SOCIAL TOPICS (Archive): ENVIRONMENT

Published, March 2000

       Mention socially responsive investing and most people picture social screening; that is, shutting the door on investments with companies that don’t meet investors’ standards for corporate behavior. Indeed, long a staple of socially responsive investing, social screening gives investors the opportunity to align their portfolios with their strongly held beliefs or mission. Social screening is most effective when investors wish to not profit from, or not be associated with firms that conflict with their social scruples.

       But others go a different route, cracking open that door for companies that investors may be able to influence through advocacy rather than boycott. These investors typically exclude only egregious corporate offenders or those firms where advocacy is not seen to be a viable option (asking Philip Morris to divest its tobacco business, for instance). For these investors, dialogue and other shareholder advocacy tools form the bulk of their social strategy.

       One of the most exciting changes at Walden in the past year, and one of the most challenging, is its new capacity to address a larger pool of companies through shareholder advocacy. Thanks in part to the Walden/BBT Domestic Social Index Fund*, which emphasizes dialogue and activism over social screening, we are engaging companies not traditionally targeted by socially responsive investors implementing exclusionary social criteria. Additionally, because the Walden Domestic Social Index Fund holds several hundred large-cap stocks, we are starting to target entire industries. For instance, Walden has recently written to several companies in the energy sector about their greenhouse gas emissions.

       Here are highlights of some our corporate interactions on behalf of this Fund.

Sub-prime Lending
       Not surprisingly, subprime lending, the practice of lending to applicants with higher credit risk at higher interest rates, is controversial. Critics suggest that rates can be disproportionately high; that lower credit risk applicants are often not advised of more competitive loan offerings; and that applicants are at times set up to fail on terms favorable to the lender. When done properly, however, subprime lending does provide an avenue for those with poor or no credit to obtain loans.

       Associates First, one of the largest subprime mortgage lenders, recently settled two class-action lawsuits alleging discriminatory lending practices. Although the company agreed to a new mortgage lending policy, continuing adverse press attention and legal and regulatory scrutiny of its subprime lending policies moved Walden to exert some pressure. We have co-filed a shareholder resolution with the General Board of Pensions of the United Methodist Church asking Associates to strengthen its policies forbidding predatory subprime lending practices and to establish a committee to oversee the development and enforcement of these policies. In an attempt to keep this issue off the proxy ballot, Associates is contesting the resolution at the Securities and Exchange Commission (SEC), the federal agency overseeing the proxy process.

Energy: Human Rights & Environment
       Occidental Petroleum is planning to drill in land claimed as sacred by the U’wa people in Colombia and the U’wa have threatened to commit mass suicide if the oil development occurs.

       Walden has raised several questions regarding Occidental’s relations with indigenous communities, including the U’wa people. A recent visit from Occidental’s vice president of executive services and public affairs was both informative and frustrating. The company claims it is able to operate responsibly in this area, and attributes the opposition to oil drilling to intimidation by left-wing guerrillas. This charge is difficult to verify. Regardless, Occidental’s choice to negotiate directly with the Colombian government and to decline further contact with U’wa representatives ignores legitimate rights of indigenous people.

       Walden has co-filed a shareholder resolution with the Sinsinawa Dominican Sisters asking Occidental to hire an independent consultant to perform a risk analysis of the potential impact on the company from the U’wa’s threat of mass suicide. We hope this public appeal will help to avoid drilling in the protested area until Occidental has met with U’wa representatives and resolved the matter to both parties’ mutual satisfaction. Occidental is currently contesting the resolution at the SEC.

       Walden has co-filed a resolution asking ExxonMobil to adopt a company policy to develop strategic plans to bring renewable energy sources into its energy mix. We are disappointed that ExxonMobil does not include data on emissions of the greenhouse gas carbon dioxide in its environmental report and does not have established goals to increase renewable energy. ExxonMobil is also a member of the Global Climate Coalition (GCC) — an industry group committed to undermining scientific consensus that climate change is a legitimate global threat.

       For a second time, we are co-filing a resolution asking Atlantic Richfield to refrain from ever drilling in the Arctic National Wildlife Refuge (ANWR) and to immediately stop the expenditure of corporate funds targeted to achieve this objective. ANWR, the only conservation area in the nation that provides a complete range of Arctic and sub-Arctic ecosystems, is the last of Alaska’s North Slope unavailable to oil and gas drilling. We believe the resolution’s request is particularly important because of ARCO’s impending merger with BP Amoco, a company with significant operations in Alaska.

Genetically Modified Organisms
       With the increasing attention to and worry about genetically modified food and seed, Walden has asked more than a dozen companies to address their practices and policies regarding the issue, including Kroger Co., Tricon Global Restaurants, and ConAgra.

       Kroger Co. is contesting at the SEC a resolution Walden has filed asking the company to adopt a policy to remove genetically modified ingredients from its store brands, where feasible, with an interim step of labeling such foods. We recently organized a conference call with Kroger and several activist stakeholders. Although the call was informative, the company failed to alleviate our concerns.

       Walden has withdrawn a similar resolution at Tricon Global Restaurants, owner of Pizza Hut, Kentucky Fried Chicken and Taco Bell. In turn, we are in the early stages of dialogue with the company and hope to avoid filing a similar resolution next year.

       We have written ConAgra to express our dismay of its joint marketing agreement with Monsanto Company to accept genetically modified corn from U.S. producers. Critics charge this agreement could reduce the market incentives for farmers to grow conventional crops. We have asked ConAgra about its current policies governing GMOs, including its position on labeling of products that may contain genetically modified ingredients, and are awaiting its response.

Workplace
       With nearly 3,000 U.S. employers offering domestic partner benefits, ExxonMobil has told us that it does not understand the interest many individuals have in the issue. We had written to ExxonMobil expressing our disapproval of the recently merged company’s revocation of Mobil’s domestic partner benefits program, as well as the expunging of “old” Mobil’s explicit reference banning discrimination based on sexual orientation in its equal employment opportunity policy. We believe these actions send a strong signal to ExxonMobil employees that the company does not view all of its employees equally. The company has informed us that, contrary to reports in the press, it has not taken away any former Mobil employee’s domestic partner benefits. However, employees from the old Exxon Corporation and new employees will not be eligible for these benefits. Although ExxonMobil does not include sexual orientation in its written anti-discrimination policy, the company does address sexual orientation in its workplace policies booklet.

       Walden's advocacy work is broader than ever. (See the box on the back cover for the latest on Walden’s overall domestic advocacy efforts.) We understand that our efforts in isolation will not necessarily yield dramatic results, particularly in the next months or even years. Yet we remain confident that our voice, in concert with great numbers of caring and vocal individuals and groups, will resound in boardrooms and executive suites throughout the world. In some, the seeds are now being planted that will grow toward meaningful change and greater corporate accountability.

*Walden serves as investment adviser to the Walden Family of Mutual Funds. The Walden/BBT Domestic Social Index Fund screens for weapons, tobacco, nuclear operations and gaming, with emphasis placed on dialogue and activism social change strategies.