TRANSCRIPT (5,270 words, slightly edited
for clarity):
How did the socially responsible investment
(SRI) industry begin?
Some twenty years or so ago, a number of firms decided
to take a stab at developing some way in which to deliver an ethical
investment product to the public. There was, prior to that, a number
of religious institutions and some foundations who at least demanded
no alcohol, tobacco or firearms in any of their investments. And
that grew out of the relationships in our country from the prohibitionist
era [when alcohol was illegal] and the abolitionist era
[when people moved to end slavery], in thinking in various
different religious circles - mainly Quakers and Shakers and Mennonites,
and the folks of the inner light - who began these processes of
questions about their investments and what their money was doing.
In the late 1970's and early 1980's a number of brokers
in major firms made a decision that they would break away and try
to clear their business, do their stock business using some of the
major firms' back offices, but trying to develop products that would
be not only alcohol-, tobacco- and firearms-free, but products that
would have an ethical stance to them, that there would be an equal
opportunity clause which would take care of gender and race bias.
And nine or ten years later there was a pretty good cry from the
animal rights people that we shouldn't have animal testing in the
cosmetics industry and in some of the pharmaceutical industries.
So that's how the products became available to the public.
There wasn't necessarily in the beginning a public demand
for these kinds of products, other than in your traditional religious
or very highly ethical circles. However, that's changed. People
have come to the realisation that to invest well, you can also do
good.
It's been a slow and steady increase in business over
the last fifteen years, such at the very height of the excess of
the market a year ago April [i.e. in 2001], we were looking
at close to a trillion and a half to a trillion and three quarters
dollars of investments sitting in the entire socially responsible
world. [Note: according to the Social Investment Forum's "2001
Report on Socially Responsible Investing Trends in the United States",
the total assets screened for one or more social issues under management
in the USA alone rose from $1.49 trillion in 1991 to $2.03 trillion
in 2001, representing 12 per cent of the total $19.9 trillion in
investment assets under professional management in the USA.]
That's a pretty large chunk of money! In today's market that money
translates into about a trillion and a quarter dollars, so we've
had a sell-off, but not anywhere near the significant sell-off that
my country, the United States, and the rest of the world have experienced.
And I think largely because of the social screening that's gone
on in these firms over the last 15 or 20 years, the models of social
screening - and that means how we actually filter alcohol, tobacco
and firearms, equal rights and animal testing, and now we're beginning
to look at companies that are really operating on a sustainable
model. There are fairly complicated systems of reporting and gathering
information, and being sure that we're cross-checking continuously
with the four or five hundred companies that we look at, that winnow
down to about a hundred, a hundred and fifty companies that qualify
for all of the five screens. Your normal socially responsible investor
will have a certain profile, where they might not need all five
screens in their portfolio, but they'd be happy with two or three
screens. We won't recommend anything that doesn't at least cover
the original three screens.
So there's my firm, Progressive Asset Management, there's
the Calvert Social Investment Fund, there's Pax World, there's Working
Assets, and there are a number of small... there's the First Affirmative
Financial Network which has recently come in through the Progressive
network, and the Progressive network is also [part of] the Financial
West Group network out in California. We happen to clear through
Payne Webber. A number of other players in the social investment
market clear through other brokerage firms or other banks. Of course
Amy Domini's fund - the Domini Social Investment Fund - is an investment
firm that not only sells a product but also clears its own screens
of socially responsible business, so they both sell a socially responsible
service and do the investing. At this point in time, Progressive
Asset Management just does a screening and the brokers who are in
the Progressive network, who are all independently using Progressive's
products, are still you know, considered as Progressive's investment
analysts.
So now we have the recent problems in the market, and
obviously the horrific acts in New York on September 11th, and that
has eroded a lot of confidence in the markets, then of course followed
on by the Enron, WorldCom, Tyco and other scandals. Now those scandals
are unfortunately seen to be a little endemic in our system, because
of some of the creative accounting and creative products that have
been developed in financial circles. We don't buy those companies.
We did not by into the whole EBITDA [Earnings Before Interest,
Taxes and Depreciation Allowances]. We did not buy into that
kind of accounting as a socially responsible investment firm, neither
did Domini or any of the other managers who manage on a socially
responsible basis. So our business has tended to begin to pick up,
it began to pick up about six or seven months ago now [i.e.
early in 2002], with people actually calling us saying "can
you help me find an ethical investment? Is it possible, you know,
in this climate, that I can have enough confidence in somebody to
find me something that I believe in and that at I know at least
proper financial procedures have been adhered to?" So that's kind
of been a sort of silver lining for us in an otherwise pretty grim
and pretty tough environment.
