Category: Fall 2013 – Integrating Sustainability

2013 Season Poised to Break Records in Filings, Support Levels for Environmental and Social Policy Shareholder Resolutions

 

New Report From the Sustainable Investments Institute Finds Growing Investor Support for Board and Workplace Diversity, Sustainability Reporting and Political Spending Disclosure

Investors are filing more environmental and social policy resolutions in the United States than ever before, and more shares are supporting them, new research from the Sustainable Investments Institute (Si2) finds. As of August 20, a total of 401 sustainability related shareholder proposals have been filed at U.S. companies in 2013, already above last year’s total of 393. In addition, average support levels have increased from 18.4 percent in 2012 to 21.3 percent this year and will likely surpass the previous all-time record of 20.1 percent in 2011. The number of high votes above 20 percent also is on the rise, nearing 100 this year, up from 79 in 2012 and 91 in 2013. Only a decade ago, average votes hovered around 10 percent and fewer than 30 votes exceeded 20 percent backing.

“The proxy season results this year show a critical mass of investors think companies need to tell more about how they manage sustainability risks and what they are spending in elections and efforts to influence lawmakers and regulators. It’s also very clear that board diversity and equal employment are top investor priorities,” said Si2 Executive Director Heidi Welsh.

“Companies can’t ignore these votes and the growing number of negotiated agreements shows they increasingly are listening to their investors. This trend puts more pressure on firms that don’t pay attention to these initiatives,” she added.

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Resolutions on board and workplace diversity, sustainability reporting and political spending disclosure have led the pack this year. These three topics have earned all the top 10 votes so far and continue to post the strongest support levels. Calls for disclosure of political spending, however, trumped all in the numbers of filings, accounting for nearly a third of the total.

Highest scoring proposals: Four of the resolutions have earned majority votes in 2013. Three were at fertilizer maker CF Industries Holdings — concerning board diversity (50.7 percent), political spending (66.0 percent) and sustainability reporting (67.0 percent, the highest ever social vote). The other was at aerospace and defense firm Alliant Techsystems on lobbying disclosure (64.8 percent). Eleven proposals opposed by management have gotten more than 50 percent since 2010, in a new era of high votes and increased stakeholder negotiation about social and environmental issues.

Record support: Investor support for dissident resolutions on sustainability issues has increased to its highest level ever in 2013, after dipping a little in 2012. Votes have been on an inexorable climb for the last 10 years, illustrating growing traction among many mainstream investors for more disclosure and action. More than half of all the 175 votes so far this year — 98, or 56 percent of the total voted — were above 20 percent, up from 45 percent of the total voted on last year at this time.

Negotiated agreements: Investor advocates withdraw more than one-third of all proposals they file, in proportions that recently have been growing. Si2’s analysis of filing trends and results shows that proposals earning high levels of investor support are the most likely subjects for negotiation. In the last three years, proposals about diversity (on boards and in the workplace) and sustainability reporting have had the highest average vote levels and withdrawal rates.

Omissions: Companies have been less successful in their attempts at the SEC to keep resolutions off proxy statements in 2013, with just 12 percent of the proposals excluded under provisions of the shareholder proposal rule compared with 16 percent last year. “This could mean proponents have gotten better at framing their proposals, but it also may mean the SEC is taking a more expansive view of what shareholders should consider,” Welsh said.

Most common sponsors: The most prolific sponsors of shareholder proposals are social investment firms, pension funds and faith-based investors, according to Si2’s analysis of 1,600 proposals filed since 2010. Individuals, unions and single-issue groups are important proponents, but they don’t file as many resolutions.

Championing diversity: Shareholder proponents continued efforts to encourage greater action on board diversity have grown. Filers cemented a record number of withdrawal agreements with companies this year, aiming to address longstanding disparities in gender and racial composition of U.S. boards. All told, diversity proposals have had the highest average support levels in 2013 and in the last three years.

Demanding sustainability reporting: Calls for companies and their suppliers to publish sustainability reports produced the second highest level of support from investors. Most requests pointed to the Global Reporting Initiative (GRI) guidelines as the preferred reporting format. Many companies agreed to extend monitoring and reporting into their global supply chains — a key objective of the proponents was made all the more pointed by events like the April factory collapse at a garment factory in Bangladesh.

Calling for disclosure of political spending: Investor interest in the disclosure of all corporate efforts to influence elections, laws and regulators ballooned further in 2013. Just under one third of all the environmental and social proposals filed pushed for reports on governance and contributions regarding political campaigns, as well as lobbying that takes place outside of elections. Lobbying transparency requests increased, with 60 proposals. Half of the 18 proposals earning more than 40 percent dealt with these concerns, while proponents racked up 28 withdrawals after reaching accords with management in nearly every instance. Simmering in the background is a continuing push for a new SEC rule that would require all public companies to disclose what they spend during elections. “The crunch issue is how much companies are willing to say about their indirect spending — what they give to trade associations and non-profits who try to influence politics,” Welsh observed.

The Sustainable Investments Institute (Si2)

About Si2: The Sustainable Investments Institute (Si2) provides institutional investors with in-depth, impartial analysis of environmental and social policy shareholder resolutions filed at U.S. companies. It also is an incubator for empirical research on emerging sustainability topics and corporate and investor responsibility issues. More about Si2 at www.siinstitute.org

To download the full report including charts and graphs as well as Proposals Pending for Late Season Votes go to-  http://bit.ly/1d61AcF

 

Sustainable Investment Organization (US SIF) Releases Guide for Retail Investors to Address Climate Change

 
The US SIF Foundation will also release a Guide for Institutional Investors 

In July 2013 the US SIF Foundation released Investing to Curb Climate Change: A Guide for the Individual Investor [1]. This guide seeks to meet the increasing interest of a wide range of investors in using their investment dollars to address the risks of climate change and to help generate solutions.

The guide highlights strategies that retail investors can use not only to address climate change within their own holdings of stocks, mutual funds, fixed income and cash instruments, but also to encourage institutions in their communities to adopt more climate-sensitive investment policies. The guide also suggests several public policy initiatives investors can support to facilitate investments in clean energy and energy efficiency. A similar guide for institutional investors was published on July 29 and will delve more into private equity and alternative investments.

US SIF Foundation CEO Lisa Woll said, “While the sustainable investment field has a long history of addressing climate change, many investors have not considered how their investment portfolios can be part of their efforts to confront climate change. This short guide provides retail investors with resources and ideas they can employ to decrease the carbon intensity of their own portfolios and to encourage more investment towards a low-carbon economy.

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“The guide is also timely because recent campaigns calling for divestment from fossil fuels have drawn the attention of a range of retail and institutional investors who may be thinking for the first time about how to invest to curb climate change.  The guide will show them the breadth of strategies that can advance their climate change efforts.  For those investors who have chosen to divest from fossil fuels, the US SIF Foundation has also created a new web page, Fossil Fuels, Divestment and Reinvestment (www.ussif.org/climatereinvestment ), which helps investors consider reinvestment options across a range of asset classes to help promote renewable energy, energy efficiency and sustainable development.”

Investing to Curb Climate Change:  A Guide for the Individual Investor is the inaugural publication of the “How do I SRI” series (www.ussif.org/howdoisri ) of practical guidebooks.  Each guide will focus on a social or environmental problem and the strategies through which investors can address it.  The series is made possible through funding from the Wallace Global Fund.

Article Link – Download the Guide (PDF)

[1]  http://www.ussif.org/files/Publications/SRI_Climate_Guide.pdf

The US SIF Foundation and US SIF Forum

The US SIF Foundation is a 501c3 organization that undertakes educational, research and programmatic activities to advance the mission of US SIF.

US SIF: The Forum for Sustainable and Responsible Investment is the US membership association for professionals, firms, institutions and organizations engaged in sustainable and responsible investing. US SIF and its members advance investment practices that consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact. US SIF’s members include investment management and advisory firms, mutual fund companies, research firms, financial planners and advisors, broker-dealers, banks, credit unions, community development organizations, non-profit associations, and pension funds, foundations and other asset owners. Details at-  www.ussif.org

Contact Person:

Megan Smith, email at- msmith@ussif.org  or phone (202) 747-7820

Horizons Sustainable Financial Services Announces Zero Carbon Energy Portfolios

 
Horizons Sustainable Financial Services, a Santa Fe, NM based registered investment advisory firm, announced in July 2013 a new line of well-diversified mutual fund portfolios with no exposure to any companies directly involved in the production of fossil fuels. With these Zero Carbon Energy portfolios, Horizons joins a very small group of firms offering fossil fuel free mutual fund strategies.

