Investing in Companies for Social Good

Investing in Companies for Social Good

A Case for Going Green

By Steve

My favorite companies are clean, green, and pay their workers well. They produce goods and services which make the world a better place. Computer technology, green energy, and biotech companies are primary drivers of my vision for the future and social values. Many products, services, and devices are developed, made, and delivered from hundreds of companies that affect our leisure time, how we work and travel, and our health and social well-being. These corporations are Socially Responsible Investments (SRI) because they exist to support our civilization’s peaceful efforts throughout the world, and for people to be more harmonious, productive and happy.

Socially irresponsible companies have adverse working environments and or make military-style firearms, alcohol, tobacco, or they pollute the environment and provide gambling experiences. We know which companies restrict employee’s earnings at minimum wage forever with little opportunities for gainful employment. The social damage done by harmful companies are severe and well-known.

Poll after poll reveals that Americans want companies to improve their labor relations, have personal firearms regulated or stop other companies from doing bad business. But divisive politics and our complex American culture will successfully stop all efforts for new regulations for the foreseeable future. A small number, but vociferous Americans, have a love affair with guns and tobacco. Millions abuse alcohol, and prescription drugs, and gamble. The rest of us must buy and consume petroleum products because petroleum is an ingredient in so many consumer goods, not just to power cars and heat our homes and businesses. Knowing this unfortunate reality, some Americans turn to their pension plans to send a message–the results are less than optimistic.

Pension plans invest in both SRI and socially irresponsible companies. Pension plans are bound by law to look out for the best economic interests of their pensionaries (fiduciary duty). Pension boards must provide the best possible return from all publicly traded companies (companies that issue stocks for investors to buy). Pensions cannot pick and choose investments based on politics or social causes.

Tobacco Industry

For many years, public school teachers, public safety, and other nonprofit workers have succeeded in convincing their pension plans to divest from a few socially irresponsible companies. My pension plan, California State Teachers Retirement Service (CalSTRS) for example, divested from tobacco stocks. How can teachers be ethical role models for a tobacco-free world when part of their wages is invested in these harmful companies?

There is almost universal agreement that smoking has been a significant health hazard for a century. The antitobacco activism started back in the 1950s, so this issue is not novel. We would like to see the day when the production and selling of tobacco products are stopped. However, taking tobacco stocks out of my pension’s portfolio resulted in an unintended and a negative result. Five years later, the pension plan reported it lost one billion dollars!

At the time CalSTRS divested in tobacco stocks, states were winning court cases against the industry with a constant decline of smoking nationwide. The industry was struggling. Who would have thought that the tobacco industry would recover so much that the pension fund lost so much money? Apparently, the world consumption rate did not fall and made up for the losses in sales in the United States.

The tobacco investment shows how complicated doing the right thing when one large pension plan gets involved. While we want our pension plans to be more socially active that reflect our environmental and social values, we also demand a pension benefit that supports our retirement lifestyle. How does a pensionary settle his or her conflict between their pension plan investing in irresponsible companies versus wanting the get a decent retirement benefit?

Americans have little power to change complicated pension plan infrastructure with elected boards, directors, department heads, and many investment managers. Unless there is a 100% political change in Congress and the White House, nothing positive is going to be passed from D.C. either. Yeah, we can demonstrate all we want (And I support demonstrations), but this will result in little change to the Pension Plan’s Board fiduciary mandates. However, I believe in the long term, that CalSTRS did the right thing by divesting in tobacco. But generalizing the tobacco case to convincing our pension plan to divest in other “harmful” companies might backfire too (In 2017 CalSTRS divested from non-US coal companies because of a state law requiring them and the dollar amount of investment was tiny).

The primary problem is that investing in SRI companies does not meet CalSTRS fiduciary standards. Yet, some environmental activists are using the latest social cause, reducing greenhouse gases, to try and get their pension plan to divest from polluting companies. This demand is complicated, risky and ill-advised. The petroleum industry is vast and politically powerful. While I agree with the environmental activists, I have a more effective strategy that has been used in the past–boycott petroleum products.

We have more power than we think

I call you to action with a little encouragement from Gandhi when he said in his famous quote, “be the change you want in the world.” If we want to reduce greenhouse gases, pay attention to products that support your values, and avoid products that do not. All of this sounds good, but people usually want somebody else to change first. Sometimes change is great even if it somebody else’s idea. Most of us need a car, so why not purchase an electric car next time. For me, this rationale is simple. A gasoline car does not support my values of clean and green transportation. But investing in an electric car does. Consuming electricity from my power company does not support my value of reducing greenhouse gases. But investing in solar panels on my roof does.

Making Money and Reducing Greenhouse Gases!

Investing in clean energy production and driving 100% electric cars supports a beautiful social cause and produces a verifiable economic benefit, too. Gandhi’s suggestion saves me about $5,000-$6000 a year in energy costs. Last year, I received a $175.00 refund from my power company, and I use the AC during the hot summer desert heat, power my swimming pool water pump, and charge two electric cars. Think about this: I not only have no energy bill to power my household needs, including my auto transportation, but I also made money, and I boycotted petroleum products.

Additional Information: My Huffington Post 2015 article on the details of my solar panels and electric car investments: https://www.huffingtonpost.com/steve-schullo-and-dan-robertson/renewable-energy-investme_1_b_8028316.html

Steve’s Bio

Stephen A. Schullo, Ph.D. (UCLA ’96) taught in the Los Angeles Unified School District (LAUSD) for 24 years and UCLA Extension teaching educational technology to student teachers. Steve wrote investment articles for the UTLA newspaper for 13 years. Thrice featured retirement plan advocate in the Los Angeles Times and U.S. News and World Report. He co-founded an investor self-help group (403bAware with Sandy Keaton) for teacher colleagues and wrote 5,000 posts in three investment forums since 1997. Frequently quoted by the media, testified at California State legislative hearings and honored with the “Unsung Hero” award by UTLA for his retirement planning advocacy. He currently serves on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee monitors the 457b/403b/PARS of 55,000 former and current LAUSD employees, worth $2 billion in total assets.

 

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