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 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.

Turning JP Morgan green from the inside out

Matthew Arnold
Matthew Arnold

Can Wall Street become a friend of the earth? For nearly a decade now, most of the big investment and commercial banks have had chief sustainability officers, but it’s never been clear to me what they can and cannot do.

To find out, I spoke recently with Matt Arnold, the head of environmental affairs for JP Morgan Chase, who I’ve known for years. Matt, a lifelong environmentalist, was refreshingly honest.

In my latest column for the Guardian Sustainable Business website, I report on what I learned. Here’s how the story begins:

Deep inside the belly of the beast known as JPMorgan Chase toils a lifelong environmentalist and former Eagle Scout named Matthew Arnold who is trying to help turn the bank, if not green, well, a bit greener. It’s a daunting job.

Arnold, 51, joined the company in autumn 2011 as head of the office of environmental affairs because, he says, of the sheer scale of the opportunity; last year, the bank booked $99.9bn (£64bn) in revenue and $21.3bn (£14bn) in profits, providing credit and raising capital of more than $1.8tn, for everything from home mortgages to credit cards to corporate bonds and IPOs. The bank manages another $1.4bn in assets (as of September 2012) for clients. If Arnold can help steer even a slice of that towards more sustainable ventures – for example, towards wind and solar energy and away from coal – he will be doing his part to make Wall Street a friend of the earth. But can he?

“The position I’m in now has the greatest potential for impact of anything I’ve done,” Arnold says. “Yet there’s no manual for this. There’s not a clear roadmap.”

You can read the rest of the column here.

On Wednesday, by coincidence, at the GreenBiz Forum in New York, I’ll be interviewing Matt and Erika Karp, who is head of global sector research at UBS, to talk about the role of Wall Street in promoting sustainability. Matt and Erika will also be joining us this spring at Fortune Brainstorm Green.



Kimbal Musk: Cooking for a change

Once an entrepreneur, always an entrepreneur.

In 1991, Kimbal Musk left his native South Africa for Toronto and then Silicon Valley where, with his brother Elon, he started Zip2, the first mapping company on the Internet. “I remember in October, 1995, seeing the first door to door directions on the Internet,” he says. “It was a thrilling time.” They made a ton of money, invested it in Elon’s startup that became PayPal, and made even more money, after which Kimbal moved to New York to enroll in the French Culinary Institute and pursue a long-held dream of becoming a chef.  “I had the good fortune to have the financial resources to do whatever I wanted, and what I wanted to do was cook,” he told me the other day.

In 2004, Kimbal moved to Boulder where he opened an eco-friendly, farm-to-table restaurant called The Kitchen with a classically-trained chef named Hugo Matheson and Jen Lewin, who is now his wife. They did very well–the Kitchen won rave reviews, and it has spun off two other restaurants in Boulder and one in Denver. But along the way Kimbal realized he wanted to do more than cook.

Like his brother Elon, who is backing an electric-car company (Tesla), a solar firm (Solar City) and commercial space-travel (Space X), Kimbal is no slouch. He wasn’t content with running a handful of eateries, even ones that supported local farmers, practiced composting and bought wind power. He’s decided to tackle America’s childhood obesity problem, and not in a small way. He wants to build “learning gardens” for thousands of schools across America. [click to continue…]

Wall Street’s costly reputation problem

Not since the Great Depression have Americans harbored so much ill-will against what were once called “the monied interests.”

This should worry Wall Street and the big banks.

The latest evidence: Bank of America’s decision this week to drop its plans to charge customers $5 a month for making purchases with their debit cards, in the wake of a customer revolt.

Jay Leno

On, a 22-year-old Washington, D.C., activist named Molly Katchpole started a petition against the BofA fee that gathered 306,000 signatures in less than a month. Politicians chimed in (for better or worse) and even Jay Leno got into the act, saying on Halloween night:

One kid wanted to charge me five bucks to give him candy…I said, “Who are you supposed to be?” He said, “Bank of America!”