Inspired by the media campaigns of such activist organizations as www.350.org  and The Fossil Free Campaign (www.gofossilfree.org ), a large and growing number of investors are asking their advisors for portfolios with no stake in any carbon energy companies. “Many of our clients have asked if we can offer them a fossil fuel free portfolio,” said Kim Kiel, President of Horizons. “With our new Zero Carbon Energy strategies, we can offer these portfolios to everyone.”

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The portfolios are built on a “sustainable, responsible, impact” (“SRI”) investing foundation. “These prudently-diversified portfolios use mutual funds from some of the leaders in the SRI industry,” said Johann Klaassen, Chief Investment Officer of Horizons. “So the clients who choose these portfolios get the best in screening (both positive and negative) as well as strong commitments to shareholder advocacy efforts and the real-world impact of community investment.”

Zero Carbon Energy portfolios are currently in use with some Horizons clients.  Financial professionals interested in making these portfolios available to their own clients may contact Horizons at- info@horizonssfs.com

About Horizons Sustainable Financial Services:

Horizons Sustainable Financial Services, Inc., is a Registered Investment Advisor that is incorporated and registered in the State of New Mexico. In accordance with federal law, we may only conduct business in states where appropriately registered or exempted from registration. Horizons offers a full range of investment services to further our clients’ socially conscious values. We currently serve clients in a number of states nationwide, and would be pleased to discuss whether it is permissible (given your state of residence or incorporation) for us to serve your financial needs. Visit us online at-  www.horizonssfs.com

Nothing in this release should be interpreted as investment advice, or as an offer to buy or sell securities.

For more information contact:

Johann A. Klaassen, PhD, CFP®, AIF®, Chief Investment Officer

719-262-0725  or  877-321-3236  or at-  johann@horizonssfs.com

Sustainable Beauty Day (Davines Salons) – October 7, 2013

 
Davines North America is pleased to announce a charitable initiative for salons across the US and Canada to celebrate our 3rd Sustainable Beauty Day, which will take place on Monday, October 7, 2013. On that day, consumers can visit participating salons and receive a cut and styling service for a suggested donation of $15 (note: suggested or minimum donations may vary).

The 2012 edition raised $62,000 thanks to the efforts of 80 salons in the US and Canada. The amount was enough to plant 5,800 fruit trees in elementary school yards and communities in Brazil. In 2013/14, we are once again partnering with The Fruit Tree Planting Foundation (www.ftpf.org ). As with many environmental charities, planting trees is central to their cause. But by planting fruit trees only in communities worldwide, they take an environmental project and raise it to the level of social  (sustainability. This “socio-environmental” duality is a beautiful fit for Davines.

Sustainable Beauty Day (Davines Salons) – October 7, 2013

The 2013 Goal

With the collaboration of Davines salons, the goal is to raise $75,000 this year to fund a fruit tree planting project in the US Southwest. Davines will be the key sponsor for a project that will bring fruit trees, agricultural education and a direct, local source of nourishment to American Indian communities in New Mexico and Arizona. FTPF’s Brazil-based support teams (NGOs and civil groups) will ensure an organized effort and will help to make sure that the literal “fruits of our efforts” will be cultivated for years to benefit the community.

In 2010, Davines embarked on a project intended to combine our company philosophy with real, identifiable, positive effects on our environment, while marshaling the collective talents and philanthropy of our Davines, salons across the United States and Canada.

We called it Sustainable Beauty Day

Now in its third edition ( #SBD2013 ) Sustainable Beauty Day has become a cornerstone. Last year Davines salons helped raise $62,000.00 to aid the The Fruit Tree Planting Foundation ( www.ftpf.org ) in planting 5,800 fruit trees in elementary school yards and communities in Brazil.

This year, Sustainable Beauty Day will be held on Monday, October 7th and our goal is to raise $75,000 to provide support – fruit trees, agricultural education and nutrition to Native American tribal communities in the American Southwest.

More details at-
www.davines.com/en/about-davines/sustainable-beauty-day

If you are in Santa Fe, New Mexico

Salon Del Mar
1221 Flagman Way, Building A-1 / phone (505) 490-2278

Find Salon Locations in the US, Canada and Worldwide
www.davines.com/en/salon-locator

Deep Green Money

by David Rose, Unified Field Corporation

ORIENTATION

Many thanks for the opportunity to share the following perspectives with GreenMoney’s thoughtful and caring readership. This article will present ideas, questions and suggestions gathered from a lifetime of attention and observation, and a deep commitment to finding ways to improve where we are going as a species in relationship to natural systems we have been stressing for some time.

I believe it’s important for us to remind ourselves that Earth’s natural systems have been functioning perfectly well without humans since long before we arrived. These systems seem to thrive through the ability to course correct, to purge those experiences that are not serving the whole system, and to develop subsystems and life forms that function for the most part instinctively so that the continuation of life and the evolution to greater efficiency and resiliency is constantly being encouraged.

Humanity seems to be the exception to this self-regulating harmony, but only in the short term; for in the long run Nature always has her way. The notion that our actions or inactions may “destroy the planet” are typical of mankind’s tendency to sometimes see itself in grandiose terms that are not necessarily connected to the performance of systems we are only beginning to fully understand.

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We are not going to destroy the planet. If we as a species are unable to evolve a few simple perspectives in our thinking and feeling natures, the way we relate with each other and our world, and to evidence those changes in our environmental, social, cultural and economic activities – we may lose our position, but life on this planet will continue in some form, though perhaps unrecognizable to us. Earth has purged subsets of species before, she has undergone climate changes that have extinguished other seemingly dominant forms of life. But Earth lives on, generates whole new living systems, new species adapted to those changes… Earth will be fine.

Perspective gives us opportunities to see beyond the horizon of our experiences, and to try on a new and more expanded way of evaluating what we are doing, thinking and feeling, what is going on around us, how we might act differently and more effectively; and based on our willingness to explore, what new possibilities may be available to us.

I believe our species is standing at the threshold of the greatest opportunity in the known history of any culture on Earth. That opportunity is not only to “save” our spot on this beautiful planet, but to learn new ways of living and acting in harmony with natural laws that will continue on with or without our cooperation; and that have been working effectively for billions of years. The reward for our courage and humility, our caring for ourselves, each other and all forms of life can be a future that includes a quality of creativity, abundance, vitality and fulfillment that we have not known before.

Indigenous Cultures around the world have preserved various traditions of living in harmony with natural Earth systems. Many of these cultures are reaching out to the Mainstream Culture in an effort to share these principles and practices with us. They need us to listen because they see themselves as part of a larger human family whose continuation is at risk. We would do well to heed their wisdom, as it seems we have a lot to learn.

The work of the Unified Field Corporation and its Regenerative Community Initiative is part of a larger impulse to translate some of these principles into terms we can apply to the world of money and sustainable community development, so that money can be used as a tool to rebuild not just our physical infrastructure so that it can function more in alignment with natural law, but also how we relate with ourselves and each other through the process. Basic perceptions underpinning our relationship with money must be reexamined if we are to meet the opportunity before us. We call this ultimately intelligent and naturally aligned use of money as a tool for the greater good – Deep Green Money.

CONCEPTS

Money is a symbol of our relationships with each other in action. It is only possible because of a decision humans have been making for thousands of years to form agreements with each other about the various forms of value they want to exchange. Money is a reflection of the trust that exists in a society, and so the consequences of money’s actions in that society are a direct expression of the quality of relationships that society is predominantly engaged in. What this means for us is that if we want money to be a more powerful tool for good, if we want to create Deep Green Money, we have to redefine our relationships with each other. The more profoundly we do this, the more directly and profoundly effective our use of money will be as a tool for the changes we wish to see in the world.

Nature displays both competition and cooperation in abundance. When we see competition as a stimulus for adaptation to change and allow it to strengthen our ability to deliver goods and services with greater quality, efficiency and consistency, it becomes useful. Cooperation is essential in all of nature, in our human families and especially in business, since few of us are able to deliver the required expertise in producing, operating, distributing, selling, marketing, managing and communicating all the value we are here to share.

