The complexity of our food production systems is astounding, as are its staggering impacts on climate change and human rights. Any given meal or afternoon snack can touch on issues as far-ranging as the survival of the orangutan or a land rights dispute in Africa. Climate change, water scarcity, nutritional content, marketing to children, animal welfare and labor rights are all on the table.
Behind each familiar brand lies a complex set of relationships stretching across the globe. We view these relationships as opportunities for positive impact. As investors, we can create the incentives for companies to simultaneously be more transparent and to dig deeper to ensure their businesses are operating responsibly. Through your investment in the Domini Funds, your money is working to help catalyze this process of transformation.
For example, deforestation is an important driver of climate change, accounting for an estimated 10 percent of greenhouse gas emissions. The Consumer Goods Forum, an industry association, has acknowledged that “the consumer goods industry, through its growing use of soya, palm oil, beef, paper and board, creates many of the economic incentives which drive deforestation.” All 400 members of the Forum, representing all the world’s major consumer goods manufacturers, retailers and service providers, have committed to zero net deforestation by 2020.
Who will hold these companies accountable for these commitments? What do they mean in practice?
The shareholder proposal is an effective tool for encouraging corporate management to come to the table to discuss our concerns. We developed a proposal that we have submitted to several of the largest food companies, asking for public reports assessing each company’s impact on deforestation and its plans to mitigate these risks. We’ve asked these companies to report on their impact by commodity, as each carries its own set of risks and possible solutions. Among these commodities, palm oil has received the most attention because its production is responsible for large-scale forest conversion in the tropics and extensive carbon emissions.
At Domini Social Investments, the research we conduct to understand the dynamics of our food systems is core to the investment process. Whether it is expressed in the avoidance of many manufacturers of agricultural chemicals, in the search for systems that provide safer food for all, or in the proxy votes we cast or the hard questions we ask of corporate managers, we view our social and environmental standards as key to the process of helping both the public and corporations understand what is at stake.
Download our new Annual Report (PDF) to learn more about the ways the Domini Funds are helping to promote better food production around the globe, including our approach to local and organic sourcing, genetically modified organisms, pesticide use and deforestation.
About 50 years ago, The New Yorker published a cartoon that tickled my father’s funny bone, so he got the artist to give him the original. It featured two men looking at a large flip chart on which was drawn a five-story urban type of building, such as you might see in any city. One man was explaining to the other, “It is designed to use modern energy-efficient technology, with windows that open to let cool breezes in.” Because of that cartoon, I know that people have been talking about the lost art of energy savings for 50 years or more.
When you start looking at the many ways to preserve energy that the typical Victorian knew but that we have forgotten, it gets a bit disheartening.
My neighbor used to have those outdoor awnings covering each of her windows. When you walked into her house on a hot summer’s day, the temperature dropped fifteen degrees. That’s because the glass in the window magnifies heat from the sun. If you don’t let the sun hit the window, you get a much cooler house. Then she’d open the windows at night to let the cooler air in, closing them again the next morning.
I’ll admit, I just don’t like air-conditioning. Somehow it just feels wrong. So I began this article with cooling ideas, but there are other energy savers that have fallen from use. Refrigerators keep getting bigger and bigger, and really, they use energy that our forebears didn’t have so didn’t waste.
A friend of mine grew up in a house built in 1699, with a cellar, not a finished basement; it had a dirt floor. The family had one room down there with floor-to-ceiling shelves. Fresh eggs were stored there for a month or more. Potatoes, carrots, beets, winter squashes, along with apples and pears and grapes, sat in baskets on the shelves. Jars of jam could be left happily for several years with wax poured over the top. The melted wax adhered to the top of the jelly. Since nothing could get in, not even air, there was no mold, so no germs. Even with the door closed, it got enough heat from the kitchen so that nothing froze, but much could be stored there that today would have to be refrigerated.
I’m not trying to make a case that the world should return to dirt floors in the basement. We are creatures of the generation we grew up in. But it is important to remember that we’re not taking the simple steps we could be taking to do our own part in the fight to save the planet from extinction. Climate change is too big a price to pay for personal convenience. So let’s get serious about the steps we can take.
First, let’s change our lightbulbs. Electric lighting accounts for roughly 25 percent of the energy the average home uses. Yes, the newer, more efficient bulbs cost more up front, but estimates say they save you $20 over the lifetime of the bulb. I don’t argue that lower cost is a reason to swap; I only use it to point out how much extra energy the old bulbs are wasting.
Next, let’s think efficiency when we consider the purchase of a car. My city has cars you can rent by the hour, and I’ve found that these work fine for most every need I have. But I do live in a city. If you need a vehicle, at least check the fuel efficiency and factor that into your calculation of the real price of the car. The new electric cars get the miles-per-gallon equivalent of roughly 60 to 120. In other words, they cost you less to fuel (a lot less), and they don’t pollute as you drive.
My last thought will surprise some. Let’s buy more secondhand. As a society, we create an awful lot of new stuff, and making new stuff uses energy. So does shipping new stuff, packaging new stuff, and lighting the stores that sell new stuff. Buying secondhand is fun and an adventure. It supports local owners and nonprofits. But importantly, it saves energy.
