribute to genocide or crimes against humanity,” you’d think that ING US would comply.

It has not.

You can read the rest here.

To put this in perspective: It has been more than 15 years since the U.S. imposed sanctions on Sudan, and nine years since the killings in Darfur were declared to be a genocide by the U.S. Congress. Yet financial institutions are still investing in the worst companies funding the genocide.

It’s another reason, not that we need one, why so much of Wall Street is rightly held in such low esteem by so many Americans.

My beef with B Corps

logoThere’s lot to like about the fast-growing B Corps movement, and one thing to dislike, as I explain in my latest column for Guardian Sustainable Business US.

If you’re reading this blog, you are probably aware of B Corps. The idea takes a bit of explaining. B Corps are businesses that are certified by a nonprofit organization called B Lab to meet what its backers call “rigorous standards of social and environmental performance, accountability, and transparency.” These businesses win certification much in the way that buildings are certified to have meet LEED environmental standards by the nonprofit U.S. Green Building Council; they have to complete an assessment of their performance, provide documentation and be open a review from B Lab, as the group explains here.

But the term B Corps is also used to describe “benefit corporations,” a corporate legal structure that has been set up by legislation that has now been passed by 20 states, including, most recently, Delaware. Benefit corporations need not be certified by B Lab, although many are.

It’s unavoidably confusing, but my beef with B Corps is simple.

The voluntary certification system makes sense to me, for reasons that I explain in the story–it’s a way to signal employees, customers and investors that a B Corps aims to do better than conventional companies. Most B Corps are small and privately held. Among the best known are Patagonia and Ben & Jerry’s, which is a unit of a conventional C Corps, Unilever.

The legal “benefit corporation” purportedly gives companies more freedom to serve society as a whole than conventional corporations have. I’m skeptical about this claim, to say the least, and I worry that it could be counterproductive–because it implies that conventional companies, which make up the bulk of the global economy, need to pursue profits, at the expense of broader social and environmental goals. This seems wrong on the face of it. After all, if Ben & Jerry’s can be certified as a “good” B Corps, doesn’t that mean that its parent company, Unilever, can be “good” too?

My worry is that the implicit argument — that most of the world’s companies don’t have the freedom to do the right thing for society — undermines faith in capitalism (which is fragile, at best, for good reason) and that it discourage reformers inside and outside of big companies who are pushing corporate America to do business better. It’s a bit smug to suggest that traditional companies can’t do as much good for the world as B Corps can.

Here’s how my story begins:

To the supporters of B Corps - benefit corporations that say they aim to serve workers, communities and the environment, as well as their owners – 1 August 2013 was an historic day. In what B Corps described as “a seismic shift in corporate law,” the state of Delaware, where one million businesses are legally registered, enacted legislation that will “redefine success in business” by giving the owners and managers of legally recognised B Corps protection as they pursue “a higher purpose than profit.”

The B Corps movement has much to be proud of: it has built a brand that stands for good business, attracted hundreds of committed followers and sparked debate about the role of business in society. But claims – sometimes made explicitly, sometimes implicitly – that B Corps have more freedom to take an expansive view of their social and environmental responsibilities is not only mistaken, but potentially damaging to the cause of sustainable business.

After all, if conventional companies have no choice but to focus narrowly on maximising short-term profits, at the expense of workers, communities and the planet, then we’re in a heap of trouble and unlikely to get out, because 99% of US businesses today are conventional C Corps, and most are likely to remain so.

You can read the rest here.

RSF Social Finance: Making money, making change

Happy customers of Revolution Foods

Happy customers of Revolution Foods

If you have a few extra dollars in savings, and you’d like to earn more than 0.00001% interest or whatever it is your bank or money market fund is paying, and you’d like to support socially-conscious businesses, you’ll want to take a look at RSF Social Finance.

RSF Social Finance is a financial services organization of modest means (about $145 million in assets under management) that is bursting with big ideas and bold rhetoric. It calls itself “a leader in building the next economy.” It seeks to generate “social and spiritual renewal through investing, lending and giving,” Its mission is to “transform the way the world works with money.”