BofA reversed itself after rivals Wells Fargo, J.P. Morgan Chase, Sun Trust and Regions Financial said they’d drop customer tests of new debit fees. Analysts say this will cost the banking industry as much as $8 billion in foregone revenue.

In other words, the banks are giving up billions of dollars because people don’t trust them to do the right thing.

[click to continue…]

In Kenya, saving lives with carbon credits

Mikkel Vestgaard Frandsen

The Skype connection to Kenya crackles. Mikkel Vestergaard Frandsen, the 38-year-old CEO of a Swiss company that bears his family name, tried to make himself heard. His excitement is palpable.

“Watching this unfold is crazy,” he tells me. “There are so many things we’re trying out here, things we’ve never done before, things that no one has ever done before.”

Vestargaard Frandsen is a Swiss for-profit company that’s in business to save lives in the global south. Its products include LifeStraw, a water filter and PermaNet, a long-lasting bednet to protect people from malaria.

Ordinarily, it sells these products to aid organizations and governments. Then they’re given to people in need. This time, Vestergaard is trying something different: It’s directly giving away about 1 million LifeStraws, at a cost of nearly $30 million, mobilizing thousands of local people to do so, tracking results carefully and expecting to be paid back in the form of carbon credits. Mikkel’s right–this has never been done before.

How this came to pass is interesting. Founded in 1957, family-owned Vestergaard Frandsen originally produced material for work clothes. About 20 years ago, it started a line of relief products like blankets and tents. By 1997, when Mikkel became CEO, the company had phased out conventional textiles to concentrate on relief aid products.
[click to continue…]

PNC Bank: Helping to destroy mountains

2825430279_a3aa7cd059_oPNC, a big regional bank (annual revenues: $16 billion) based in Pittsburgh, has become the bank that environmental activists love to hate because of its support for mountaintop removal mining.

The bank was identified as the worst of the worst in Grading the Banks: A Mountaintop Removal Scorecard, a new ranking compiled by the Rainforest Action Network and the Sierra Club.

According to the report, the bank has made loans to six companies engaged in mountaintop removal mining: Massey Energy, Patriot Coal, Alpha Natural Resources, International Coal Group, Arch Coal and Consol Energy.

PNC, by the way, was a recipient of TARP funds (since paid back) so these loans were, at least in a small way, your tax dollars at work.

I emailed PNC to ask for their comment and got a prompt reply from Fred Solomon, vice president, corporate communications:

PNC’s practice is not to comment on analyst or other research reports, and in general, our credit policies are proprietary information.

Interesting. We’ll see how long that no-comment approach lasts, if any of the enviro groups decide to bring pressure directly on PNC, a major consumer bank in the mid-Atlantic region. Transparency, evidently, is not for now part of the PNC culture.

I’m returning to the topic of banks and coal after just a couple of weeks (See J.P. Morgan Chase’s Coal Problem) because of a couple of significant new developments. The first is the RAN/Sierra club report card–a tactic that, in the argot of the corporate campaigns, is known as “rank ’em and spank ’em”. The second is a new policy from by JP Morgan Chase, released just before the bank’s annual meeting, which was held today. [click to continue…]

JP Morgan Chase’s coal problem

Activists target Chase

Do we really want to keep blasting the tops off mountains, destroying forests and dumping the rubble into waterways, in order to extract and burn coal that is messing up the climate?

For now, the answer to that question is yes, despite vigorous efforts by environmentalists and activists in Appalachia to stop mountaintop removal mining. Some are behind a bill in Congress sponsored by Lamar Alexander, a Republican, to end the practice. Others are calling on big banks–in particular JP Morgan Chase–to stop financing mountaintop mining.