The Partnership Mindset goes far deeper than collaboration. It holds that none of us ultimately wins unless we all win. It is a no matter what commitment to the success of the whole, via the use of positive competition and creative collaboration to generate the more complex, synergistic relationships and assets that mimic natural ecosystems. Within this creative synergy, magnificence is engaged, genius applied, creative impulses expressed and resources activated in each of us working successfully together.

Risk is the uncertainty we face when investing in anything that has not proven itself; that has yet to occur in the future. The uncertainty of risk is natural and stimulates a positive form of fear we call vigilance, which from all financial perspectives is healthy and necessary. From the Deep Green Money perspective, fear can become degenerative when it overtakes the trust in a relationship born of a natural alignment between a collaborative assessment of the apparent uncertainties of the investment, the investor’s level of informed willingness to take an inspired risk and their ability to safely absorb a possible loss.

Potential is the positive side of the assessment. How can the principles of Deep Green Money help us evaluate the success of a venture and our investments? Here also we need to go deeper than the numbers – to the heart of those people making the decisions that will shape the success or failure of a venture. What Deep Green Money suggests is that we look for investments that are based on a sound business premise meeting a real need that can be profitable, aligned with our sustainable values commitments, and where the ultimate decision makers; those who have the authority and the responsibility to direct that enterprise, have strength in all 3 of the following essential areas:

•  Persistence is a decision that we make at the core of our being that regardless of the obstacles we encounter we will continue until we succeed. In a person who has mastered that decision there is no possibility of giving up. Such a no matter what decision attracts forces and support that accomplish what may seem impossible to others.

•  Adaptability is the commitment to learn from our experiences; to refine our approach, our strategies, our team, our effort and thinking so that our Persistence becomes more effective over time.

•  Transformation simply means that if we are committing to accomplish something that hasn’t been done before, we must be willing to learn and grow in new ways that aren’t always comfortable for us – in service to our own betterment and to a purpose greater than ourselves.

IMPLEMENTATION

The implementation of Deep Green Money relationships will be enhanced through alignment of the venture with a sustainable business commitment including a Quadruple Bottom Line approach to planning and evaluating the full impact of the venture. The Quadruple Bottom Line asserts that a focus the environmental, social and cultural bottom lines are essential to and supportive of the long term success of the financial bottom line. More information on these and other implementation concepts such as the 9 Areas of Sustainability can be found on our website: www.unifiedfieldcorporation.com

Alignment is the art of exploring and structuring relationships including Deep Green Money investments via an assumed appreciation and respect for the naturalness of both parties. Preconceived needs going into a discussion can become blinders, keeping us from seeing the real potential as well as the real limits within the relationship. Better to lay aside our agenda temporarily so that we can truly see the other, appreciate and understand their potential within a naturalness that we’ll be able to count on, and from there bring our needs collaboratively and transparently back into the structuring portion of the exploration, fully empowered with knowledge of what’s possible and optimal in that relationship. Deeply aligned relationships are more secure, long lasting and productive. Misunderstandings are more easily converted into movement forward that everyone can be pleased with.

Most important, aligned relationships access a deeper source of strength through the harmony and connectedness they are built upon. Beginning a relationship with sincere respect, appreciation and a commitment to the greatest possible mutual benefit, and keeping to that commitment for the duration builds trust and a strength that can carry us through to greater success on all levels.

The actual practice of Alignment is a 4 step process of inquiry that clarifies resonance and or dissonance in the areas of Vision, Placement, Perception of Fairness and generally held Core Beliefs about how life works. GreenMoney readers are invited to email a request for a complimentary 5-page orientation on the practice of Alignment to- info@unifiedfieldcorporation.com

Article by David Rose, Founder and CEO, Unified Field Corporation

Following serial careers spanning over 30 years in home building, real estate investing, wellness product marketing and sustainable business development teaching and consulting, David Rose founded Unified Field Corporation (UFC), a sustainable community development systems company in 2008. David developed and has used the Alignment Process in his business development work for over 10 years. UFC’s Regenerative Community Initiative is working with licensees in several communities across the U.S. on projects that will build market for organic local farmers and strengthen local food systems. He can be reached via email at-  david@unifiedfieldcorporation.com

 

GMOs in Our Food: Do We Have a Right to Know?

 
By Steven Hoffman and Nikki McCord

If you’re anything like us, you’re probably enjoying a snack while checking your email and catching up on your blogs. If you’re eating a conventionally produced snack – that is, one that is not Certified Organic or Non-GMO Verified – chances are it could be full of GMOs. Check your packaging. Did you see the label informing you of this fact? Most likely you didn’t because companies are not required to tell you whether or not GMOs are in your foods. And yet, GMOs are in about 80% of commonly processed foods. So what are GMOs and what is their impact on human and animal health and the environment?

Genetically Modified Organisms (GMOs) are organisms whose genetic material has been altered using genetic engineering techniques. Such genetic engineering techniques include laboratory-induced DNA alteration or adding or subtracting from the organism’s genome. According to the USDA, genetically modified (GM) plants are created to “provide protection from or resistance to environmental threats, to modify the quality of agricultural products, to increase the nutritional value of foods, and to accelerate the growth of the organism.” However, a growing body of scientists, researchers, agriculturists and consumer advocates are questioning if indeed genetically engineered foods are fulfilling those promises or if indeed they are creating their own potential health and environmental crisis.

What Crops are Genetically Engineered, or GMO?

There are nine genetically engineered crops currently approved for commercial production in the United States market.  They include:

• Corn           • Cotton          • Hawaiian Papaya           • Soybeans           • Sugar Beets

• Zucchini      • Canola        • Alfalfa        • Yellow Crookneck Squash

The five major varieties—soy, corn, canola, cotton, and sugar beets—have bacterial genes inserted, which allow the plants to survive an otherwise deadly dose of weed killer. The second GM trait is a built-in pesticide, found in GM corn and cotton.

GMOs, Human Health and the Environment

Potential Human Risks:

There are a variety of scientific studies citing allergic reactions, liver problems, reproductive dysfunctions, and epidemics stemming from the consumption of GM or genetically modified foods. Tests of GMOs on laboratory rats is a first step to extrapolate their dangers on humans. A 2005 report in the journal Allergy and Asthma Proceedings revealed that a skin prick allergy test showed that some people react to genetically modified soy, but not to wild natural soyA gene called Bt (for Bacillus thuringiensis) is inserted into the plant’s DNA, where it secretes the insect-killing Bt-toxin in every cell. This is found primarily in GM corn and cotton. A study has shown that mice that were fed the Bt-toxin started having immune reactions to formerly harmless foods. This means that, after the introduction of Bt, these animals developed allergies to non-GMO foods. Lab rats have also experienced reproductive issues after being introduced to GMs. A study conducted by Institute of Higher Nervous Activity and Neurophysiology of the Russian Academy of Sciences (RAS) found that more than half of the babies of mother rats fed GM soy died within three weeks. Additionally, there is anecdotal evidence of death of animals after grazing on Bt cotton plants after they were harvested. Farmers in India report that thousands of sheep, buffalo, and goats have died as a result of eating GM crops.

Documented Human Risks

:

To date there have been no human clinical trials of GM foods. Pro-GMO groups state, “[It is] generally agreed that long-term monitoring of the human health risks of GM food through epidemiological studies is not necessary because there is no scientific evidence suggesting any long-term harm from these foods.” However, in 2004, the journal Nature Biotechnology published the results of a study of a human GM feeding experiment that revealed that the genetic material inserted into GM soy transfers into bacteria living inside human intestines and continues to function. According to the Institute for Responsible Technology, this means that humans may still have GM proteins produced continuously inside them. These may be proteins altered in a way the human body doesn’t recognize and may be contributing to an increase in food allergies.

GM food supplements have caused human deaths in the past. In the late 1980s, a contaminated brand of a food supplement called L-tryptophan killed about 100 Americans and caused sickness and disability in another 5,000-10,000 people. The source of contaminants was almost certainly the genetic engineering process used in its production. As there is currently no monitoring for GMO-related illnesses and no long-term animal studies, there is an inability to identify the source of the problem.

Environmental Risks

Many genetically modified crops are altered to be resistant to herbicides and pesticides. In many cases, farmers have been known to overuse herbicides and pesticides, as they do not harm the crop. Nature published a study that showed that pollen from Bt corn resulted in a high mortality rate among monarch butterfly caterpillars. The caterpillars feed on milkweed plants but the pollen from the Bt corn from a neighboring field interacted with the milkweed plants.  The caterpillars would consume this infected milkweed and die. The potential risk posed to non-target organisms is a real concern. Additionally, the United States Geological Survey (USGS) has found the herbicide glyphosate (Roundup) consistently in rain, rivers, surface water and air throughout the entire growing season in agricultural areas in the Mississippi River watershed.