Whew. What’s going on here?

To find out, I visited RSF Social Finance’s offices in the Presidio complex in San Francisco last week to talk with Don Shaffer, the organization’s president and CEO.

At the simplest level, RSF looks and acts very much like a bank: Its flagship product, the Social Investment Fund, takes deposits and makes loans to so-called social enterprises, a term that’s widely (and often carelessly) thrown around to describe businesses or nonprofits whose intention is to improve society and the environment.

Deciding what qualifies as a social enterprise is subjective, at best. That said, the RSF Social Investment Fund supports companies and nonprofits that, by all appearances, do great work. Among them: [click to continue...]

Deep green investing: a closer look

A divestment rally at Harvard

A divestment rally at Harvard

As you’ve no doubt heard, Bill McKibben and his allies at 350.org have launched a  a national campaign to persuade colleges, universities, churches, foundations and, yes, people like you and me, to stop investing in the fossil fuel industry. The campaign raises interesting questions as, I’m sure, McKibben hoped it would. Among them:

Does divestment make sense as a strategy to curb climate change?

If those of us who are concerned about climate change want to align out investments with our beliefs, what options are available?

In a column called Deep Green Investing published last week by Ensia, a lively new online magazine about environmental solutions, I argued that, by itself, divestment will probably not accomplish much. Having said that, the campaign could prove useful as one of a number of tactics being deployed by 350.org, the Sierra Club and others that are aimed at bringing about political change–namely, taxes or caps on global warming pollutants, EPA rules to curb coal-burning, etc.

In The Nation, Mark Hertsgaard argues that these grass-roots climate efforts have already produced results–350.org galvanized opposition to the Keystone Pipeline, which may have persuaded President Obama to delay a decision after the election, and the Sierra Club’s Beyond Coal campaign has, along with cheap natural gas, helped drive the decline of coal in the US. Hertsgaard writes:

As important as the victories themselves was how they were won. Both the Sierra Club and 350.org eschewed the inside-the-Beltway focus and top-down political strategy of big mainstream environmental groups, as exemplified by the cap-and-trade campaign. Instead, they emphasized grassroots organizing at the local level on behalf of far-reaching demands that ordinary people could grasp and support. Their immediate goal was to block a specific pipeline or power plant, but their strategic goal was to build a popular movement and accrue political power.

This is the political context in which the divestment movement makes sense. It won’t shake up the oil industry–the Ensia story explains why–but it’s a useful organizing tool.

But what might the campaign mean for investors? Today, I’m taking a closer look at a couple of “deep green” broadly-diversified mutual funds that have decided, unlike most other funds that market themselves as green or socially responsible,” to cleanse their portfolios of companies that extract fossil fuels. [click to continue...]

In Israel, clean tech is not the new new thing

David Ben-Gurion, a clean tech pioneer

David Ben-Gurion, clean tech pioneer

Sounding more like a clean tech venture capitalist than a head of state, David Ben Gurion, the first prime minister of Israel, once said that Israel requires “the study of desalination, massive utilization of solar energy, preventing waste of useful rainwater and maximization of power from wind turbines.”

Ben Gurion, who was born in 1886, said this in 1955. This was a man ahead of his time.

Since then, an Israeli company called Netafim pioneered the idea of drip irrigation in agriculture to save water, another called Luz built the first solar thermal power plants, still another called IDE Technologies became a global leader in desalination and Chromagen developed solar thermal water heaters that can be found on most rooftops in Israel, and elsewhere.

Today, Israel, which has been dubbed Startup Nation, remains a seedbed of clean tech innovation–last year it ranked second in the world (behind Denmark) in a report called Coming Clean: The Cleantech Global Innovation Index 2012 [PDF, download] by CleanTech Group and WWF.  I visited Israel last week, and had a chance to talk with a founder of Israel Cleantech Ventures, the chairman of a company called Miya Water and executives at electric-car company Better Place. I’ll report this week on my findings.

