Nik Blosser, Celilo Group Media

A long-time labor leader in the West once said to me that organized labor is fraught with problems, but history has consistently offered no alternative. In many cases, that seems just about right.

The latest example? So-called “socially responsible investing.” The problem? How do we reconcile fiduciary responsibility with sustainability goals?

We have stated public policy goals related to human rights and environmental protection, and as a country and as individuals and companies, we are investing billions to achieve these goals. However, the biggest barriers to achieving such goals are often placed by large corporations (some of which are wholly owned by governments) whose profits depend on polluting the environment and violating human rights. But here’s the clincher: We—as individuals, through retirement funds and through other institutions such as university endowments—own very large parts of these large corporations. According toYahoo! Finance, 52 percent of Exxon Mobil Corp. (NYSE: XOM) is owned by institutions and mutual funds, which in turn are largely owned by or benefit us.

Who chooses to invest in Exxon stock? Money managers. Why? Fiduciary responsibility. Socially responsible investing (SRI) was supposed to fix all of this, but so far it hasn’t. SRI as it has primarily been practiced is a candidate for Greatest Greenwash of the Century award. In 2004 Paul Hawken’s Natural Capital Institute released a report (available at ResponsibleInvesting.org) titled “Socially Responsible Investing: How the SRI industry has failed to respond to people who want to invest with conscience and what can be done to change it.”

A few funds, including Portland-based Portfolio 21, are exceptions. But many SRI funds simply use negative screens in three or four industries: military, gambling, alcohol and tobacco. This is far too simplistic to accomplish much of anything. (And despite the simplicity, one SRI fund, PAX World, recently settled with the Securities and Exchange Commission for $500,000 for violating their own investing restrictions for the past five years.)

Other tactics have been taken to attempt to reconcile sustainability goals with fiduciary responsibility. A few enlightened CEOs, most notably Ray Anderson at Interface [see “Triple threat,” page 21], have endeavored to justify their environmental and societal efforts under the name of long-term fiduciary responsibility. A few academic studies, including those by University of Oregon business school professor Mike Russo, have shown that companies with superior environmental performance have better long-term financial performance.
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