Super Weeds

As weeds adapt to herbicides, they develop resistance and evolve into what are called “super weeds.” When that happens, herbicide use increases and the benefits of herbicide resistant crops are diminished, if not lost. This is a counterintuitive finding, as one would assume that crops that are engineered to resist herbicides should result in the decrease in the use of herbicides. However, as Washington State University research professor Charles Benbrook found in his research, herbicide-tolerant crops worked extremely well in the first few years of use, but the weeds became resistant to the herbicides being used causing farmers to use increasing amounts weed killing chemicals to try to control these “super weeds.”

A 2011 Dow Chemical Co. study found as many as 20 million acres of GMO corn and soybeans may be infested with Roundup-resistant “super weeds.” Farmers spend more money to buy herbicide resistant seeds to plant.  However, now that weeds are resistant to the herbicide as well, farmers are using older herbicides like 2,4-D that many have deemed to be dangerous to humans and has been shown to cause birth defects in animals exposed to the chemical. Before the introduction of these herbicide resistant plants, farmers used “multiple herbicides, which slowed the development of resistance. They also controlled weeds through plowing and tilling — practices that deplete topsoil and release carbon dioxide, but do not encourage resistance. The GM crops allowed growers to rely almost entirely on glyphosate, which is less toxic than many other chemicals and kills a broad range of weeds without plowing. Farmers planted them year after year without rotating crop types or varying chemicals to deter resistance.”

Counterpoints from the Bioscience Community

The corporations developing GM crops object to the claims that GMOs are harmful to humans and the environment. On its website, Monsanto states of its genetically modified foods, “so long as the introduced protein is determined safe, food from GM crops determined to be substantially equivalent is not expected to pose any health risks. Further, it is impossible to design a long-term safety test in humans, which would require, for example, intake of large amounts of a particular GM product over a very large portion of the human life span. There is simply no practical way to learn anything via human studies of whole foods. This is why no existing food – conventional or GM – or food ingredient/additive has been subjected to this type of testing.”

In general, companies that produce genetically modified organisms argue that there is no evidence to prove that GMOs are harmful. Organizations like the American Association for the Advancement of Science (AAAS) state that GM crops “pose no greater risk than the same foods made from crops modified by conventional plant breeding techniques.” This statement, however, was refuted by the Center for Responsible Genetics (CRG), claiming that the AAAS came to this decision without vote by its full membership and without a complete review of the science behind the statement. Further, the American Academy of Environmental Medicine called for a moratorium on genetically modified (GM) foods, stating: “Avoid GM foods when possible… Several animal studies indicate serious health risks associated with GM food… There is more than a casual association between GM foods and adverse health effects. There is causation… The strength of association and consistency between GM foods and disease is confirmed in several animal studies.”

The overarching position from companies with a financial stake in the production of GMOs is that there is no evidence to prove that GMOs are harmful, therefore, the public should not worry about any real or perceived health threat from GMOs, and that mandatory labeling of GMOs would only “confuse the consumer.”

Consumers React

The risk of GMOs being harmful to humans and the environment has mobilized efforts around the world. In the US, several states have tried to tackle the GMO issue. Most notable are the efforts put forth in California. California Proposition 37 was written with input from food groups, industry, science, and legal and health experts. The initiative was designed to require clear labeling to let consumers know if their food was genetically modified. Corporations like Monsanto and DuPont spent millions of dollars to defeat the initiative, arguing that a food-labeling requirement would cause foods to be banned for sale unless they were repackaged, relabeled or remade with higher cost ingredients, therefore increasing food costs for consumers. Proposition 37 was presented to California voters in November 2012 and was defeated in a very close vote. Despite the loss, the awareness of this issue has encouraged other action like Initiative 522, which will be presented to Washington State voters in November 2013.

On May 25, 2013, more than 2 million people in 50 countries worldwide marched to protest Monsanto and bring public awareness to genetically modified foods. This grassroots protest was organized in February 2013 and quickly grew into a worldwide event. There is increasing public support for the labeling of GMO products. Although there have been setbacks in the movement, there is increasing public support for labeling.

What You Can Do

There are a number of things you can do to learn more about genetically engineered foods and to support the consumer’s right to know how our food is produced.

First, in order to ensure that you are not eating GMOs, choose organic.  Foods that bear the USDA organic seal are prohibited from using GMOs in organic production.

Next, consumers should support labeling of products containing GMOs. Groups like the Non-GMO Project have a verification seal for products that contain no GMOs. Just Label It supports the labeling of products that contain GMOs.

Regardless of whether you live in the state of Washington or not, citizen consumers can support the efforts of the Yes on 522 Initiative. This Washington initiative will be before voters in November 2013 and seeks to require labeling on foods that contain GMOs. If the state initiative passes, it will change the debate on mandatory federal labeling of GMOs in the U.S.

Last, consumers are encouraged to join social media efforts like GMO Inside which gives people information and tools, and provides a place for a growing community of people from all walks of life to share information and actions around genetically engineered foods.

Currently about 93% of the US population supports labeling of GMOs. However, the influence and dollars from large corporations are preventing consumers from having a clear understanding of whether or not GMOs are in their food. These grassroots efforts by organizations and concerned citizens is the best way to change the conversation and encourage companies to provide transparency to the public by clearly stating which products contain GMOs.

Article Authors:

Steven Hoffman has been involved in sustainable food and agriculture for more than 30 years. He is Managing Director of Compass Natural LLC, a marketing, communications, public relations and business development agency serving the natural, organic and sustainable products businesses. Hoffman served on the Steering Committee of California’s Prop 37 and currently works on Washington State’s I-522 GMO labeling campaign. A former Peace Corps volunteer and agricultural extension agent, Hoffman holds a M.S. in Agriculture from Penn State University.

Nikki McCord, with a B.A. in Political Science and Government from the University of Notre Dame and a Master of Public Policy from Michigan State University, specializes in Government Relations and legislative, regulatory and public policy work through the McCord Consulting Group in Boulder, CO.

GMOs Resources List

For more information about Genetically Modified Organisms visit the following sites:

Non-GMO Project

This organization is committed to preserving and building sources of non-GMO products, educating consumers, and providing verified non-GMO choices. They offer North America’s only third party verification and labeling for non-GMO (genetically modified organism) food and products.  www.nongmoproject.org

Organic Consumers Association

Representing over 850,000 members, the Organic Consumers Association undertakes crucial issues of food safety, industrial agriculture, genetic engineering and other key topics.  www.organicconsumers.org

Food Democracy Now!

Food Democracy Now! is a grassroots movement of more than 650,000 farmers and citizens dedicated to building a sustainable food system that protects our natural environment, sustains farmers and nourishes families.  www.fooddemocracynow.org

Center for Food Safety

The Center for Food Safety (CSF) is a national non-profit public interest and environmental advocacy organization working to protect human health and the environment by curbing the use of harmful food production technologies and by promoting organic and other forms of sustainable agriculture. www.centerforfoodsafety.org

GMO Inside

GMO Inside is a campaign dedicated to helping all Americans know which foods have GMOs inside, and the non-GMO verified and organic certified alternatives to genetically engineered foods.  https://www.greenamerica.org/gmo-inside

California Right to Know

California Right to Know supported the efforts of California Proposition 37, a ballot measure that required clear labels letting consumers know if foods are genetically modified.  www.carighttoknow.org

Yes on 522

Yes on 522 is an initiative campaign working to ensure that genetically engineered foods are labeled in the state of Washington. yeson522.com

 

Beyond Socially Conscious Investing: How integrated reporting is helping sustainability go mainstream

 
By Dr. Peter Graf, Chief Sustainability Officer and Executive Vice President, SAP AG and Dr. Christoph Huetten, Chief Accounting Officer and Sr. Vice President, SAP AG

When SAP first began talking about the importance of sustainability to our business, some people – even inside our own company – were confused. What does SAP, one of the world’s leaders in enterprise software, have to do with sustainability? We are not a manufacturer, so we are not a big polluter and have a small carbon footprint compared to other large companies. We do not consume large amounts of natural resources such as timber or water. In fact, we operate in an industry that – for these reasons – has ignored sustainability challenges for a long time.

