SOCIAL TOPICS (Archive): HISTORY OF WALDEN ASSET MANAGEMENT/SRI

Published, March 1999

       by Heidi Soumerai, Walden's Director of Social Research

       I have a vivid memory of a conversation with my colleagues that occurred well over a decade ago. We were discussing — for far too long I thought — what we should call our social investment service. The industry had coalesced around the phrase “socially responsible investing,” but that did not resonate with us. Ultimately we decided upon “socially responsive investing,” an expression that continues to adorn our stationary and newsletter to this day. I had thought we were making far too much a fuss, but I have since come to realize the merits of our decision.

       There are a number of reasons why “socially responsive investing” rings true. We want to be responsive to each client’s unique concerns and priorities in the process of establishing and implementing an investment approach, including screening guidelines. While there is much overlap, our clients are by no measure a homogeneous group. Our job is to help translate clients’ many social objectives into meaningful and feasible investment criteria.

       Equally compelling is our desire to be responsive to evolving social concerns and to stay at the forefront of research and activism on emerging social issues. For example, in the mid-1980s we grappled with animal testing screens. Later we began asking companies whether their equal employment policy explicitly prohibited discrimination based on sexual orientation. Ten years ago I could not have anticipated that today we would be questioning the logic of genetically engineered produce, some of which has been designated by the Environmental Protection Agency as an insecticide. Nor could I have imagined that the compensation of chief executives at our nation’s largest companies would soar from 42 times the average worker’s salary in 1980 to a multiple of 326 in 1997¹, catapulting concerns about wage inequality high in the public consciousness.

       Finally, we chose responsive to describe our management philosophy because we did not wish to presume that we have the truth and the way, that we always know what it means to be a responsible investor. I still cringe at requests from well-meaning people who ask for a list of socially responsible companies. Corporations, the engines of capitalism, are complex social, legal and organizational entities. Behavior varies. Most companies have both strengths and weaknesses. Firms sometimes face competing constituencies where to be responsible to one is by definition irresponsible to the other. In contrast, we feel confident in our ability to identify responsive companies as those which confront their challenges.

       For these reasons we do not grade the social performance of companies. What grade should we give BP Amoco, an industry leader on the issue of climate change, if it stands ready to explore for oil in the Arctic National Wildlife Refuge were the signal to turn green? Should it get a “C,” the average of an “A” and an “F”? Only a comprehensive understanding of the company’s actions justifies our positive assessment of BP.

       In our quest to invest responsively we spend much more time “investing in” than “screening out” companies. Through communications with management and partnerships with other agents of change, we use our clients’ leverage as shareholders to foster progressive corporate practices. Central to this work, across all social issues, is pressing companies for greater public disclosure and accountability. Armed with meaningful information, communities, employees, consumers, policymakers, activists and shareholders are able to hold companies accountable for their actions. These transparent corporations are likely to be, by their very nature, more responsive companies.

¹ Business Week, April 28, 1998, Annual Special Report on Executive Pay.