On Christmas, I opened a beautiful makeup gift set from an upscale department store, and my heart sank after reading the ingredients. I wouldn’t be able to use it. For years I had struggled with eczema; however, it wasn’t until reading an article about a form of eczema as a delayed allergic reaction to chemicals in the environment that I was able to get it under control. The real kicker was learning that when my dermatologists recommended moisturizing daily to manage my skin disorder, regular lotions (even hypoallergenic ones) actually perpetuated my symptoms instead of alleviating them. Once I switched everything, from my laundry detergent to my lipstick, to more natural options, the itchy rashes I suffered for seven years virtually disappeared.
Many Americans assume the U.S. has stringent product-safety regulations in place to protect them from potential injury. Yet, chemical safety standards in the U.S. are anything but rigorous. The motto caveat emptor (the idea that the buyer is responsible for confirming the quality of an item before purchase) is perhaps a better description of our system.
Hard to believe? Although the Toxic Substances Control Act (TSCA) of 1976 was intended to regulate chemicals that pose a risk to the environment or human health, approximately 62,000 chemicals already in existence were grandfathered in without testing for use in consumer products. Four decades later, the Environmental Protection Agency’s TSCA inventory list includes an additional 23,000 chemicals, but the regulation only invites chemical manufacturers to voluntarily submit data and risk assessments if the company believes the chemical poses a threat. The burden of proof for toxicity or carcinogenic risk lies with the EPA, which has managed to adequately study little more than 250 chemicals and ban only five.
The Investor Environmental Health Network and As You Sow Foundation are leading shareholder advocacy organizations that engage corporations on their chemical safety policies. They ask firms to examine chemical safety procedures and find safer alternatives. In recent years, a new coalition has emerged: The Chemical Footprint Project gives companies a new benchmarking tool for improving their chemical management practice. The footprint is determined through a framework that evaluates company strategy, chemical inventory, goals for safer alternatives, and public disclosure practices beyond legal requirements. The framework gives investment analysts better quality information to understand a company’s risk profile and performance against peers. As of today, “CFP Signatories with $2.8 trillion in assets under management and over $700 billion in purchasing power are asking their stakeholders: Where are you on your chemicals management journey?”.
While government legislation regarding chemical safety in consumer products remains incredibly lax, investors have begun to evaluate the financial impact for companies that do not conduct proper chemical testing. Johnson & Johnson has taken heat recently regarding asbestos in baby powder, but it’s not the company’s first instance of corporate chicanery. The company has been criticized by investors before for reformulating products with safer alternatives for the European market, which has stricter safety standards, but leaving the more dangerous formulation in place for the U.S. market.
By placing profit over people, Johnson & Johnson has not only endangered the firm’s brand reputation and public trust, it also created the potential for costly legal ramifications. Although such short-sighted thinking is not a good bet from an investment standpoint, Johnson & Johnson is not alone in its disregard for such risks; Avon, Procter & Gamble, and Colgate-Palmolive are among other major brands that have scrambled to remove harmful chemicals from their products only after a consumer outcry.
Congress did pass a chemical reform bill in 2016, forty years after the TSCA was approved. Although it was called ‘toothless’ by several advocacy groups, the bill did introduce some changes that were better than the status quo, including the review of “confidential business claims” of product components; the requirement for science-based decisions, founded on the weight of evidence; and the collection of fees on new and existing chemicals filed for the TSCA inventory list that are directed to the EPA. Much of the legislation, however, depends on the EPA to implement and enforce the rules. Unfortunately, the current leadership at the EPA has delayed implementation of the new rules for so long that a federal judge recently intervened, calling the delay “arbitrary and capricious.”
With nearly all of 85,000 chemicals on retail shelves without adequate vetting for health and environmental safety, the actual impact that poor regulation has had on human development is immeasurable. The fight for greater chemical safety continues within the nation’s capital, and progress will likely be stymied until new leadership arrives. In the meantime, consumers, academics, and investors alike should warn corporations: caveat venditor (Let the seller beware.). Studies have shown a marked increase in consumer demand for chemical safety assurances, and corporations have noted higher sales growth for green goods, as more Americans become aware of chemical dangers in their purchases. Pike Research projects the North American market for “green chemistry” to expand sevenfold, from approximately $3 billion to $100 billion by 2020. If the federal government continues to shirk its duties, the public will vote with their dollars at the checkout line.
A little over one year ago, President Trump reaffirmed his intention to withdraw the United States from the Paris Climate Accord. As if on cue, an iceberg the size of Delaware broke away from the Larsen C ice shelf in Antarctica, where temperatures have risen nearly five degrees on average over the past few decades. And Hurricane Harvey, Hurricane Maria, and Hurricane Florence wrought unprecedented destruction in rapid succession upon Texas, Puerto Rico, and North Carolina, respectively.