We decided that our approach had to include consideration not only of short-term but also long-term success. As a result, some of the non-financial indicators we focused on were not what many expected. They included employee engagement and customer satisfaction – measurements that seemed far removed from the usual environmental definition of sustainability.

But for SAP, our long-term success depends on our ability to innovate. Indicators such as employee engagement are more strongly connected to our core value creation as a software company than our own energy consumption and related carbon footprint. Engaged employees create better software. This is why our executive compensation takes into account how effectively leaders engage their teams. Our sustainability as a company depends on their ability to do so.

Such an approach – which led to the creation of our first Integrated Report this year – speaks to a maturing of the sustainability field that is highly relevant both to companies and the investors who bet on their prospects for success. As its name suggests, an integrated report merges financial and non-financial results – everything from revenue and margin to carbon reduction and social investments – into one cohesive document. More important, a truly integrated report looks at the connections and interdependencies between the two categories of performance measurement.

Such reporting stands for the idea that sustainability is no longer a nice-to-have with appeal mainly to the socially conscious investor. Instead, leading companies are recognizing that in order to succeed financially, they must determine how to make their core business strategy sustainable in the long term. And they must act in the context of their industry, as each must respond to mounting global challenges, different regulations, changing consumer demand and expectations, and varied levels of scarcity of natural resources.

Integrated reporting reflects this evolution and is a tool to help drive it. As noted above, a fully integrated report does more than place financial and non-financial results side by side. It highlights their connections. The story woven throughout an integrated report is about how sustainability can enhance a company’s core value creation. Increasingly, financial and non-financial performance circle the same theme and can be captured in overlapping language. Together, they mean more than they could apart.

For companies, integrated reporting is about integrated thinking, which leads to everything from greater innovation to the creation of new markets to better fulfillment of customer needs. For investors, integrated reporting provides a more complete picture of what they care about: which companies are creating the most value and are best equipped to navigate the future.

SAP’s journey to a more sustainable strategy

From the start, our approach to sustainability has been rooted in our business. Our mission is to help the world run better and improve people’s lives. We realize this mission by delivering software to our customers to address their business challenges in a complex, fast-changing global marketplace. The non-financial indicators that are most material to SAP, therefore, are those that best support this business strategy.

Sustainability is increasingly relevant to our strategy because the challenges faced by our customers are changing. The world’s largest manufacturers, for example, must now contend with diminishing natural resources, unpredictable energy prices, supply chain complexity, and climate-related disruptions. Many are working to increase efficiency, track carbon and reduce energy costs. In order to help our customers address such challenges, we need first-hand experience in doing so ourselves. For this reason, even though our environmental impacts are limited, we rigorously measure our performance in such areas as our total energy usage, carbon footprint, and data center efficiency.

SAP has benefited from these efforts in both top and bottom-line ways. Insights from our experience have led to new innovations. We are now providing our customers with solutions to enhance their efficiency, as well as track their emissions and energy usage. We have also expanded our innovation to create new efficiencies that directly impact our bottom line: Since the beginning of 2008, our sustainability initiatives have contributed to a cumulative cost avoidance of €240 million, compared to a business-as-usual extrapolation.

Exploring the sustainability link to value creation

The key to this approach is that we have not sought to reduce our energy usage or carbon footprint in a vacuum, off to the side of our core business. Instead, we have linked these efforts to creating value for shareholders as well as creating software to meet our customers’ changing needs.

We have made similar connections with the social dimensions of sustainability – namely, employee engagement, diversity, health, and retention – all of which relate to how our employee experience supports the creation of better software.

Engaged employees feel a strong connection to SAP and are driven to develop new solutions. Companies with highly engaged employees achieve 12 percent more profitability and 18 percent more productivity than their peers, according to Gallop Consulting. Diversity is equally tied to innovation, as diverse teams better understand our customers and come up with a greater range of ideas. The health of our employees speaks to their ability to be their best, while retention reflects how well we are holding onto top talent.

While employee engagement and customer satisfaction are paramount at SAP, other dimensions of sustainability may be more relevant to other companies. The work of integrated thinking – and ultimately the value of integrated reporting – lies in finding these points of connection. A utility, for example, may focus on creating more efficient power plants or developing alternative energy sources. Car companies are exploring “connected cars” that save energy and deliver better service to drivers. A sporting goods company may come up with better designs that appeal to consumers while incorporating more sustainable materials. A retail giant may vastly improved efficiency in its supply chain, delivering lower prices while reducing its environmental impact.

All of these examples show how sustainability can be linked to a company’s core value creation and in turn, its financial performance. One of the features in our integrated report that drew the most attention illustrates this link with a visual diagram (http://bit.ly/18CtgQw ). Arrows point between such seemingly disparate areas as engagement, health, margin, revenue and our carbon footprint.

Once we began mapping these connections, we found that they often overlap, creating a web of impact on our business performance. For example, reducing our carbon footprint increases our employee engagement, which is turn increases our revenue, margin, health and retention. At the same time, employee engagement contributes to our ability to reduce our carbon footprint.

For the first time in the past year, we sought to quantify these linkages, looking at the financial impact of our retention rate. We calculated that for each percentage point that this rate goes up or down, the impact on our operating profit is approximately €62 million. Beyond showing that holding onto talent impacts our business success, this finding frames a non-financial indicator in traditional business terms. It makes sustainability relevant to those who care about financial performance.

Exploring and documenting this kind of link separates integrated reporting from merely combined reporting, which to us would miss a critical point – that the interconnections between financial and non-financial performance are where new opportunities exist to create value.

Going mainstream: A shift from socially conscious investors to investors

Why does all this matter to investors? The answers are both obvious and hidden. They start with the wording of the question, which we have deliberately framed around “investors” and not “socially responsible investors.” Historically, sustainability has felt most relevant to those who care about the environment or specific social issues. Then the trend began to broaden; one early action by investors who were not specifically focused on sustainability was to exclude from their portfolios companies that made certain types of bombs or tobacco. In recent years, more and more such investors started to shift from exclusion to inclusion, seeking out companies that were working to create positive change. The growth in investor interest became a driving force behind the worldwide increase in sustainability reporting.

In light of these developments, sustainability has taken on broader meaning to a bigger class of people – not just those who care about environmental or social issues, but those who care about making smart, long-term investments. Sustainability is no longer only about reducing environmental impacts or even creating a positive social good. As we move further into the 21st century, it can be defined as a company’s ability to create long-term value, at lower risk, in the face of pressing global challenges.

An integrated report sheds light on this ability – is a company identifying and seizing new business opportunities, even in the midst of diminishing resources or pressures such as population growth? To what degree is an organization anticipating change or cultivating assets to outperform its competition? In the case of SAP, if we do not work to attract, retain and engage top talent, we will inevitably suffer losses in our ability to innovate and serve our customers.

Investor demand is once again starting to drive a trend toward transparency on such issues. According to a recent study by the Association of Chartered Certified Accountants (ACCA), a whopping 92% of investors agreed that financial and non-financial information should be more integrated. Such integration speaks to the interests of investors in another way. Whereas financial reporting tends to focus on results that have already occurred, integrated reporting is also about looking forward. It encourages companies to think in the long term. It is aspirational, built on the proposition that challenges can, and should, be turned into opportunities. And it involves looking at every form of capital – social, human, environmental and financial – and asking how they are relevant to future success.

As a result, integrated reporting offers a more complete, holistic view of a company’s prospects, which have always been and will always remain the central focus of investors.

A future that is both sustainable and profitable

In other words, integrated reporting does not mean that investors should stop caring about profits. To the contrary, it provides a more meaningful understanding of what it takes to create value in a changed world. Integrated reporting is therefore helping to drive sustainability mainstream, broadening its relevance to a much larger community of investors.

This said, integrated reporting is not an end in itself. It is a milestone on a journey. At SAP, we have said for years that we cannot limit ourselves by merely creating a sustainability strategy; instead, we are working to make our corporate strategy more sustainable. We are still on this journey. The importance of our first integrated report is that it drives us toward integrated thinking – and such thinking is only as valuable as the actions that it spurs.

In the end, integrated reporting must signal more than a shift in how companies report on their performance, but how they conduct business in a world in which sustainability, viability and profitability increasingly mean one and the same thing.

