Battling Government’s Assault on Shareholder Rights

The Securities and Exchange Commission has announced its intention to make fundamental changes that would impede one of the most important tools to advance corporate social responsibility: the rights of shareholders to influence corporate policies and practices. In order to raise public awareness of what’s at stake, leading advocates for socially responsible investing have launched the Investor Rights Forum website. The forum provides current information and commentary on the importance of shareholder advocacy, case studies of successful shareholder engagements, details on the SEC’s proposals to undermine long-standing precedents, and efforts underway to prevent proposed rule changes from going into effect.

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The Power of Protest

On a recent beautiful September weekend, I traveled to Hawaii Island (also known as the Big Island) to support the protests against the construction of the Thirty Meter Telescope. On one side of this issue, science institutions and the state government are moving to start construction on a giant, highly advanced telescope on the summit of Mauna Kea, a stunning 13,800-foot-tall volcano. On the other side, Native Hawaiians and their allies have blockaded the only access road to the summit of Mauna Kea to prevent construction of the facility on a site that many hold as a most sacred place.

Arriving at the site of the demonstration, I saw dozens, perhaps hundreds, of Hawaiian flags and heard the rhythmic sound of drumming and chanting in the Hawaiian language. The Mauna Kea protectors built a whole village at this remote highway intersection on a windswept volcanic plain. It included a medical tent,

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Caveat Emptor: What Are You Putting on Your Skin?

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.

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Divestment as a Moral Imperative

This article is highlighted as part of the 100th issue special, celebrating twenty-five years of quarterly newsletters. 

Just one year after this story was published, the crisis at the Mexico border has intensified. The federal government is detaining thousands of people—including large numbers of unaccompanied children—in migrant detention camps under conditions that visiting doctors have described as torture. Natural Investments advisers continue to educate investors and encourage divestment from private prison corporations contracted by the federal government to detain people.

Few stories dominated headlines this summer like the unfolding of the family separation debacle happening at the U.S.-Mexico border. As civil and political unrest worsened in some Latin American countries, the border saw a dramatic increase of families seeking asylum. Over the spring and early summer, Immigration and Customs Enforcement (ICE) forcibly separated more than 3,000 children from their parents, per the Trump administration’s “zero tolerance” policy on immigration, and imprisoned them in detention centers across the country; in combination with the surge in unaccompanied children crossing the border, the number of children in U.S. detention centers has now ballooned to more than 13,000.

News reports revealed images of solitary children, huddled under thin aluminum blankets and wailing in the cages of detention centers run by two private companies: GEO Group and Corrections Corporation of America (referred to as “CoreCivic”); both manage private prisons as well as ICE detention centers. Immigrant children held in facilities run by these two companies have complained about

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The Fight for Shareholder Rights

The frontline battle over the limits of corporate power is turning into a full-fledged war, as the legislative and executive branches of the US government accelerate their push to deregulate companies and curb shareholder influence.

Shareholders like the ones we work with, of course, want companies to act responsibly and profit without exploiting employees, communities, and the environment. But we are up against corporations with an entirely different agenda— and with hefty lobbying budgets. In response to the sea change in Washington, socially responsible investors (SRI), including Natural Investments, formed the Shareholder Rights Group in 2016. Our mission is to defend the right of shareholders to engage with public companies on governance and long-term value creation. We hired attorney Sanford Lewis to

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Advocating for Our Collective Future

I was one of several Natural Investments advisers to travel to Washington, D.C., in May to participate in a day of advocacy organized by USSIF: The Forum for Sustainable and Responsible Investment.

You may be wondering why a group of financial advisors who are on a mission to transform the world into a more equitable place would venture into the political arena. It’s a good question, and it’s one with an important answer. Right now, strategies for using investing as a tool for social change are under attack. The Security and Exchange Commission is trying to scare pension funds away from socially responsible investments by rolling back rules put in place during the Obama era. In Congress, Republicans are trying to strip

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Fighting Deregulation with Community Investment

On May 24, President Trump signed legislation to roll back critically important regulations on the financial industry. The consumer protection measures, which were put in place under the former Obama administration as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, have now joined the long list of public-interest regulations to be terminated by this administration.

When Obama signed Dodd-Frank into law in 2010, the mortgage meltdown that had begun in 2008 was in full swing, the government was bailing out the big banks that had caused the crisis with taxpayer dollars, and Americans were furious enough that legislators were able to push through the most significant changes to financial regulation since the reforms that followed the Great Depression. These include the Volcker rule, which keeps banks from taking speculative investments, and the creation of the Consumer Financial Protection Bureau—which is responsible for regulating consumer financial companies like banks, lenders, and credit unions. The act also created stipulations for banks to create plans to wind themselves down, instead of filing for bankruptcy, in the event of another economic collapse.

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Supporting the Youth-Led Movement for Gun Control

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.

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Standing Up for Standing Rock

Oceti Sakowin Camp, North Dakota

The Oceti Sakowin Camp in Cannon Ball, North Dakota, where the Standing Rock Sioux and other water protectors lived
as they fought to stop the Energy Transfer Company from routing the Dakota Access Pipeline through sovereign Sioux land.