So following on from that kind of success, Progressive
itself is looking at doing an internet socially responsible trading
vehicle, where the public can trade with confidence and know they
are trading on a socially responsible basis. I am working, as a
progressive broker, on trying to develop a green fiduciary. Now
what I mean by that is there are a number of firms that I have already
mentioned who are selling securities throughout the world on a socially
responsible basis. They are all relatively new at the game, and
they have been using Citicorp, Bank of America, Wells Fargo, Merrill
Lynch, Payne Webber - which is Union Bank of Switzerland now - they've
been using those kinds of firms as their fiduciary. So their money,
the money that the client is giving us is still, in a sense, feeding
back through that same trough, that same loop that's involved in
the rest of the financial network. The idea now is that if we've
got a trillion and a quarter dollars, we ought to be able to set
up our own fiduciary, clear the business ourselves, and thereby
become more proactive in - hopefully - municipal, green municipal,
green Euro, and green UK gilt paper, debt paper, and finance some
of the projects that we've been talking about here in Johannesburg.
That's a small nutshell of what I want to do.
What would you like to talk about now?
Well I'd like to talk a little bit about what where we
are, kind of in the world today, as some of us see it, in terms
of a World Summit on Sustainable Development. First of all I think
"sustainable development" is a loaded word, I think "development"
carries a lot of baggage with it, which is go go go go go, and let's
build build build, and let's, you know, dig up all the minerals
we can, and build all the cars we can, and build all the buildings,
and build all the roads, and continue this Western understanding,
this financial understanding and consumption model that's predicated,
the reason indeed for these kinds of conferences. I would have hoped
to have had them come up with a little better name than "development"
but so be it! We perhaps really should look at a model of re-habing
the built environment and the built infrastructure that we have
today, leaving the greensward of the Earth alone and preserving
that forever in a Trust - similar to what the United Kingdom and
Ireland and other sensible nations have done over the last fifty
years, and that's preserving their property in a greensward, and
putting a protective stricture on how it's used, and the governance
of how that land is used, and the minerals underneath it.
I think that the world should look at doing that, you
know, especially if we don't want to get into the Malthusian stories
of what great large nations might do when scared for their energy
supplies into the future. Those stories are stories that we all
know about and are paradigms that some of our secret agencies seem
to dwell on a little bit too much! So I would hope that at some
point, out of all of what we've talked about, that we would come
to an understanding of peace with this Earth that we live on, so
that we can leave it to the seventh generation - and by that I mean
if you can think forward far enough to seven times your own number
of generations - that would be a good way to begin planning how
we use water, how we use oil, how we use the minerals that are here,
because they're not infinite, they're finite. And we have only been
around for, as some people would like to say, you know, ten or fifteen
or twenty or twenty five thousand years, whatever it is. That's
just a drop in the bucket of time to this planet, and if that sun
that's over there across the side of this building does burn for
another billion years, that's a long time to go. And we need to
think in those kinds of terms and we need not to rush and think
that business and development is only going to happen if we continue
to get bigger and bigger and bigger. We need to re-think some of
those paradigms.
How significant is the pool of money
that's screened according to SRI principles in the USA, and is there
a significant untapped potential for this to grow?
Traditionally in the brokerage and investment banking
business, if you see a dollar from a customer there is probably
at least another dollar behind that dollar, maybe two, that you
don't see. We'll call that the mattress money, the kind of thing
that the client, no matter how hard you press him and profile, is
not going to tell you about. He's going to say well I've got some
insurance policies, some rainy day money and the rest of that. So
the potential for actually self-funding or kicking a sustainable
rehab of our municipal and national infrastructures around the world
exists today. At least, it exists enough to build some pretty good
- I'm loath to call them pilot projects, you know, I would say they
would be very good in situ demonstrations of how you could
run a city, or how you could run a small rural area, effectively,
efficiently and cost-wise. And the other problem that we run into,
or the methods we use to gauge costs, you'll hear that solar costs
so much per kilowatt-hour, against oil which is cheaper per kilowatt
hour - on a market price. Well to market-price oil, or to market
price any commodity is a fallacy of our generation. It will be a
fallacy and a hoax in the future, it will be something that you
will hear a lot of other people talking about as time goes on. You
cannot price finite resources as though they are infinite like growing
corn, or growing soy, or growing vegetables, or even - unfortunately
- growing cattle. They are not infinite! They are finite! So to
market price against say, well you know it's going to cost so many
kilowatts an hour for solar versus so many pennies a kilowatt for
oil, is really, it's really a hoax. And it's another way in which,
unfortunately, globalisation, NAFTA, those kinds of deals that are
set with commodity nations by some of the Western nations, tend
to pick a market basket of commodities and then they award a price
to them. It's usually a fairly decent price on whatever today's
average price would be. If, six months, nine months a year down
the road, the producing nation finds itself in an over-capacity
situation, it drives the price down, and then drives these developing
countries into debt. And that also is a process which needs to stop.