Article Authors:

Dr. Peter Graf
Chief Sustainability Officer and Executive Vice President, SAP

Peter and his team built SAP’s sustainability strategy and organization from the ground up. Under his guidance, SAP has become highly regarded for its leadership both as an exemplar of sustainable operations and as a provider of software solutions that enable SAP’s global customers to enact more sustainable business practices. Peter oversees strategy and innovation for sustainability solutions and operations.

During his tenure at SAP, Peter has held various management roles including the Deputy Chief Marketing Officer at SAP, responsible for the go-to-market strategy for all of SAP’s product lines across all industries and geographies. Based out of SAP Labs in Palo Alto, CA, Peter is part of the company’s global leadership team and reports to the co-CEOs, Jim Snabe and Bill McDermott.

Dr. Christoph Hütten
Senior Vice President and Chief Accounting Officer, SAP

Christoph is responsible for SAP’s financial reporting under IFRS including related SEC reporting and all accounting policies, as well as certain corporate governance topics and SAP’s Global Finance Academy. He has been with the Company since 1999 when he joined SAP as assistant to the CFO. Before his current role in Corporate Financial Reporting, which Christoph assumed in 2003, he was head of Corporate Finance.

From 2006 until 2011, Christoph served as a member of the German Accounting Standards Board. He is a key member of many leading professional associations for standards and accounting. He has published numerous academic articles on the subject of national and international financial reporting.  Prior to SAP, Christoph was lecturer at the Institute of Financial Accounting of Saarland University.

Off-the-Grid Investing: Perspectives and Voices of a Transforming Financial System

By Don Shaffer, RSF Social Finance
 
Don Shaffer, RSF Social FinanceRSF Off-the-Grid

When you are looking for the new or emergent, you usually have to look off-the-grid. In many ways as RSF Social Finance has grown, we too have had to go off-the-grid to develop our unique approach to finance.

In 1984, a school burned down in New Hampshire. RSF organized a group of investors to rebuild it. Since then, we have made over $275 million in direct loans to social enterprises. Our track record has been excellent, with just 2 percent in cumulative loan losses over 29 years, and a 100 percent repayment rate to investors.

The key: bringing investors and borrowers closer together. We have found that if the individual investors who are providing capital and the social entrepreneurs who are borrowing capital can be more visible to each other – if they can understand each others’ needs and intentions, and sustain a personal connection whenever possible – then risk decreases and fulfillment increases.

Participants in a transaction become participants in a relationship. We believe this is nothing less than the antidote to modern finance, and can be applied on a substantial scale. It is the opposite of high frequency trading.

Specifically, four years ago RSF adopted a new approach to loan pricing for our $100 million flagship senior-debt fund. Each quarter, we convene representatives from our staff, our investors, and our borrowers to decide what annualized return rate investors will receive the following quarter, and what interest rate borrowers will pay – a radical form of transparency.

We call it community-based pricing. The response from participants has been overwhelmingly positive – and our interest rate, referred to as RSF Prime, has been very stable. We are now off-the-grid of the global financial interest rate system and no longer directly affected by the vagaries of Wall Street.

But of course the vast majority of all 401(k) programs, pension funds, and endowments are tethered to Wall Street, so it is naïve to believe we are fully off-the-grid.

This circumstance leads to questions many of us in the social finance field think about:

•  What is it going to take for the number of socially and environmentally-focused investors to grow substantially?

•  Can it happen fast enough for those of us who acknowledge the urgency of climate change and natural resource depletion?

•  Are there enough sound investment opportunities for investors who want to go off-the-grid?

•  How will we address the perennial issues of risk, return, and liquidity when there are so few established intermediaries in which to place funds?

•  What are the long-term implications for those of us who anticipate needing funds for retirement and who want to embrace off-the-grid investing?

A Generational Voice

I believe the very definition of wealth will change in my lifetime (I’m 44), where measures like GDP evolve to measures of well-being. These indicators will put spiritual, community, and ecological health at the center of the human experience and pull us toward an economy and supporting financial system that are direct, transparent, and personal, based on long-term relationships.

A growing recognition that we are all interconnected will inform how people make economic choices, how rewards and incentives are structured, and how legal systems evolve.

In fact, we are witnessing this shift already. New sectors of the economy are growing steadily:

•  The sharing economy, in which people acknowledge that they don’t necessarily need to own a car or lawnmower, and they can connect with each other online to find homes to stay in while traveling.

•  The DIY (do-it-yourself) economy, in which websites like Etsy connect hundreds of thousands of artisans and craftspeople with those who want unique homemade products.

•  The local food economy, in which more and more consumers want to connect with the people who grow and process their food.

I could also mention the potential of crowd-funding, though it is still early on. Time will tell, but I believe these are trends, not fads—trends toward aligning one’s money and values, more personal connection through emerging economies, and mutually beneficial economic exchanges. Even though they are evident today primarily in more affluent communities like Brooklyn, Berkeley and Boulder, this is changing too. Many observers agree: networks engaged in small-to-small trade will continue to replace centralized corporate incumbents in many categories.

Yes, there will continue to be demand for airplane engines, pharmaceuticals, and semiconductors – examples of products that require more centralized R&D and manufacturing, and large-scale capital markets. I hope ESG Funds will continue to refine their methodologies and raise the bar for “what’s good”; and I hope experts in shareholder advocacy of publicly traded companies will continue to be effective.

But in my direct association with Gen Xers and millennials (especially) in the U.S. over the past few years, I am coming into contact with people who want to consume less and save more; expect lower financial returns while having an extraordinarily high bar for “impact” from their investments; plan to hold less personal debt and have more free time to enjoy arts and culture. Many are anxious about the future. Many want to have a closer connection to their investments. Many are completely disillusioned with big banks, financial advisors, and the stock market.

Though most have not described it in these terms exactly, they have an intuitive and visceral sense that the existing paradigms and assumptions about investing and markets no longer work. In my meetings, these individuals essentially echo the key findings of Leslie Christian’s 2011 paper entitled “A New Foundation for Portfolio Management”.

•  They recognize that ecological risk should be a primary consideration in every investment decision.

•   They believe we may have entered an extended “new normal” period where economic growth rates are much lower than in the post-WWII era.

•  They want to form their own personal investment thesis based on their unique vision for the world.

A Practical Story

For example, I know a woman who is quietly engaged in a radical act. She is a cashed-out tech entrepreneur, and has begun a journey to learn how she can best align 100% of her money with her heart, mind, soul, and values. No small undertaking.

It is not important that you know all the details of her story, but here is a brief summary: She is an engineer who came to Silicon Valley by way of Texas and Tennessee in the late 1970’s, started a software company with her husband in the late 1980’s, raised a family and grew the business in the 1990’s (with no outside capital), and sold it in 2000 for a lot of money.

She has begun to explore the idea of integrating her investments and philanthropy around the theme of soil health. She is a gardener and rancher herself, so she has firsthand experience in this area.

Plus, she challenges the assumption that investors should always seek the highest possible financial return. She wants to invest in the appreciation of real value of an underlying asset; not speculate on price appreciation of that asset.

A Reflective Voice

I am reminded of Wendell Berry’s essay, “The Whole Horse,” as I reflect on what this woman is setting out to do because she is taking control of her investing in a way that I haven’t seen many people do yet, flipping many conventions around to suit her personal vision. She is re-imagining and transforming the activity we call investing to fit her “agrarian mind”:

“The fundamental difference between industrialism and agrarianism is this: Whereas industrialism is a way of thought based on monetary capital and technology, agrarianism is a way of thought based on land.”

“…An agrarian economy rises up from the fields, woods, and streams – from the complex of soils, slopes, weathers, connections, influences, and exchanges that we mean when we speak, for example, of the local community or the local watershed. The agrarian mind is therefore not national, let alone global, but local. It must know on intimate terms the local plants and animals and local soils; it must know local possibilities and impossibilities, opportunities and hazards. It depends and insists on knowing very particular local histories and biographies.”

“Because a mind so placed meets again and again the necessity for work to be good, the agrarian mind is less interested in abstract quantities than in particular qualities. It feels threatened and sickened when it hears people and creatures and places spoken of as labor, management, capital, and raw material. It is not at all impressed by the industrial legendary of gross national products, or of the numbers sold and dollars earned by gigantic corporations.  It is interested – and forever fascinated – by questions leading toward accomplishment of good work: What is the best location for a particular building or fence? What is the best way to plow this field?  What is the best course for a skid road in this woodland? Should this tree be cut or spared? What are the best breeds and types of livestock for this farm? – questions which cannot be answered in the abstract, and which yearn not toward quantity but toward elegance. Agrarianism can never become abstract because it has to be practiced in order to exist.”