How Socially Responsible Investors Supported the Dakota Access Pipeline Protests

The Dakota Access pipeline (DAPL) starts in the Bakken oil fields of North Dakota and runs nearly 1,200 miles to its terminus in Illinois, where it connects to additional pipeline infrastructure that carries the oil to refineries as far south as Texas. Along the way it crosses hundreds of streams, rivers, and other waterways, including the Missouri River less than a half-mile upstream from the Standing Rock Sioux Tribe reservation.

The project was completed and oil started flowing in June of 2017, after a prolonged protest by the Standing Rock Sioux Tribe, who were joined by water protectors from more than 100 indigenous tribal nations from across the Americas, as well as non-native allies from around the world. As the water protectors decried the violation of tribal sovereignty, the desecration of sacred sites, and the imminent threat to their only source of clean drinking water, they faced attack dogs, tear gas, rubber bullets, and water cannons in sub-freezing temperatures. These protests and concurrent lawsuits were documented by citizen journalists and eventually picked up by major news outlets.

One aspect of the stand-off that did not receive much media coverage was the role that socially responsible investors played in supporting the Standing Rock Sioux in their fight against the pipeline. At the November 2017 SRI conference, remarks by Rebecca Adamson, founder of First Peoples Worldwide (an indigenous-led grant-making organization that focuses on funding local development projects in indigenous communities while creating bridges between their communities and corporations, governments, academics, NGOs and investors in their regions) were presented by Susan White, co-chair of the Investors and Indigenous Peoples Working Group (a coalition of socially-responsible investors and others dedicated to supporting indigenous peoples rights) and Sydney Morris, chair of the Calvert Advisory Council. They provided a compelling account of the behind-the-scenes support socially responsible investors lent to the cause and the results of subsequent advocacy efforts undertaken by SRI groups:

In August 2016, the tribe asked First Peoples Worldwide and the Investors and Indigenous Peoples Working Group to lead an investor strategy aimed at diverting financing from DAPL. Investors worth more than $1.7 trillion signed a statement supporting the tribe’s request for a reroute.

Shareholder resolutions requesting better disclosure of environmental and social risks (from companies invested in the pipeline project) received record-breaking vote counts: Marathon Petroleum (38%), Enbridge (30%), and Wells Fargo (19%).  

Energy Transfer Partners (the lead developer of the Dakota Access Pipeline project) stock is down more than 60% since its 2014 highs.

More than 500 NGOs and over 700,000 signatures catalyzed consumer bank account closures worth over $4 billion. Three banks divested from DAPL (BNP Paribas, DNB and ING), twelve of seventeen banks met with the tribe, and ten banks signed a statement requesting changes to the Equator Principle, (an ESG risk management framework used by ninety banks worldwide) in response to investor and civil society pressure. The fight against the DAPL has placed the costs of social risk front and center on the financial industry’s radar.

 In response, First Peoples Worldwide created a seminal research effort now underway with the University of Colorado’s Leeds Business School and the American Indian Law Clinic. The first case study will be titled DAPL: Social Costs and Material Loss. Leeds Business School and the American Indian Law Clinic have formed a collaborative: First Peoples Investor Engagement Program. FPIEP has dedicated faculty and graduate students who will continue the work on quantifying social risk, designing market-based strategies for upholding Indigenous rights, harnessing the activist infrastructure that emerged from DAPL for future campaigns, and offering the Shareholder Advocacy Leadership Training to tribal leaders.

Although the Standing Rock protest did not stop the construction of the pipeline, it did catalyze these and other significant advances—not least a greatly increased awareness about the continuing impacts of colonialism on First Nations people. In 2018, the Investors and Indigenous Peoples’ Working Group (of which Natural Investments is a participant) will continue to advocate for the rights of indigenous peoples. The working group will push for companies to adopt Indigenous Peoples’ Free, Prior and Informed Consent (FPIC) policies and to cease activities that harm Indigenous lands, communities, and cultures. It will also focus on building investor, corporate, and U.S. government support for the United Nations Declaration on the Rights of Indigenous Peoples. And the group is committed to identifying opportunities, including strategic partnerships and investor support, to advance Indigenous community economic development initiatives.

“The SRI community made our voices heard, and we thank you,” said White and Morris, as they concluded their talk at the SRI Conference. Their eloquent presentation affirmed and deepened the commitment of Natural Investments to advance the rights of Indigenous peoples around the world through the powerful lever of impact investing.

 

 

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The CHOICE Act is the Wrong Choice

With all of the chaos happening in Washington, DC it can be hard to keep up with everything that is changing. While your advisors here at Natural Investments stay up to date on a wide variety of policy issues, we particularly want to highlight a bill that would have a large impact on our industry and our ability to advocate for social change.

Earlier this year Republicans in the House introduced HR10 The “CHOICE” Act. CHOICE stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, but in simple terms this bill is a massive give-away to large Wall Street firms. It destroys much of the regulatory framework put into place under the Dodd-Frank reforms. And, most disruptive to socially engaged investors, it puts limits on the shareholder activism work that is so critical to our ability to impact change at the businesses we invest in on your behalf.

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