Portfolio 21 is a unique investment management firm based in Portland, Oregon. I recently wrote a book chapter reviewing their business practices for the upcoming book "Investing in a Changing World", to be published by Wiley in late 2011. It is such a fascinating approach to investing that wanted to share some excerpts from my interview with Portfolio 21 Director and Co-Founder, Carsten Henningsen. What sets Portfolio 21 apart from many investment managers that I’ve come across is that they apply the principles of The Natural Step and The Global Footprint Network to their investment process. As a result, Portfolio 21 does not invest in any mining, oil or gas stocks. Not one. And it still performed relatively well compared to its benchmarks.
I find that often when we talk about responsible investing, people get stuck on the issue of divestment. They think that the ONLY way you can take a stand on an issue and be a responsible or ethical investor is by dumping your stock in the company in question. This is problematic because divestment is positioned as a very black and white issue, when in fact there are many shades of gray. There are many strategies available to responsible investors - such as ESG Integration, positive screening, and shareholder engagement (see my previous blog The ABCs of ESG for more information on these strategies).
Here's an excerpt from my speech:
I want to dive a little bit deeper into the issue of negative screening and divestment. Divestment, as you know, is the practice of selling your stock in a company as an act of protest against the company’s business practices. Divestment is often used as a tool to respond to critical incidents or controversial business practices.
Last month, I participated in the 2011 Proxy Preview webinar hosted by As You Sow and the Sustainable Investments Institute (SI2). There are some interesting topics on the agenda this year, so I thought I'd give you a preview of the proxy voting trends for 2011.
For the beginners, first thing is first, what exactly is proxy voting? Proxy voting is an important tool for investors to exercise the rights and responsibilities that come with owning shares in a company. Every year, shareholders of publicly traded companies get to vote on key issues such as the election of directors, appointment of auditors and other corporate governance matters. Shareholders also vote on shareholder proposals, which are simply formal requests submitted by fellow shareholders asking companies to take an action, or adopt a policy. Voting on environmental, social and governance (ESG) shareholder proposals sends an important signal to companies about what issues are important to investors, and can often help focus a company's attention on critical improvements it needs to make.
It's an interesting conundrum - do you buy a clean tech stock, knowing the company is working hard to solve some of the world's most pressing environmental problems, even when the clean tech industry itself has significant environmental impacts?
I asked a similar question a number of years ago at a socially responsible investing industry conference I was attending: To what extent are social investors looking past the social and environmental impact of the clean tech industry (solar was the topic of the day), simply because the end product has environmental benefits? The response to my question: silence.
Goldcorp Inc. has been added to the Dow Jones Sustainability Index (DJSI). It's a company with a checkered past. And while Goldcorp has taken steps to improve its human rights practices as of late, its listing on the DJSI led me to wonder, are sustainability indexes good or bad when choosing to invest in sustainable and socially responsible companies?
When companies like Goldcorp or BP Plc. are added to the DJSI, or any other sustainability or corporate social responsibility (CSR) index for that matter, it always seems to raise the ire of critics. Does listing on the DJSI simply give companies an unwarranted stamp of approval?
The Wall Street Journal has reignited a debate about the value of corporate social responsibility (CSR). Does it add value to a business, or is it an unnecessary drain of resources away from shareholders?
Just as in any industry, the responsible investment (RI) industry is full of jargon, abbreviations and acronyms. This post will familiarize you with common terms we use: Responsible Investing (RI) or Socially Responsible Investing (SRI); Environmental, Social and Governance (ESG); Shareholder Engagement; ESG Integration; Positive & Negative Screening; Institutional Investors; and Retail Investors.