So we need to be able to take the pressure off of our
planet, the pressure off of our Earth, to supply us with energy,
fossil fuel, coal. We need to look to the sun, we need to look to
the wind, we need to look to this planet, to way this planet, to
the beautiful way in which the creator has constructed this planet
for us, and realise that these energy sources are real, they will
do the job, and we need to pursue building them. So hence I think
that a green fiduciary would be a great way in which to kick some
of this off.
What about the way the World Bank works
very closely with multinationals to create structural adjustment
policies, and then people do a currency raid on a country like South
Korea, causing massive bankruptcies which enables the multinationals
to come in and buy up their companies at bargain basement prices?
Yes, that's kind of part and parcel of the same way in
which we price the other commodities. If you go in and make these
structural arrangements with these countries, knowing full well
on the get-go that these countries have assets that you want, and
later on you can destabilise them and buy the assets on the cheap,
you know I think that's bad business!
Can regulatory frameworks put an end
to that kind of practice? Do you think this is the desirable way
of dealing with it?
I think education is the desirable answer! And knowing
what your - I mean I hate the word opponent but if I may use the
word - opponent across the table in negotiation from you, if you
know what he or she really wants, price to scarcity! And I've been
telling every African nation that I run into here "Price to scarcity.
Do not price to market, price to scarcity! If you want to do business
with us, and you want what we have, we'll be happy to sell it to
you but we want some kinds of guarantees as to price and quantity
that you're going to take. We also want to be able to know that
you're going to be able to give us technology transfers, you're
going to be able to help us to make that leap into these new technologies
that are coming along, and that you're not going to try and manipulate
a destabilisation."
I mean if somebody corners the market in something like
- well I don't want to get into the names of some famous actors
that are still running around Zug, Switzerland - but, you know,
it is possible to take some of these smaller nations who have very
good resources and to corner those resources and thereby drive their
prices down and thereby destable their currencies after you've agreed
currency lock-ins and currency rate adjustments.
So it's all part and parcel of the same kind of responsible
investing and a responsible way in which to deal with your neighbours,
because we're all connected on this planet and if we don't all deal
with each other with the same set of tools then we're going to end
up in the situations which happened on 9/11 in my country and we're
going to end up with the situations which have happened all around
the world with people who are disaffected and disinherited. We cannot
continue with this behaviour, and guise it as good business and
a way to make a profit and a way to solve the immediate cash problems
of our multinational corporations.
You hear this continually: what can we do to make corporations
be good citizens? A quick little historical note (I'm lousy, I apologise,
on names) but it was the Union Pacific Railroad - after the Civil
War, I believe in the late 1880's or 1890 - had gone across a large
rancher's land, they'd taken it by eminent domain, or attempted
to take the land by eminent domain, but I believe it was still some
territorial land, and the rancher sued. He sued Union Pacific, Vanderbilt,
Carnegie, and Mellon and the whole crowd. It got all the way up
to the Supreme Court, and the argument on the Union Pacific side
was that, after all, it was the operators of the railroad that were
responsible, that shareholders shouldn't be held responsible, and
the Court agreed with them. And thereby, forever after, shareholder
responsibility or liability - as a plank of registration for common
shares of stock - was removed. Thereby saying that shareholders
have no responsibility but obviously it was the directors of a corporation
who have the responsibility. And then in the 1960's - again, historically
I apologise - I believe it was the Douglas court made a corporation
a legal entity; they couldn't give it breath to live but gave it
all the rights of a citizen of the United States. It's a little
different in the UK, you still have a Charter House in the UK which
every UK corporation, I believe, is still serving, basically at
the pleasure of Her Majesty. That's how corporations were originally
set up. The Sovereign was not able to do the work, the Sovereign
was doing other things, so he set up trading companies and corporations
and business cartels that were given a licence by the Sovereign
- the Sovereign still held those people responsible for it. So that
was removed from the plank of registration in American corporations.
I put it to you that if we returned that plank of shareholder
liability back into the corporate domain, you certainly would have
a very strong lever for corporate governance, because you definitely
would want to know, early and often, what your money was doing,
what they were doing with it, and what was going on. So you would
have at least some element, then, of corporate governance.