First, some context. As Ben-Gurion saw more than half a century ago, Israel is short on natural resources–water, land, oil–and thus needs to use what it has efficiently. This is the biggest, but not the only, explanation for the growth of Israeli clean tech. Most everyone serves in the military, exposing them to advanced technology. Ariella Grinberg, a young associate with Israel Cleantech Ventures, told me she did her service in the Israeli equivalent of the US’s super-secret NSA (National Security Agency), overseeing a multimillion dollar budget and sophisticated software, when she was just 19. The country also benefits from its world-class colleges and universities, among the Israel Institute of Technology, aka the Technion, the nation’s oldest university. (Here’s a fun example of what their students can do.) A strong entrepreneurial spirit pervades the culture, which may also have its roots in universal military service. “People come out of the army, they’re tired of taking orders, they want to be their own boss,” one executive told me. Finally, targeted government support for basic research has helped underwrite the sector. [click to continue...]

Should “green” funds invest in fossil fuels?

Bill McKibben’s groundbreaking Rolling Stone story (Global Warming’s Terrifying New Math) and 350.org’s “Do the Math” divestment campaign raise important and difficult questions about fossil fuels. One that is starting to roil the world of socially-responsibly investing is this: How should mutual funds that strive to be “green” or “sustainable” or “socially responsible” deal with the fossil fuel companies in their portfolios? Should they divest, as McKibben argues?

That was the topic of a column I wrote last week for the Guardian Sustainable Business, which generated some noteworthy responses. It’s part of the British newspaper The Guardian, which has one of the most popular English language media websites in the world. Here’s how the column begins:

“We’re going after the fossil fuel industry,” Bill McKibben tells about 1,800 cheering fans in a Washington, DC, theatre. “They’re trying to wreck the future, so we’re going after some of their money.”

Al Gore notwithstanding, McKibben – an author, academic and founder of the grassroots climate group 350.org – is America’s leading environmental activist. His 21-city Do The Math tour begins a campaign to persuade colleges, churches, foundations and governments to divest their holdings in coal, oil and natural gas companies.

“It does not make sense,” McKibben tells the Washington audience, “to invest my retirement money in a company whose business plan means that there won’t be an earth to retire on.”

He’s right about that, but the divestment campaign raises a thorny question: where can investors who worry about climate change put their money?

Divest for our Future, 350.org’s divestment website, recommends “environmentally and socially responsible funds“. The trouble is, the biggest and best-known mutual funds that call themselves environmentally and socially responsible also invest in fossil fuel companies. They evidently haven’t heard McKibben’s message.

Is this green?

The column–you can read the rest here–goes on to report that the Parnassus Equity Income Fund  holds about 14% of its assets in oil, natural gas companies and electric utilities that burn fossil fuels, that the TIAA-CREF Social Choice Equity Fund owns shares in dozens of oil and gas firms including Hess, Marathon and Sunoco, and a pair of shale gas giants, Devon Energy and Range Resources, that the Calvert Equity Portfolio  has about 10% of its portfolio in fossil fuels, including  Suncor, which says on its website that it was “the first company to develop the oil sands, creating an industry that is now a key contributor to Canada’s prosperity,” and that the Domini Social Equity Fund has, among its top 10 holdings, Apache Corp, an oil and gas exploration and production company.

Are you surprised to learn that these funds invest in oil and gas companies, including those in the Canadian Tar Sands? Perhaps naively, I was. [click to continue...]

Chevron. Sustainable. Really?

It’s not every day that one of the world’s biggest corporations files an ethics complaint against a little-known government official–in fact, if it’s happened before, I missed it–but that’s exactly what Chevron did last week in the state of New York.

The company accused Thomas DiNapoli, the state comptroller, who oversees the state’s pension fund, of accepting about $60,000 in campaign contributions from lawyers and supporters of people who are suing Chevron in Ecuador. The campaign donations, it is alleged, influenced DiNapoli to use his power as the trustee of  the pension fund, which owns Chevron stock, to push Chevron to settle the long-running, bitterly-fought lawsuit.