Scientists and researchers are still working to measure the astounding human and environmental toll from the hurricanes, which are considered to be climate disasters due to their intensity. Hurricane Maria resulted in nearly 3,000 deaths and left Puerto Rico without electricity, telecommunications, or water services for months. Hurricane Harvey caused at least 100 recorded releases of toxic chemicals in a region with 500 chemical plants and 10 oil refineries. NASA’s satellite images of North Carolina after Hurricane Florence show inky black currents of organic matter—mostly sewage from massive chicken and hog farms in the area—seeping into the blue waters of North Carolina’s coastline.
For those of us who remember Columbine, the Parkland massacre and its immediate aftermath evoked a colossal feeling of failure. How could it be that two decades and dozens of mass shootings later, nothing had changed?
But as the days turned to weeks, a steely resolve grew within the Parkland students’ collective trauma. They joined forces with Black and Latino youth organizers across the country that have been laboring for decades— ignored by the mainstream media—to stop the scourge of daily gun violence and police shootings that have ravaged their communities. Together, these young people are growing the resistance movement that our generation did not. Serious gun control discussions are finally on the table in America, thanks to children who are tired of executing active shooter drills in closets or taking different routes home to avoid stray bullets.
As socially responsible investment professionals, not only are we deeply inspired; we have a range of tactics to support these young activists in their quest for commonsense gun control laws—many of which we have been using for years already.
At Natural Investments, none of our client funds hold stock in companies with assault or military weapons. Our Heart Rating process asks mutual funds about their weapons and defense holdings as well. Complete purification of the portfolio is, admittedly, difficult. In fact, Bloomberg published two articles—one for and the other against the effectiveness of divestment—within two days of each other.
When I boarded the El on January 20, I felt encouraged by the bits of pink I saw throughout the packed train car. “Please, let us look at least close to the size of last year’s Chicago Women’s March,” I remember thinking. I tempered my hope by reminding myself that the anger over the 2016 election might have subsided—and that many who marched in the unprecedented global display of resistance in 2017 could be burned out after a year-long assault by the new administration.
I met a friend at our appointed spot, Hero Coffee Bar on South Dearborn, and we joined the stream of pink plumage coursing down Michigan Ave. Even if we were only half of the quarter-million demonstrators counted on the frigid Chicago streets last year, it would be enough. The signs and the speeches buoyed me. On this unusually warm, sunlit January day, we chanted and marched, riding an electrifying surge of energy.
The stamina and strength of organized resistance to the destructive policies of the current administration has manifested not just in the streets, but also in a marked rise in interest for women-led investments within the finance world over the last year. We have seen encouraging growth in women-centric investment funds operating in the impact investment field. What’s more exciting is that the trend for more equitable treatment in finance is not only relegated to the US. A recently issued gender equality bond in Australia was 20x oversubscribed upon release.
In the decades leading up to the 2016 election, SRI investors had labored for years on gender parity issues without gaining much traction. Although numerous studies have shown that companies with more equitable gender representation, at the board level and in management, perform better financially, only 2% of venture capital dollars went to women entrepreneurs in 2017.
Natural Investments has long advocated for gender equity and more diverse boards through shareholder dialogue. Indeed, one long-standing and important aspect of the Natural Investments Heart Rating is a company’s diversity and inclusion policy. We have also always believed in the promise of gender-lens investing, based on research showing that investing in women has a 50% greater positive impact on primary drivers of long-term, intergenerational change, as well as the reduction of hunger and poverty.
Although investment that directs capital into women-led enterprises is certainly not new, we are thrilled to see the increase in interest and demand. Natural Investments advisors have developed specialized expertise in mutual funds, notes, and microenterprises in developing countries that bolster female-driven businesses and initiatives. We have also hosted a Women Invested interview series, highlighting professional women in the SRI field championing these causes.
As an SRI professional who rarely marched before the 2016 election, I am still riding high off the energy of the 2018 Women’s March. Whereas I once thought of civic protests as largely symbolic as compared to the more tangible work of socially responsible investing, I now understand that hitting the streets is an important way to motivate ourselves and others to undertake more substantive actions like moving our money, divesting from fossil fuel, and engaging with companies and elected officials to advocate for a sustainable future.
After my day on the streets of Chicago, I returned home after the march feeling tired yet accomplished, and of course, eager to see the numbers. So, how did we do? News outlets reported the next day that Chicago’s turnout saw 300,000 attendees—a 20% increase over the 2017 march in our city and indicative of huge and boisterous rallies across the country. Even more inspiring was the news that more than 20,000 women have contacted Emily’s List about running for political office as of 2017, up from only 920 women who contacted the group in 2016. These are all positive indicators of a new body politic fueled by “sheros” ready to change the world.