Again these treaties such as NAFTA and other treaties
that are being talked about in the host country here in Africa where
we are, tend to denigrate the eh values, they I mean - it's not
really the values the word that I'm looking for - they tend to abrogate,
perhaps, common law in the country where they are because of the
treaty law that's going on around these particular companies that
are going to be multinationals operating in your country. So you
don't have the same protection, the same rule-of-law protection
that you would once you've given up some of that and the corporation
has the right to demand to strip mine or ... ashore or dig for oil
in a wildlife preserve, or drill for oil in a wildlife preserve,
or do that kind of behaviour. Again if we were able to put that
plank of responsibility back into the registration of new issues
of stock - and perhaps correct the deficiencies, or at least hold
that as a club over the heads of boards so that they would perform
in a better manner - I think that would go to a great extent to
dissuade some of the fears that the investing public has today,
and rightfully so.
Is the investing public powerful enough
to get that kind of legislation passed?
In the times that we're in right now, perhaps! Perhaps
if enough clamour is made with enough elected officials, the possibility
of that happening could begin to gain some momentum. I, frankly
as much as I like, inherently, the system of government that I've
grown up under, I've grown up to realise that it has its deficiencies
and it has its limitations. There's an old adage in the United States:
if you can't get a job, get elected
Do you think the proposed Framework
Convention on Corporate Accountability, which has been made by the
NGOs here in Johannesburg, is a good idea?
Yes, I think it is a good idea. The proposed convention
on corporate responsibility by the NGOs here at the Johannesburg
summit is a step in the right direction! Again what they need to
look at is this registration piece, because until and if the laws
are changed in some of these countries to bring that responsibility
back to the shareholder, it's tough to bring these corporations
to heel. The bankruptcy laws in the United States are such, and
the organisational laws are such, and the cronyism is such that
deals can be cut in the back rooms and hands can be spanked and
the entities can continue to roll on doing business almost as usual.
Let's talk about security and military
corporations. How important are weapons manufacturers to the US
economy? Are US military planners and strategists beginning to redefine
the concept of security, to include environmental and social problems
overseas that lead to conflict and terrorism?
That's a large question! Again, what we're talking about
is how can one view the military industrial state in the United
States in light of the fears for terrorism and in the light of the
new argument at the Pentagon that seems to be going into a pre-emptive
stance. The language is "in certain occasions where it may warrant
a pre-emptive stance, we cannot stand by and wait for somebody to
bomb us" for instance "to use a suitcase," and all the fear and
scare tactics that are going on in this present administration over
"what ifs." The question is, does that feed into the profits, directly,
of the military industrial complex? And of course it does! You can
make a very good argument for the fact that if you continue to pound
the table on terror, and you continue to terrorise the people about
terror, and talk to them about it - and the media is clamouring
over it - yeah, you're going to be able to push through Congress
huge appropriations for the military, for Lord only knows what kind
of gear that we may never use! And of course the impact of that
on the environment is ten-fold! First of all they're not investing
that much money on the environment, they're not doing that much
about it, and now they're going to spend more of the tax-payers'
dollars - world-wide - on building engines of destruction, hopefully
that will never get used! You know, and if you want to know why
we've had a surplus, the Cold War ended, folks! You know, we didn't
have to build any more stuff that we will never going to use, so
that money could go somewhere else, you know. And if we start doing
that cycle of building stuff that we'll probably never use - and
if we do use it it's a pretty scary ending - you're just building
in utilities of death that we don't need, and that hinder, hinder
investments for the environment and really do leave it to the concept
that I'm talking about, and that others are talking about, about
a green bank, about a green fiduciary that can do this kind of work
that both our governments and our industry, our present industry,
don't seem to be inclined to doing.
Again it goes back to those elected officials, you know,
they're people, I mean they put their pants on one leg at a time
or zip their skirts up, you know, just like everybody else does,
and they have fears and they get scared and they can be terrorised.
And to a large extent America is in that mode at this point in time.
It is a breath of fresh air, for a little bit of time to be out
of that daily "let's roll to war" concept that goes on without even
a scintilla of thought as to the cost. And not just the cost of
building the materials, but the energy that's used, that we can't
find again to use to do something else. At some point we're going
to get to the law of diminishing returns, where we may not be able
to get to the future using the resources that we have today, that
we have today, we may not be able to get there, we may have expended
to much stuff.
So instead of chasing Osama Bin Laden, and bombing, pounding
sand in the desert, and now chasing Saddam Hussein, we should use
other methods, we should use political methods, methods of persuasion.
