Joe Nocera in The Trouble with Socially Responsible Investing in the International Herald Tribune explains the problem. He says ethical investment experts oversimplify the world's problems. They give investors a false sense that they're putting money into companies that consistently perform in ethical ways. They rarely do. "It allows investors to believe that their money is only being invested in the good guys, and they take foolish comfort in that belief," he writes.
To illustrate the dilemma Nocera points to the oil industry. Exxon Mobil Corp. (NYSE: XOM) -- the company that socially responsible investors love to hate -- has a strong worker safety record, but it employs executives who until recently failed to admit global warming existed. Then there's the Valdez, whose crash resulted in one of the largest human-made environmental disasters on record. Exxon still owes the state of Alaska a couple of billion dollars in punitive damages for that debacle.
In contrast, some socially responsible investment funds were willing to put their money into BP PLC (NYSE: BP). After all, it was the first oil giant to heed early warnings of global warming and had some great advertising campaigns promoting its sustainable stands. However, it fell short on worker safety. In 2005, a major refinery accident in Texas killed 15 workers. Last year, BP had a big oil spill in Alaska and then shut down its pipeline operations for a stint following admission of major corrosion in its pipelines. BP went from being known as Beyond Petroleum to Big Problems.
Nocera offered an interesting backstage tour of a company that runs socially responsible indexes. KLD Research & Analytics of Boston operates the impressive Domini 400 and counts 420 clients including TIAA-CREF. It has a staff of 40 covering 3,000 global companies. Astonishingly, company executives told Nocera that the staff almost never goes abroad to check out operations of companies it follows. Instead it relies on newspaper stories, activists and the companies' own information. Since when did China or Indonesia allow its journalists to tell things as they see them? For anyone willing to believe they're getting the unvarnished, simple truth from the Chinese media or large corporations, I sentence them to a year in solitary with their pick of big company annual reports.
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Reader Comments (Page 1 of 1)
4-09-2007 @ 8:20PM
C Vickers said...
Re: Loving Exxon over BP posted 4/9/2007 2:04PM
What about nuclear power? Nuclear waste is more than a “messy issue” it is a disaster
hiding from their public since the late 50’s or early sixties. These power plants &
facilities and equipment, lands and waters nearby get so contaminated radioactive waste
has to be buried under mountains and some countries like the US are running out of
mountains. Too much of this waste is not conducive to neutralization let alone
biodegradable for some hundreds, thousands, or ten thousands of years. The fact is
nuclear power sourcing, generating, recycling costs trillions more than it supplies or
saves given the current technology and problems. WMD & nuclear power plant designers
and engineers believed half a century ago they could work out the messy little details of
radioactive waste but they haven’t. It scares us (in our seventies) It seems the worse the
situation is in this country the slicker, the greater, the more adamant, more effective the
denial. An uncomfortable or tragic truth is proffered silly, trivial or inconsequential. The
ruck has to stop if anybody out there cares what happens to our children and
grandchildren. A powerful elite can and has swept nuclear waste products (some have
half lives of ten thousand years) under the publics cognitive rug and maybe their own.
The informed consent of the people on this subject has been absent. We heard the piece
on CNN last night about France having the key to reusing radioactive tainted waste or by
products. Oh, really? Think about it. They want to sell or give theirs away to the US, or
Iraq or Iran. Sound reasonable?. Read Helen Caldicott’s book “Nuclear Power Is Not
the Answer. Fellow Americans, Europeans, CNN do some real investigating reporting on
this subject, please. Yes you are correct it is not easy to find socially responsible
companies to invest in. We heard John Deere was investing in some wind energy
products. Plant products would be excellent and comparatively cheap, benign sources of
energy. If we could develop extensive, comprehensive, renewable sources like wind,
solar, plants, corn, hemp, weeds that do not even need especially fertile soil. Think of the
possibilities for the consumer, for the producers? The proximity of the product to the
market, the fact it does not harm the air, the earth, or bodies of water? Unfortunately the
US has invested (trillions of our tax dollars) in nuclear power projects here and abroad.
We know the huge investments oil and gas moguls have in infrastructure, equipment,
tankers, pipelines as well as foreign sources. Unless the public or press put on pressure
or insist substantial change will not be.The elite of the military industrial will barely
acknowledge global warming. The reason we have not heard much at all about nuclear
power and it’s pitfalls until recently is many of our 103 US power plants now need to be
replaced. The first generation of plants only had a “safe life” of 40 years. Although many
may have extended licensing. The government line? We should not reveal any
vulnerability or culpability to our own citizens let alone the world. Especially a big
one.17 other countries are involved in nuclear powering.The Brits have put up quite a
squawk on the nuclear energy subject. But do consider many more countries survive and
supply their energy needs efficiently without nuclear energy. In fact nuclear powered
ships were banned back in the 80’s (when we visited) on Australia’s shore. And they did
not import oil because they did not want to risk any accidental spills on their pristine
shores. Or be held hostage to “those blokes that have been at it i.e.killing each other off
(over nothing important) for thousands of years. What chance do we have depending on
them?” Made sense to us.