The pressure on JP Morgan Chase is coming from activist groups including the Sierra Club, the Rainforest Action Network and an Appalachian group called Climate Ground Zero which calls itself an “ongoing campaign of nonviolent civil disobedience in southern West Virginia to address mountaintop removal coal mining.” All are stepping up their efforts in advance of JP Morgan Chase’s annual shareholder meeting on May 18. They plan to release a list of the worst funders of MTR mining before then, and chances are Chase will be at or near the top.

What’s wrong with mountaintop removal mining? Lots. Here’s an overview from a [click to continue…]

Jamie Dimon, telling it like it is

Here are a few words from Jamie Dimon, chairman and CEO of J.P. Morgan Chase, about U.S. energy policy:

Shame on us. This is our third energy crisis. And we still don’t have the fortitude as a nation to do anything about it. And we’re going to earn a fourth.

We need a real energy policy and it’s going to have to include taxing people on energy so that energy costs stay up and people buy smaller cars and smaller homes.

This is not just a financial issue. This is a geopolitical issue. We are arming the people who want to kill us. That’s what we’re doing.

What the hell is wrong with us?

If you’re a reporter, you’ve got to love Jamie Dimon. He’s not afraid to say what he thinks. In a world where most big-company CEOs choose their every utterance with care, and where many are carefully managed by their media relations people, saying what you really think turns out to be not only endearing, but a surprisingly effective way to communicate. Imagine that.

You hear a lot about the importance of transparency these days in the corporate world, but you don’t hear a lot about candor. Maybe that’s because candor is in such short supply in the executive suites. I can think of only a few CEOS I’ve interviewed over the years who I would describe as open and candid—Herb Kelleher of Southwest Airlines comes to mind, as does Ted Turner. T.J. Rodgers of SunPower is a great interview, and Jack Welch could be blunt. But it’s a short list. Jamie is a more restrained that Herb or Ted or T.J., but not by much.

Jamie delivered the remarks above recently at Yale CEO Summit, which gave him a leadership award. (You can watch the entire video here.) Jamie also did a couple of great interviews with Charlie Rose last summer, available here. I’ve never written about Jamie, but I had a chance to see him in action a few years ago at a company retreat in Deer Valley, Utah. (His vice chairman, Bill Daley, the former commerce secretary, invited me there to talk about corporate responsibility, shortly after the publication of my book, Faith and Fortune.) At the time, Jamie expressed outrage about the Enron and Worldcom scandals and how much damage they have done to corporate America.

This has been quite a year for Dimon. Yale give him a leadership award even though J.P. Morgan Chase’s stock is down by close to 30%. That tells you what kind of a year it’s been on Wall Street. J.P. Morgan Chase appears to be one of the very few companies that have emerged stronger from all the turmoil, by acquiring Bear Stearns and Washington Mutual as they were about to collapse.

At the Yale event, Dimon talks a fair bit about the financial crisis, taking some blame for mistakes at J.P. Morgan Chase. What I found most interesting, though, were his observations about corporate culture, both at Bank One (where he used to be CEO) and J.P. Morgan Chase. (They come about 35 minutes into the video.) He talks about trying to take the politics out of big companies, and about finding people who have strong opinions and personalities but understand that, in the end, they are working for a company and its clients, and that they need to see themselves as part of a team. Interestingly, when my FORTUNE colleague Shawn Tully did a cover story about Dimon and his “swat team” last summer, Dimon insisted on being photographed with the bank’s other senior execs.

“Business is more Shakespearean than MBA,” Dimon says. “Look at these companies, with these neurotic bursts of energy and firings and mass changes and it doesn’t work. You can compare any industry. In the best companies, things get better. Wal-Mart. GE. Others are blowing up, people are being fired, boards are bringing in new mgmt teams, which is a Hail Mary pass, unless you really know the person.”

Investment decisions matter, he went on, but in the end the job of a CEO is to find the right people and create a climate in which the right decisions get made. “The best thing I can do for JPM leave with place with high integrity, high powered people, who are always learning, always changing. That DNA will set the company forward for a hundred years.”

That’s another benefit of a candid CEO: The people around him are likely to speak their minds, too.