And frankly, we should go talk to these people, and find out exactly
what they want! And perhaps it won't be as onerous as we might think.
Will I get back into the country [the USA]?
Michael, I'll be living in Ireland!
Hazel Henderson has been talking to
me about the fact that most developing countries hold their foreign
reserves in dollars or in other currencies like that. She's proposing
to them that they, for starters, shift to the Euro, and that would
create some changes in terms of American power.
Yes it would!
Then there are other proposals like
those made by Richard Douthwaite and FEASTA- the Foundation for
the Economics of Sustainability (www.feasta.org)
in Ireland. He says that holding the foreign currency reserves in
dollars is in effect a massive loan being given to the USA and to
the other countries in whose currencies the foreign reserves are
held in.
Absolutely!
Richard Douthwaite also points out
that in order to overcome the problem of the addiction to growth
that's built-in to the current system - because the money supply
is created through debt issued by the banks - there's a need to
revert to the system where money is actually created by governments.
FEASTA has interesting proposals in this regard for a two- or three-tier
system with a global currency created by a new UN agency that would
be used for foreign currency reserves, and then regional and national
currencies issued by inter-governmental networks and national governments.
I think it's very important to bring the developed and
developing nations up to some kind of a peer floor, where you're
not having to take your currency - which is floated against the
US dollar, to buy oil or other baskets of commodities throughout
the world. I mean that puts you in second place in any kind of a
race for development or a race for market share that you'd be involved
in. And no matter what the resources are in your country, that you're
continually forced to buy energy in terms of the American dollar,
and you're South Africa, you've got to convert, you've got to have
that conversion go on, and you're going to lose in that conversion.
And yes, it is a boon to the country whose currency is used as the
benchmark for world trade, as it was for the UK. Now the same thing
doesn't have to happen that has happened in the past. I think that
there are a number of conversations today about different kinds
of currencies, not only country currencies but a world currency,
and this, frankly the UN currency that is being discussed might
be a very interesting step in that direction!
And what is the potential for the world's
religious communities to become a really active force for sustainability
in all its manifold expressions?
That's the really good news, I think, about what I've
seen here in Johannesburg and in what I saw over the last year or
two in the run-up to this summit. The world's religions are focusing
on - most of them - on the concept of a web of creation. And by
that I mean that all of what we know and what we call creation -
this Earth, us, all the plants, all the animals - all of us are
interconnected. We all depend and help each other. And for us as
a dominant, to take up the role as the dominant species, and not
be mindful of the rest of the beauty that's here, and understand
that beauty, ties back in to what I was talking about earlier about
a preservation order for the Earth, to stop any further development
which would degrade the Earth's biosphere and the Earth's carrying
capacity. So the religions today - in the Western experience and
in the Eastern experience for a long long time - the Western experience
religions are catching up to where a lot of the Eastern traditions
are, which already had a profound respect for nature, a profound
respect for the cycle of life, the tree of life, as do the Indigenous
people that the settlers in the Western world ran into, had a great
and wonderful understanding of what the Great Spirit and creator
had given them; and their role in that gift, and where their responsibilities
lie in that gift. And, luckily, we're beginning to move away from
this concept of dominion logic, where we think that everything,
you know, on this planet is, should be viewed from an anthropocentric,
a human-based concept. We're beginning to move away from that, and
the churches are taking the lead in that, and that's a really great
story, and one that I'm very happy to be a part of, because this
wonderful blue everything that we live on, this wonderful blue spaceship
that carries us on, is all we know. There is no spare anywhere.
It is an oxygen generator. And, you know, you ought to love your
mother!
And a final question: do you know of
any local authorities or governments starting to invest their money
in ethcially-screened portfolios?
Yes, the answer is yes! Contra Costa County in California
divested itself of all of its tobacco stocks at the request of Progressive
Asset Management. A number of other companies over the last four
or five years have - a number of other municipal and state entities
and state trust funds and labour and union trust funds have divested
themselves of alcohol, tobacco and firearms stocks - to a great
extent. And as I was saying, Contra Costa County in California took
the lead on that, so did Humboldt County, and there are other, we're
in conversations with other municipal and state entities to divest
themselves of those kinds of investments and to keep that money
in a clean yield.
We are talking earlier about the one and a quarter trillion
dollars that's invested in socially responsible investment and how
much money is behind it. There is arguably a few hundred billion
if not another trillion dollars in municipal and state government
funds that could be directed towards responsible investing. And
in a lot of areas where the people live that are investors of ours
now, these conversations are starting to take place. You know, it's
ten o'clock: what's your money doing?
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