Imagine. Politicians being influenced by campaign donations.

Chevron would know about that. Last month, the company donated $2.5 million to the Congressional Leadership Fund, a super PAC that supported House Republican candidates. The donation “appears to be the largest contribution from a publicly traded corporation to a political group” since the Supreme Court’s Citizen United ruling, The Washington Post reported. Chevron also spent nearly $15 million on Washington lobbying since the start of 2011, the Post said.

So…evidently, it’s fine for Chevron to lavish money on politicians but unethical for its opponents to do so.

As it happens, Chevron’s complaint against DiNapoli was not even the most surprising news about the company to surface last week. Even more unexpected was the announcement that Chevron was being added to the holdings of the NASDAQ OMX CRD Global Sustainability Index, a “benchmark for stocks of companies that are taking a leadership role in sustainability performance reporting.”

The NASDAQ CRD Index helps guide investors seeking companies that are more sustainable.  Just a few months ago, at the Rio + 20 confab, NASDAQ  and several other stock exchanges promised, along with the UN Global Compact, to “promote long-term, sustainable investment in their markets.”

But what does that mean when an index includes Chevron, America’s second-biggest oil company? [click to continue...]

What a long strange trip it’s been: How the Social Venture Network changed business in America

Ben Cohen, of Ben & Jerry’s renown, is asking me for money, and he’s not selling ice cream. I give him a dollar bill, he stamps it in red ink — NOT TO BE USED FOR BRIBING POLITICIANS — and returns it to me. It’s part of his new crusade to get corporate money out of politics.

“Corporations are not people, and money is not free speech,” Cohen declares.

The 61-year-old ice-cream mogul sold Ben & Jerry’s to Unilever in 2000.  (He’s on the left, without his trademark beard, next to his longtime pal Jerry Greenfield.) The T-shirt says: “Stamp Money Out of Politics.” These days,  as “Head Stamper” at StampStampede, Cohen is working for an amendment to the US Constitution to get money out of politics.

It sounds improbable but no more improbable than this: That a gathering of about 70 people, including Ben and his partner Jerry Greenfield, at the rustic Gold Lake Mountain Resort not far from Boulder, Colorado, Colorado back in 1987 could spawn a movement that has changed the way millions of Americans think about and do business. The Gold Lake get-together led to the creation of the Social Venture Network (SVN), a group of business people, investors and philanthropists, many of them shaped by the political and cultural movements of the 1960s, who believe that business can change the world for the better. About 700 SVN members, friends and family gathered last week in New York for a 25th anniversary dinner and celebration–a time to assess how far their movement to remake business has come, and how far it needs to go.

The dinner was a star-studded affair, at least for those of us who pay attention to businesses that aim to build a more just and sustainable economy. On hand along with Ben and Jerry were Eileen Fisher of the eponymous clothing company, Gary Hirshberg of Stonyfield Farm, Drew and Myra Goodman of Earthbound Organic, George Siemon of dairy co-op Organic Valley, Jeffrey Hollender, formerly of Seventh Generation, Chip Conley, founder of Joie de Vivre Hotels, Roger Brown and Linda Mason of Bright Horizons, Amy Domini of Domini Social Investments, all of whom were named to the SVN “Hall of Fame.” Spotted in the crowd of 700 or so were Gifford Pinchot III, president of of Bainbridge Graduate Institute, my friends Seth Goldman of Honest Tea and author Mark Albion (More Than Money: Questions Every MBA Needs to Answer), Danny Kennedy of Sungevity–the closest thing to a power elite of the sustainable business movement.

None of them, to be sure, run FORTUNE 500 companies. But the movement birthed by SVN powered the field of corporate social responsibility, opened up new possibilities for entrepreneurs, raised expectations that big companies now need to meet and helped shape the way companies ranging from Google (“Don’t be Evil”) to Walmart do what they do. [click to continue...]