Do these spreadsheets make my assets look big?

Yesterday, I got to sit in on a small-group discussion on campus with Bennett Freeman, Senior Vice President for Social Research and Policy at Calvert. Calvert is an investment services company specializing in socially-responsible investment through their many mutual funds. As part of that investment process, Freeman’s team analyzes companies along seven social criteria, including:

• Governance and Ethics
• Workplace
• Environment
• Product Safety and Impact
• International Operations and Human Rights
• Indigenous Peoples’ Rights
• Community Relations

Those companies and stocks ranked favorably on these criteria are included in the pool of possible investments, selected by the securities analysts in the firm. Those that fail never enter the funds.

There’s certainly a niche of investors that want to align their money with positive impact on the globe (or at least minimize negative impact). But the question came up several times during the conversation: What is the role or responsibility of social-sector organizations when it comes to investing their own assets?

Back in January, the Bill and Melinda Gates Foundation took some heat for their investments. Said the article:

The foundation reaps vast profits every year from companies whose actions contradict its mission of improving society in the United States and around the world, particularly people afflicted by poverty and disease.

The Gates Foundation called the accusation naive, saying that while ”shareholder activism has worthwhile goals, we believe a much more direct way to help people is by making grants and working with other donors to improve health, reduce poverty and strengthen education.”

The counter-argument to socially screened investment among nonprofits suggests that asset strategies for social-sector organizations should serve the financial health and capacity of the organization, and that social restrictions on investments dilute such strategies. Freeman and others would counter that socially-responsible strategies can have equally strong and flexible financial results, while also aligning with the investor’s personal or organizational values.

So, should union pension funds invest in companies with proven labor violations? Should health care organizations invest their endowments in companies that have a negative impact on health? Should cultural organizations invest their assets in companies that engage oppressive governments, or repress free expression?

I’m not suggesting that all cultural nonprofits should run out and change their endowment investment strategies (those with endowments, anyway). But it certainly seems a useful conversation to raise with the board. Your organization intends to make a positive impact in its community, in its discipline, in its part of the world. Should you also take care to put your money where your mission is?