| EFA works to link its grantmaking values with its investments to promote greater social responsibility of corporations. We seek to avoid investing in companies that contribute to the very problems we are attempting to address through our grants. Alternatively, EFA sometimes holds shares in companies whose practices it opposes and engages in "shareholder activism" with the company, which has become an increasingly effective tool for holding corporations accountable. In fact, whether the issue is the environment or diversity, corporate governance or sweatshops, there have been hundreds of interventions by concerned investors--and increasing responsiveness by many companies. Corporations do pay attention not only to the size of the shareholder vote, but also to who is voting. A strong showing by institutional investors, especially foundations, has been demonstrated to have an impact. |
| Socially Responsible Investing is an investment strategy designed to achieve superior financial returns while reinforcing the social objectives of the investor. EFA focuses on four different types of socially responsible investing. |
| Avoidance Investing: Screening out companies in an investment portfolio that conflict with the ethics and values of the investor. |
| Supportive Investing: Investing in companies which have exemplary conduct in social issue areas of importance to the investor. |
| Social Purpose Investing: High impact alternative investing for the purpose of positive social change in a specific area of interest to the investor. Also known as Alternative Investing and Program Relating Investing. |
| Shareholder Activism: Taking, or holding onto, small investments in the companies that have policies and practices which the investor opposes for the express purpose of changing those policies through proxy mechanisms. Avoidance and Supportive Investing are the predominant forms of Socially Responsible Investing. Avoidance and Supportive screens are established by adopting a social investment plan. The social investment plan sets forth the specific criteria for the ethical screening of investment portfolios. In most cases, only small portions of an investor's portfolio (usually 5-10% or less) are allotted to alternative Social Purpose Investing and Shareholder Activism. |
| Since 1995, the Foundation's new investment advisors have been directed to only invest in companies that meet EFA's social investment screens. Social screening supplements a financial market evaluation of a company by assessing the company's social and environmental performance. |
| Supportive Screens |
| The Educational Foundation of America seeks first and foremost to invest in companies with long-standing or unique programs, which demonstrate commitment primarily in the following areas: |
| Environment |
- The company has reduced its environmental impact by eliminating the use of hazardous or toxic materials
- The company uses recycled material in place of raw material.
- The company seeks to develop innovative products with clear environmental advantages.
- The company employs state-of-the-art pollution control equipment.
|
| Alternative Energy |
| The company is involved in alternative energy technologies, including wind, solar, natural gas, cogeneration, and biomass. |
| Shareholder Activism |
| EFA uses its investments to seek improvements in corporate practices by utilizing its standing as a shareholder in various corporations to push for environmental and social change. EFA believes that while it can choose to screen some of its portfolio to better meet its mission, it can also make a significant impact by becoming an active shareholder. First of all, EFA votes its shareholder proxies to support its program goals. For example, the Foundation votes for resolutions that urge companies to become signatories to the CERES Principles for Corporate Environmental Responsibility. In addition, EFA co-files on shareholder resolutions initiated by others, for example, Walden Asset Management's resolution with the Kroger Company on genetically engineered foods. |
| More specifically, the Foundation has had significant success in leveraging its standing as a shareholder to push for groundbreaking environmental practices at several corporations. Examples of these actions follow. |
| Home Depot and Old-Growth Forests |
| In 1998, EFA worked with a group of socially responsible investors to ask Home Depot, the world's largest retailer of old-growth lumber, to consider phasing out sales of old growth wood. A shareholder resolution initiative managed for EFA by the As You Sow Foundation received the support of 11.8% of all shareholders (113 million shares) at the company's annual meeting in May 1999. This result was more than double the 5% average support that such resolutions routinely receive at annual meetings of publicly traded companies. A coalition of environmental activists (including Rainforest Action Network, Greenpeace, Forest Ethics and others) was separately pressing the company to phase out sales of old-growth wood. |
| Three months later Home Depot announced it would indeed phase out sales of wood products from endangered forest areas by the end of 2002. Within months of Home Depot's announcement, all of Home Depot's major competitors in the do-it-yourself retail sector (Lowe's, Menard's, HomeBase, etc.) made similar commitments on phasing out old-growth timber. Two of the largest homebuilding companies in the U.S.-Centex Homes and Kaufman & Broad-also pledged to stop using timber from endangered forest areas for new home construction. |
| Coca-Cola and Recycled Content |
| EFA initiated a dialogue with the company in 1999 on recycled content and container recovery, along with several socially responsible investment groups that have been in dialogue with the company for several years. Like the Home Depot initiative, the issue started with the persistent work of grass roots environmental groups, like The Grass Roots Recycling Network. |
| In 2000, we became concerned with the lack of progress by the company. As You Sow, which also managed this initiative for us, filed a resolution with the company, along with our dialogue partner Walden Asset Management, asking Coke to use 25% recycled content in plastic bottles and to set an 80% container recovery goal by 2005. At the April 2001 annual meeting, the resolution received the support of 5.2% of shares voted (88 million shares). |
| As a result of the resolution and dialogue, Coca-Cola announced shortly after the meeting that it had introduced 2.5% recycled content into three-quarters of its plastic beverage containers. Subsequently, the company pledged to increase recycled content in plastic containers from 2.5% to 10% by 2005. In February 2002, PepsiCo matched Coke's commitment to use 10% recycled plastic by 2005. We will continue to urge Coca-Cola to set recycled content goals closer to our 25% goal. We will also continue to press the company to set an aggressive container recovery goal. |
| Computer Take Back and Recycling |
EFA is supporting a new shareholder effort, led jointly by As You Sow and Calvert Group (a family of socially screened mutual funds). They are challenging the five leading U.S. computer makers to take responsibility for take back and disposal of old computers. Calvert filed resolutions in 2002 with Apple, Dell, Gateway, Hewlett-Packard, and IBM. A resolution at Hewlett-Packard asking the company to study the feasibility of taking responsibility for computer recycling received the support of 8.3% of the vote (92 million shares). The April 29 vote was the first resolution on computer recycling to be voted on by U.S. shareholders. A May 16 vote at Gateway Computer yielded 7.5% for the same resolution. For more details on this work, consult As You Sow at www.asyousow.org. For more information on socially responsible investing by foundations see the website of the Foundation Partnership on Corporate Responsibility at www.foundationpartnership.org.
|