Systemic change is happening from the ground-up in small concentric ripples – one person, one investment at a time. More and more investors like the woman described above feel a calling to practice their deepest values through their money. As a financial professional, I too am called. I am called to support and facilitate, in myself and others, a thoughtful understanding of risk and return, full integration of self and money, and personal empowerment to question convention and insist upon alignment. I know that it’s time to create new frameworks for investment decision-making, new networks of support for the pioneers who are questioning conventional doctrine, and new ways of sharing stories to inspire each other.

It’s time to ask openly and wholeheartedly: what does the agrarian mind mean for the world of finance?

Article By Don Shaffer, President & CEO, RSF Social Finance. For more information about RSF Social Finance go to- www.rsfsocialfinance.org

The Green Bonds Impact – How Praxis Mutual Funds is helping change the climate of fixed income

 
Madalyn Metzger, Everence Financial and Praxis Mutual FundsBy Madalyn Metzger,
Everence Financial and Praxis Mutual Funds

The goal of most investors is to achieve a positive return – with success typically measured in annualized percentages. And while this is an important measure, a growing number of investors are looking for more. Specifically, they’re looking for ways their investments can make a difference, and improve the quality of life in their communities and around the world.

That’s where green bonds come in. First introduced by the World Bank in 2008, green bonds (also known as qualified green building and sustainable design project bonds) are designed to help investors make a positive impact on environmental projects through their investment portfolios.

The market for green bonds has picked up steam over the years. Since their introduction, the World Bank has issued approximately $3.5 billion in green bonds. And while they’re somewhat new to the scene, green bonds make complete sense to Praxis Mutual Funds, a faith- and values-based fund family advised by Everence Capital Management.

Praxis approaches its investment strategy through stewardship investing, a philosophy of financial decision making that balances social and financial considerations and is motivated and informed by the fund family’s faith convictions. This focus is driven by the company’s core values, which include the need to respect the dignity and value of all people, demonstrate a concern for justice in a global society and work toward environmental sustainability.

“At Praxis, we want to do our part to transform our world,” said David C. Gautsche, President of Praxis Mutual Funds. “Our investment philosophy consists of company selection, shareholder advocacy and community development investment. Our core values embrace a wide range of environmental, social and governance concerns, as well as traditional, prudent financial considerations.”

Praxis applies this strategy to all of its five mutual funds – but it is especially notable in the Praxis Intermediate Income portfolio, which includes more than 10 percent of green bonds and other high social impact bonds. In addition, the Praxis Genesis Portfolios (three diversified funds-of-funds celebrating their third anniversary this year) include the Praxis Intermediate Income Fund in their portfolio mix.

Making a High Social Impact Through Bonds

When it comes to stocks, it’s easy for investors to see how they can have a positive social impact by including progressive companies in their portfolios and/or utilizing shareholder advocacy to help goad companies to better social and environmental performance.

Fixed-income investors, on the other hand, can’t make a positive impact in the same way, because they don’t have company ownership. And because many of those same progressive companies are young and small, they likely aren’t borrowing from the public investment grade bond market yet. However, bondholders can help organizations and companies bring down the cost of borrowing at the margin – effectively making an impact in places where a stock portfolio couldn’t. Also, some of these organizations don’t have public stock, and companies borrow for specific energy projects that would not issue equity in the public market.

Since its inception, the Praxis Intermediate Income Fund has screened out companies that don’t match its core values. In the past, it also used a small portion of its portfolio to make a positive impact through solar project bonds and community development investment notes. However, the fund’s investment managers saw how they could make an even bigger social impact in 2006, when they first purchased bonds financing immunization and wind energy. The Great Recession of 2008 and early 2009 put some positive investing plans on hold, but by late 2009, the fund managers became the first socially responsible (SRI) investors in the U.S. to purchase the World Bank green bonds, and added other positive bonds for wind energy and pollution control.

Since then, the Praxis Intermediate Income Fund has purchased a number of green bonds to support renewable energy and environmental projects. For example, the fund has purchased:

•  $2.2 million in United States Agency for International Development (USAID) bonds designated for water and wastewater systems in Egypt.

•  A $167,000 bond in NextEra Energy Resources to fund multiple wind energy projects operated by FPL Energy National Wind (a subsidiary of NextEra).

•  An $800,000 bond purchased in Topaz Solar Farms LLC (a subsidiary of MidAmerican Energy Holdings Company) to construct a major solar farm installation in San Luis Obispo County, Calif.

•  A $750,000 bond in the Pelton Round Butte hydro-project, the only hydroelectric project in the U.S. jointly owned by a Native American tribe (the Confederated Tribes of Warm Springs) and a utility (Portland General Electric Company). The agreement protects important Native American cultural resources, and power from the three dams is an important source of income for both partners.

In addition to green project bonds, some of the Praxis Intermediate Income Fund’s recent purchases include a social justice element. For instance, the fund purchased a $1.5 million U.S. Department of Housing and Urban Development (HUD) bond to help support community development and increase access to affordable housing free from discrimination. Another $2.5 million in bonds purchased were for a green apartment complex in Long Island, N.Y., as part of Fannie Mae’s Multifamily Green Initiative. The fund also purchased $1 million in low-income housing bonds issued by the city of Indianapolis, Ind., the proceeds of which are going toward providing financing or financial assistance toward costs of the acquisition, renovation and equipping of an approximately 360-unit multifamily rental housing project.

Most recently, the Praxis Intermediate Income Fund purchased $2 million in the second issue of International Finance Facility for Immunization bonds, funding a program to help save millions of children from preventable diseases. These so-called vaccine bonds provide investors the opportunity to fund immunization programs through the GAVI Alliance, a public-private partnership created to increase access to life-saving vaccines in the world’s poorest countries. The bonds are backed by legally binding donation commitments from governments to the GAVI Alliance.

Part of the Praxis Strategy

So, why does the Praxis Intermediate Income Fund focus such a significant portion of its portfolio on high social impact bonds? The reason is simple, given the fund family’s stewardship investing approach.

“These are just the types of securities we like to have in our portfolio,” explained Benjamin J. Bailey, co-manager of the Praxis Intermediate Income Fund. “We want investments that make both social and financial sense, especially bonds that support renewable energy projects and the human condition.”

Green bonds – such as wind and solar projects – allow the Praxis Intermediate Income Fund to still have a diversified portfolio and get a higher yield. But because these bonds are lower rated, the fund is taking on more risk. This can be stabilized with Aaa-rated World Bank bonds for international projects, where there’s not as much return but little risk.

“This helps us balance out the portfolio,” explained Bailey. “We’re trying to do some different things, such as wind, solar, geothermal, hydroelectric, pollution control, etc. We always want to have diversification, so we’re diversifying among different rates, different risks and different avenues of positive investing and green bonds.”

Looking Ahead

According to Bailey, the popularity of green bonds continues to grow, especially for green projects funded through the World Bank, which supports environmental and sustainability programs in developing countries around the world. Solar projects, specifically, appear to be an area of growth and opportunity – and a way for investors to address climate change in a positive and effective way.

As investor interest in green bonds increases, so does the demand for accountability. Some companies, such as the Center for International Climate and Environmental Research at the University of Oslo, are now certifying green bonds, so investors know the money is going to actual projects – rather than to pay overhead expenses.

In addition, more asset managers are coming into the green bond market on a larger scale, and are coming up with new strategies to offer green bonds to clients. Some speculate this growth will eventually enter the retail investing space, and perhaps begin to resemble the standard bond market.

The developments in the green bond market continue to be a good fit for Praxis Mutual Funds.

“We believe we need to be just as concerned about the impact of our investments on others as we are about the financial returns we receive,” said Gautsche. “Looking ahead, we’re excited about where green bonds and other high social impact investments are heading, and we’re glad to be part of it.”

Article by Madalyn Metzger, Marketing Communication Manager for Praxis Mutual Funds and Everence Financial, based in Goshen, IN. For more information on Praxis Mutual Funds, visit www.praxismutualfunds.com

Bond funds will tend to experience smaller fluctuations in value than stock funds. However, investors in any bond fund should anticipate fluctuations in price, especially for longer-term issues and in environments of rising interest rates.

