72 Million Reasons to Care About Socially Responsible Investing
Ken is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you don’t think Socially Responsible Investing (SRI) matters to your portfolio’s returns, think again. Sometime between May 1 and June 21, mutual fund giant TIAA-CREF divested $72,943,861 worth of Caterpillar, Inc. (NYSE: CAT) shares from its Social Choice Fund. CREF bowed to pressure from activist groups including Human Rights Watch, Amnesty International, and the Presbyterian Church USA who objected to Caterpillar’s sales of equipment to the Israeli Defense Force (IDF).
The market has been in a bearish mood lately, so it is impossible to know if TIAA-CREF’S liquidation has much to do with Caterpillar under-performing the S&P 500 by more the 10% since the beginning of May, but the divestment campaign is certainly not a bullish signal.
As you can see from the chart, the last few weeks have been brutal for Caterpillar shareholders.
Socially Responsible Investing is Big Business
I’ve written before about the compelling case for paying attention to Socially Responsible Investing. According to US SIF, "an estimated $3.07 trillion out of $25.2 trillion in the U.S. investment marketplace” is dedicated to SRI. The organization further reports that the cash flows into SRI investment funds outpaced the overall growth of the market for the past 15 years. Companies that pay attention to SRI concerns get access to a significant and growing niche of investing dollars.
Who’s Next?
The Presbyterian Church USA is scheduled to take a controversial vote by the end of the month to consider adding other companies to the divestment movement.
Hewlett-Packard Company (NYSE: HPQ) and Motorola Solutions, Inc. (NYSE: MSI) are in the activist cross-hairs. Hewlett-Packard supplies technology for keeping track of individuals moving through checkpoints and supplies the Israeli Navy with IT solutions. Motorola sells communication and surveillance equipment to the IDF. Given the dramatic reaction of TIAA-CREF to Caterpillar, shareholders of Hewlett-Packard and Motorola Solutions should pay attention to the outcome of the pending divestment vote.
The Israel-Palestine dispute is not the only issue on the SRI radar. Amazon (NASDAQ: AMZN) was chastised last year over reports that workers overheated during a summer heat wave. In order to keep its workers comfortable, preserve its image with customers, and possibly to keep angry activists controlling trillions in investable dollars in their good graces, Amazon announced it is spending $52 million to install creature climate comforts in its warehouses. As an Amazon shareholder, I am happy to see my company making efforts to keep workers safe and its image intact.
Air conditioning and ancient religious land disputes make for strange bedfellows, but both issues are of concern for the SRI flock. Regardless of where you stand on the particulars of these divisive issues, remember that doing your investing homework should include picking up the latest Human Rights Watch report to go along with parsing through quarterly earnings.
Should investors pay attention to SRI activists? Should Hewlett-Packard and Motorola Solutions change their relationship with the IDF to avoid the big divestment axe? Get active with your comments and chime in below.
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