I would like to draw attention to an op-ed in today’s NY Times by Darren Walker, President of Ford Foundation. http://nyti.ms/1P8ZpXG This is an important message not only to all individual donors, but to all foundations, and non-profits with endowments, including colleges and universities: The good that you are doing with your donations are appreciated. Please continue to give and give as much as you can. BUT, the harm that you are presently doing with the investments that are generating the income to produce those donations hugely dwarfs the good. By investing in companies that encourage, support, and facilitate human rights violations, poverty wages, discrimination, environmental destruction, forced labor, and more, you are creating or exacerbating the problems you claim you would like to solve. (Yes, you are personally responsible for the damage done by the companies you own, no matter how small your stake.)
Choosing not to own stock in, or hold the debt of, such companies is one option. So is voting your proxy when another shareowner files a resolution to bring positive change to your company. But not voting, abstaining, or giving your proxy to your money manager or fund manager without insuring that they will vote as you would are the same as actively voting to support management and continue the bad behavior you (I hope) deplore.
And if you believe, “Oh no. None of the companies I own could possibly be doing that”, it is not hard to check. Ask your financial advisor, wealth manager, etc. “what are the ESG ratings of the stocks/funds I own?” The answers will likely surprise you. For that matter, ask whether those managing and investing your money adhere to the United Nations Principles of Responsible Investment, and therefore even look at ESG ratings. (Too many do not. That would be the cause of the blank stare or misdirecting comment when you ask.)
Thankfully, companies that are paying better attention to these issues in their operations have lower costs of capital, lower turnover of employees, higher rates of productivity, and produce better long term returns. For investors concerned about the future, rather than just the next quarter, these are key facts.
Whether you are a $30 billion endowment, a community foundation, or a 401(k) owner writing a check to a local charity, if your goal is truly to make a difference, it may be time to make a difference in how you manage your money.