As of June 30, 2013, the Praxis Intermediate Income Fund had invested 0.58 percent of its assets in IFFIM FRN, (0.68 percent in FNMA DUS, 0.29 percent in Indianapolis Ind. Multifamily HSG REV Meadowlark, 0.33 percent in Warm Springs Reservation ORE Confederated Tribes, 0.55 percent in MidAmerican Energy Company, 0.24 percent in Topaz Solar Farms, 0.08 percent in FPL Energy American Wind, 0.03 percent in FPL Energy National Wind, 0.28 percent in FPL Energy Caithness (Harper Lake Solar), 0.43 percent in U.S. Department of Housing and Urban Development, and 0.63 percent in United States Agency for International Development. Fund holdings are subject to change. To obtain holdings as of the most previous quarter, visit www.praxismutualfunds.com

Consider the fund’s investment objectives, risks and charges and expenses carefully before you invest. The fund’s prospectus and summary prospectus contains this and other information. Call (800) 977-2947 or visit www.praxismutualfunds.com  for a prospectus, which you should read carefully before you invest. Praxis Mutual Funds are advised by Everence Capital Management and distributed through FINRA member BHIL Distributors Inc. Investment products offered are not FDIC insured, may lose value and have no bank guarantee.

Unique Investment Options: Parnassus Workplace Fund and Parnassus Asia Fund

by Jerome Dodson, Parnassus Investments

Jerome Dodson, Parnassus InvestmentsRecently Cliff Feigenbaum, managing editor of the GreenMoney Journal, asked me to write about Parnassus Investments, so I decided to write about two of our funds: the Parnassus Workplace Fund and the new Parnassus Asia Fund.

Parnassus Workplace Fund

A good place to work makes for a good investment – that’s the basic premise of the Parnassus Workplace Fund. In other words, a company that treats its employees well should be successful as a business. Since its inception over eight years ago (on April 29, 2005), the Parnassus Workplace Fund has demonstrated the truth of this premise.

The idea for the Parnassus Workplace Fund was first presented to me by Milton Moskowitz, co-author of the annual Fortune magazine survey of The 100 Best Companies to Work For in America. Russell Associates, the analytics group and creator of the Russell 2000 Index and other benchmarks, had contacted Moskowitz and told him that they had done a study of the publicly-traded companies in the annual Fortune list, and found that the stock-market performance of those companies had been excellent, handily beating the S&P 500 over long periods of time.

Moskowitz called me with the news and urged me to start a mutual fund that invested in companies with good workplaces. I was hesitant at first, because studies are not the same as investing with real money, and the results can be very different. However, the idea struck a chord in me because I’d always felt that a company with a happy workforce made for a good investment, but until then I had no way of proving it. Despite my initial hesitation, I decided to go ahead and start the Parnassus Workplace Fund with Milton Moskowitz as a consultant to the Fund. The Fund has been successful, and as of June 30, 2013, it has over $350 million in assets.

We use two sets of criteria in making investment decisions: financial and workplace. Assessing the financial criteria involves doing fundamental analysis to find companies with high returns, good products and services, sustainable competitive advantages and solid balance sheets. Once we have done the financial analysis, we make an estimate of the value of the company. Usually, we will only buy a stock if it is selling for no more than two-thirds of its intrinsic value. This gives us an important margin of safety.

While the financial analysis is quantitative, the workplace assessment is qualitative. We think it is important to visit companies and talk with management to find out if a company has a good workplace. While almost all companies will say they have a good workplace, the ones that impress us the most are ones that can give specific examples and articulate policies that make them good places to work. Important characteristics include: some meaningful form of profit-sharing or stock-ownership; good health-care and retirement benefits; support for working mothers; an emphasis on training and personal development; job flexibility; and recognition for accomplishments. We like companies that respect their employees, genuinely care about them and don’t just treat them as hired hands.

I think that picking companies with good workplaces is one of the keys to the Fund’s success. Some of the extra return we get is because of our financial analysis and using a value approach to investing, but a lot of our edge comes from choosing companies that are great places to work. If people are happy at work, they will be more productive, and this means better results from the same number of people. It also means that that there will be lower turnover, and this results in less money spent on recruiting and training new people. More importantly, workers at this kind of firm will help to save money for their employer and also find ways to develop more business for the company. It’s impressive what can happen when happy workers are allowed to be creative and come up with ways to build a better business.

The Fund is careful about taking risks, making sure that there is the potential for more upside gain than downside risk. The market has really taken off so far in 2013, so we have to be careful to avoid stocks that may be over-valued. Right now, the economy is improving, so there should be more upside, but there’s no doubt that some valuations have gotten ahead of themselves, so it’s important to look at both potential risk and potential return.

Parnassus Asia Fund

On April 30, 2013, Parnassus started its first new fund in eight years: the Parnassus Asia Fund. This is our first venture into international investing. Asia is a very dynamic and creative place. It contains the world’s fastest-growing middle class, and it is the scene of much technological innovation. Asia is also a region with a lot of entrepreneurship, and it is developing deep financial markets. Given that the region is growing at a fast pace, and we expect that growth to continue, it makes sense to invest in Asia ahead of future positive developments and despite all of the complications in doing so.

There are some challenges in starting an Asia fund. Asian companies are much more difficult to research than U.S. companies, so it takes us a while to find good investments there. Information on ESG (environmental, social and governance) considerations is not as available for Asian companies as it is for U.S. companies. Also, the ESG record of many Asian companies is not as good as that of U.S. companies. It is taking us longer to find this kind of information on Asian companies, so this slows the investment process.

Making decisions on ESG factors is a very subjective process. No company, of course, American or Asian, is perfect, so we’re dealing with shades of gray. Sometimes it’s hard to decide where to draw the line, when balancing the good and bad factors about a company.

Despite all these difficulties, we do have some important advantages in managing the new Parnassus Asia Fund. Parnassus has almost 30 years of successful experience in making investment decisions, and we are one of the largest mutual fund companies in terms of assets managed in conjunction with ESG screens. Also, we have a great staff member helping me as a senior research analyst. Billy Hwan is a graduate of Stanford University and holds an MBA from the University of California at Berkeley. He also speaks Mandarin and Japanese. Previously, he served as an analyst at Dodge & Cox, a large mutual fund firm based here in San Francisco. Billy has also interned at Matthews Asia Funds, the biggest mutual fund company specializing in Asian stocks. Billy and I spent three weeks in Asia in May, visiting 30 companies in Thailand, Singapore, Indonesia, Hong Kong, Taiwan and Japan. This has given us a lot of intellectual capital in making investment decisions for the Fund.

More information about Parnassus Investments and the funds referenced above is available at www.parnassus.com

Article by Jerome Dodson, the Founder and President of Parnassus Investments. He is the lead Portfolio Manager of the Parnassus Fund and the Parnassus Small-Cap Fund and is the sole Portfolio Manager of the Parnassus Workplace Fund and the Parnassus Asia Fund. Prior to founding Parnassus Investments in 1984, he served as President and Chief Executive Officer of Continental Savings of America from 1976 to 1982, where he started the “Solar T-Bill” program to finance solar energy installations and also developed innovative programs to finance low and moderate income housing. Mr. Dodson received his bachelor’s degree in political science from the University of California, Berkeley and his master’s degree in business administration from Harvard Business School.

After graduating from Harvard Business School in 1971, Dodson worked for the San Francisco Local Development Corporation, a non-profit organization that gave business and technical assistance to minority-owned businesses. In 1976, he helped organize Continental Savings and Loan and became its first president. Continental made loans to finance housing and developed an innovative product for depositors to finance solar energy projects with competitive yields and capital preservation. In 1983, Dodson founded and became the first president of Working Assets Money Fund, a responsible investment money market fund.

Parnassus Investments was founded by Jerome L. Dodson in 1984 as an investment management company offering responsible investment funds to the public. This was the culmination of his desire to provide investment products in a responsible manner.

Jerome L. Dodson founded the firm’s namesake fund, Parnassus Fund, with $300,000 in initial seed capital from friends and family. The firm has grown to over $8.3 billion in assets under management as of June 30, 2013 and now manages seven funds: five fundamental, U.S., core equity strategies across multiple capitalizations, one Asia-Pacific equity strategy and one U.S., fixed-income strategy.

 

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