The Sacramento treasurer’s office moves toward more socially responsible investing
Like most public agencies with investment pools, the city of Sacramento buys and sells millions of dollars worth of stock issued by giant multinational corporations that often engage in unethical labor, environmental and human-rights practices. But according to City Treasurer Russell Fehr, that will soon change.
“We’re about to make a significant revision of our investment policy,” Fehr said in a June 30 interview. “We invest about a billion dollars on behalf of the city and its clients,” which include the Sacramento Housing and Redevelopment Agency, the Capitol Area Development Authority, the United Way and others. As things stand now, Fehr said his staff spend “a lot of time doing research on individual companies,” but focuses on stock and industry performance. Under the new policy, his analysts apparently will be taking a company’s actions into account as well.
“The new policy allows us to sacrifice yield for community benefit, but not sacrifice principle,” Fehr said. “We’re looking at investing more money in local institutions. But we’re not going to take significant risks with the money—it’s public money.”
Today, just about 10 percent of the $25.1 trillion investment marketplace is wrapped up in so-called “socially responsible investing,” according to the Social Investment Forum, a Washington, D.C.-based nonprofit dedicated to promoting investment in ethical companies. “SRI recognizes that corporate responsibility and societal concerns are valid parts of investment decisions,” states the Forum’s Web site. “SRI considers both the investor’s financial needs and an investment’s impact on society. SRI investors encourage corporations to improve their practices on environmental, social, and governance issues.”
As the city treasurer’s May 2009 “Monthly Investment Transactions Report” (accepted by the city council during its June 23 hearing without question or comment since it appeared on the agenda’s consent calendar) suggests, a more socially responsible investment strategy may be in order. Here are five companies the city treasurer’s office dealt with during May 2009, with brief notes on why they might make taxpayers queasy. We’ve also included their latest “ethical rank” (out of 541 multinational corporations), as compiled by Covalence, a Swiss firm that tracks corporate ethics:
• Philip Morris International
(Bought 10,000 shares on May 18 for $426,035)
Ethical rank (for parent company Altria Group): 507
Let’s just quote the company itself: “We are the leading international tobacco company, with products sold in approximately 160 countries.”
• Dow Chemical Company
(Sold 1,300 shares on May 20 for $60,581; sold 800 shares on May 27 for $33,968)
Ethical rank: 276
During the Vietnam War, the company manufactured the herbicide Agent Orange. Dow also made silicon breast implants. Today the company owns the old Union Carbide plant in Bhopal, India, that killed 15,000 people, and flatly refuses to pay out any more money in damages or cleanup costs. And the company knows toxic cleanups, because it owns 96 of nation’s worst Superfund sites.
• Federal National Mortgage Association (Fannie Mae)
($6.3 million in bonds called on May 5; $15.1 million in bonds matured during the month as well)
Ethical rank: 484
This quasi-private mortgage lender has been under investigation for all sorts of accounting fraud allegations since 2004. Then, in September 2008, the federal government took Fannie Mae over after billions in bad loans crushed it during the subprime-mortgage crisis.
• Fluor Corporation
(Bought 20,000 shares on May 18 for $888,096; bought 800 shares on May 20 for $36,471)
Ethical rank: 265
Since the 2003 invasion, Fluor has received billions of dollars in Iraqi reconstruction money from the federal government. Despite the fact that Iraqi streets are still dangerous and the nation’s infrastructure is still crumbling, Fluor is still at the top of the list for government contracts.
(Sold 2,000 shares on May 20 for $42,830)
Ethical rank: 170
Pfizer, the wealthiest pharmaceutical company in the world, has a relatively high Covalence ranking even though it prices the anti-AIDS drugs it manufactures so high that most people in Africa—who suffer disproportionately from the disease—can’t afford them. “[T]he poorest people find vital drugs are priced out of reach,” says Oxfam’s Web site. “We’re campaigning hard to change this, targeting governments and drugs companies—like Pfizer and Novartis—to ensure developing countries get cheaper and better medicines quickly.”
Fehr said his office is “pretty close” to finishing the policy. “We’re just trying to find time on the [city council] agenda,” he said. “It should be done at the end of July, early August. There will be a public hearing—we won’t bury it in the consent calendar.”