It may surprise some that many nonprofit organizations with social or environmental missions do not utilize socially responsible investing (SRI) strategies. Two exceptions are the National Wildlife Federation (NWF) and Amnesty International USA. These two advocacy organizations are meeting the challenges of implementing SRI with innovative solutions that incorporate screening, community investing, and shareowner action.
"The fiduciary responsibility of maximizing investment performance while at the same time struggling with how to meet the mission goals creates a natural tension that is not easily reconciled," said NWF Senior Vice President of Finance and Administration Lawrence Amon. "People are thinking about the issue, but they are still in the process of developing solutions and responses to the questions."
Although the SRI strategies employed by NWF and Amnesty International USA are still in the maturation process, they demonstrate the kind of ingenuity being applied by other institutional investors that use SRI strategies.
Neither NWF nor Amnesty applies strict exclusionary screens, but instead they both implement positive screens that reflect and advance their respective missions.
NWF, whose portfolio totals about $40 million, employs a "green screen" toward its domestic equity portfolios. The screen is a best-in-class scorecard generated by Innovest Strategic Value Advisors, a firm that specializes in assessing companies’ environmental performance. This scoring system seeks to reward and encourage the better environmental performers in all industries and sectors.
NWF provides its value and growth money managers with the Innovest scores and reports for its portfolio companies. The managers’ instructions are, with all other investment factors being equal, to pick the better environmental performers. However, NWF does not have a threshold score that companies must achieve in order to stay in their portfolios.
"Because I’m still holding the investment managers to their benchmarks, I’m not going to pressure them into making sell decisions," Mr. Amon told SocialFunds.com. "I’m not focusing on the score of any one company so much as I’m looking at the overall effect, the aggregate score."
"The idea is, if we have a poor overall score, we want to increase it over time, and if we have a good score, we want to hold onto it," explained Mr. Amon. NWF’s approach thus looks for improvement over time.
Consistent with its mission, Amnesty International USA applies positive screens that focus on social issues, such as workers’ rights, justice and equality for minorities, and support for such initiatives as education, health care, affordable housing, and adequate nutrition.
Amnesty USA divides its assets of $25 million into several pools, including two categories of endowment, three categories of reserves, and pooled income and gift annuity funds.
Amnesty has only one negative screen: it will not invest in any government issues. An exception is made to this screen, however, for pooled income and gift annuity funds. The exception must be made to comply with state laws.
"Some states do require that you invest in government issues," said Gary Giscombe, deputy executive director of finance and administration for Amnesty International USA. "What we do in that case is invest in specific bonds, such as Fannie Mae or Ginnie Mae, instead of investing in general obligation items."
Fannie Mae (ticker: FNM) and Ginnie Mae create a positive social impact by supporting housing, whereas general obligation investments could end up in U.S. Treasuries, which support the Department of Defense.
Amnesty also practices community investment and shareowner action.
"We invest in some community capital banks, such as South Shore and Amalgamated Bank of New York," said Mr. Giscombe. "And we started shareholder activism last year."
Amnesty filed a shareowner resolution along with Walden Asset Management, the New York City Employees’ Retirement System (NYCERS), and the Interfaith Center on Corporate Responsibility (ICCR) asking ExxonMobil (XOM) to adopt a human rights policy.
"The resolution received 6.3 percent of the vote, a very good result for the first time out the chute," said Mr. Giscombe. "And we just recently pulled a resolution back from ChevronTexaco (CVX) after meeting with them last Friday to discuss developing a human rights policy."
"Rather than being in an adversarial position, we are working with them," said Mr. Giscombe. "With this experience under our belt, our shareholder activism will only increase."