Social investing (finally) grows up

Calvert_Web_Logo_72dpiDo you agree or disagree that…

…nuclear power may help solve the climate crisis.

…we need weapons to prevent humanitarian disasters like the Darfur genocide.

…Wal-Mart’s sustainability efforts are making the world better.

…A cold beer at a summer ballgame is a wonderful thing.

Reasonable people will differ about those assertions (except, perhaps, for the one about beer, which is inarguable). But until recently, most  socially responsible mutual funds—funds designed to appeal to people who want their portfolio to reflect their mostly liberal values—screened out companies that provided nuclear energy, manufactured weapons or brewed beer. As for Wal-Mart, forget about it.

That’s changing, and it’s about time. Calvert Investments, a leader in social responsibility investing (SRI), has introduced new funds that—are you sitting down?—own shares in oil and mining companies, in a utility that sells nuclear power and in Wal-Mart. Calvert also has modernized its screen against weapons and some of its funds are now permitted to invest in so-called sin stocks that profit from alcohol and gambling.

I’ve argued before that SRI’s traditional negative screens don’t make sense. They reflect the SRI industry’s roots in 1960s activism (not that there’s anything wrong with that) and liberal religion (nothing wrong with that, either), but they don’t reflect the complexities of today’s corporate America, as well as the mainstreaming of the corporate social responsibility movement. So when I heard about the changes at Calvert, which is based near my home in Bethesda, Md., I arranged to sit down with Bennett Freeman, Calvert’s senior vice president for sustainability research and policy, to learn more.

Social investing funds like Calvert’s, he noted, date back to the 1920s and connected during the Vietnam War era with investors who did not want their money going to companies that supported the war. “We very much drank from the stream that emerged in the 1970s that melded a religious and moral point of view with a political one that lent itself easily to declaring what we were against,” Bennett told me. “It was not only alcohol and tobacco but weapons and nuclear power.” These funds were mostly defined by what they were against, with war as the dominant issue.

Since then, of course, we’ve had the 2001 terrorist attacks as well as  humanitarian crises in the former Yugoslavia in the 1990s and Darfur in the 2000s. So Calvert has revised its weapons screen to exclude companies that make purely offensive weapons as well as weapons such as land mines and cluster bombs that violate international law. But other military hardware is no longer barred. “We don’t like any weapons,” Bennett said, “but many of us associated with Calvert unfortunately have concluded that there are legitimate uses of military force.”

More significantly, Calvert now offer three categories of values-based funds—Calvert Signature funds, which are SRI funds that retain the old-fashioned screens; Calvert Solutions funds, which invest in companies that help solve water and energy problems (including a utility, FPL, that operates nukes), and Calvert SAGE funds, which invest in a broad array of companies and push them to improve their practices.

SAGE stands for Sustainability Achieved through Greater Engagement. The idea here is that Calvert will buy stock in imperfect companies (a category that includes every company I know) and then push them to do better. Investors get a “rock-solid commitment from Calvert to do intensive, indeed, aggressive engagement and advocacy with those companies,” Bennett said.

What companies? The first SAGE fund, called the Calvert Large Cap Value, owns shares in  Wal-Mart, BP, Conoco Phillips and Newmont Mining, among others. Those firms “may not meet all of our investment criteria but are open to positive, progressive change,” Freeman said.

With each company, Calvert has a specific “ask.” Some examples:

Wal-Mart is being asked to adopt international labor standards, including the right to bargain collectively, as well as to be more open about its global ethical standards for suppliers.

GE is being asked to provide regular updates about PCB cleanup in the Hudson and Housatonic Rivers, as well as to adopt a risk framework around nanotechnology.

BP is being asked to keep its commitment to stronger safety practices, assess the risk of its investment in the Canadian oil sands and invest more in renewable energy.

Kraft Foods is being asked to disclose its animal welfare policy and address risks and problems in its palm oil supply chain.

Calvert meets with company executives to push its agenda, coordinates with other activist shareholders and files shareholder resolutions when that seems to make sense. Freeman says it will report back to investors on progress. (You can read more here about the advocacy process.) Over the years, I’ve been told by numerous companies–Coca-Cola, Dell, and Wal-Mart among them–shareholder advocacy has an impact by bringing real and reputational risks to the attention of senior management.

All of this, it seems to me, is welcome news. It reflects a shift away from a style of investing that was mostly about making people feel good — because their money wasn’t being used for weapons or oil wells or to build big-box stores —  to one that is designed to make a difference. Below is an excerpt from my conversation with Bennett.


  1. says

    Sound Great!

    Working with what we have and changing things from the inside seems like a wonderfully mature approach to take to making a difference.

    I really enjoy your blog Marc. Thanks for your contributions.


  2. says

    Calvert’s maturity is welcomed and let us all hope that it can attract more funds to boost its clout with those it invests in.

    Now that the Press has been emasculated by the advertising drought, we depend on the SRI community to pressure business to maintain standards and make sustainable progress.

    While corporate executives might bridle publicly at the attentions of the SRI community, most admit in private that they need influential outsiders to keep up the pressure for change.

    Peter T. Knight
    Context America

  3. says

    I am (not surprisingly) pleased that Calvert has made the point that if you choose to enjoy a drink at the ball game, it can indeed be a responsible one.

    Calvert’s decision reinforces my point of view that some of the most important corporate responsibility work happens in so-called “vice” industries with the biggest social or environmental footprints. Engagement is essential to achieve change and as others follow Calvert’s lead, more investors will have both a carrot and stick with companies like mine.

    Engagement can come in many forms. For example, Brown-Forman opened its doors a bit more last week by launching Our Thinking About Drinking: The Issues Forum. I believe it is the first time that a beverage alcohol company has been so transparent about where it stands on material issues and so open in soliciting stakeholder feedback.

    Feel free to offer YOUR thinking about drinking at

    Rob Frederick
    Director of Corporate Responsibility

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