That cartoon on the wall is 50 years old and is as amusing today as it was when it was drawn. We giggle at the thought of claiming that opening windows is the height of new technology. But there is an important message there.
Sometimes simple steps are important.
Domini was honored to be invited to participate in an event on board Greenpeace’s flagship, the Rainbow Warrior III, to celebrate progress in the protection of the canyons of the Bering Sea. We were asked to say a few words about our engagement with companies on sustainable seafood, and our interest as investors in preservation of these important undersea canyons. The small audience included Greenpeace staff and the ship’s crew, as well as a government scientist and members of the fishing industry (Read Greenpeace's blog post on the event).
Greenpeace has been diligently working to protect the Bering Sea canyons, a delicate ecosystem that is threatened by the lucrative Alaska pollock fishery. The area is a breeding ground for pollock and other species, and its exploitation threatens the entire fishery. Over the past year, we have raised these concerns with McDonald’s and Costco, two major seafood buyers.
On the eve of a critical meeting of the North Pacific Fishery Management Council in Juneau, Alaska, Greenpeace’s Oceans Campaign Director John Hocevar reached out with an urgent appeal. Despite serious scientific studies supporting the need for conservation, the Pollock fishermen were standing in the way of the development of a plan. We contacted both companies to ask them to intervene and were pleased to learn that our email to McDonald’s was circulating at the meeting. According to Hocevar:
“I do not know the details of what McDonald’s did, but it definitely got people’s attention in a very constructive way and was greatly appreciated by all of us in Juneau trying to move this issue forward.”
Greenpeace is cautiously optimistic that they now have a plan in place that they can work with. When shareholders express their concerns, it can make a big difference. We were pleased to play a small role in moving this issue forward on behalf of our Fund shareholders, and thank McDonald’s for their efforts.
A recent Time Magazine cover story envisioned “A World Without Bees.” One third of U.S. honeybee colonies died or disappeared last winter, a 42% increase over the year before and well above the normal 10-15% losses. This alarming trend has been dubbed “Colony Collapse Disorder” (CCD), a global syndrome that is killing off honeybees in alarming numbers.
Why should investors worry about honeybees? Honeybees are the most economically important pollinators globally, and bee die-offs attributed to CCD pose serious threats to our food supply. According to the US Department of Agriculture, “Bee pollination is responsible for more than $15 billion in increased crop value each year” and “[a]bout one mouthful in three in our diet directly or indirectly benefits from honeybee pollination.” The USDA warns that if losses continue at current levels, “it could threaten the economic viability of the bee pollination industry. Honeybees would not disappear entirely, but the cost of honeybee pollination services would rise, and those increased costs would ultimately be passed on to consumers through higher food costs.” Crops dependent upon honeybees include almonds, blueberries, apples, lemons, zucchini – the list goes on. Honeybees provide an invaluable service that has no substitute. As Time Magazine warned, “eliminate the honeybee and agriculture would be permanently diminished.” Other pollinators, including bumblebees, are also at risk.
Although the causes of this ongoing crisis remain unknown, recent studies show that even low doses of exposure to the class of pesticides called neonicotinoids (or “neonics”) undermine bee immunity against pathogens and impair critical brain functions, and may be a contributing factor to CCD. The European Union has taken steps to ban certain neonics, and the EPA has issued warning labels.
As diversified investors, the Domini Funds hold shares in companies dependent on pollinators at several points in their supply chains. Working with other concerned investors, we sent letters to food producers, retailers and home improvement retailers who sell pesticides, including Mondelez International and Lowe’s, where we are taking a lead role. Lowe’s sells neonicotinoid-based pesticides and has been targeted by a Friends of the Earth campaign on this issue. We also spoke with Campbell’s about their approach to pesticide use in their supply chain. We will be encouraging companies to review the science and the risks of neonicotinoids and other pesticides to pollinators, and to act accordingly
At the request of Ceres, during the second quarter we contacted AT&T, Google, American Express, Lowe's and Apple to seek their assistance in defeating a rollback of renewable energy portfolio standards (“REPS”) in North Carolina that was orchestrated by the American Legislative Exchange Council (ALEC). REPS are critically important in encouraging electric utilities to increase production from renewable energy sources. In the end, ALEC’s effort was temporarily defeated in the State legislature.
During the quarter, we also signed two Ceres-authored documents—a declaration by businesses supporting strong climate legislation, which was referenced in President Obama’s historic June speech on climate change, and a letter to the EPA expressing our strong support for proposed Motor Vehicle Emission and Fuel Standards, designed to reduce harmful emissions of carbon monoxide, nitrogen oxide, and volatile organic compounds.
Domini does not invest in coal companies, but we may be able to have an influence on that industry through its bankers. PNC Financial Services has been a long-term holding in the Domini Social Equity Fund. As a Pennsylvania-based bank, PNC has a number of large coal-mining clients and has, in the past, directly financed mountaintop coal removal, a destructive practice that adds to the already unacceptable environmental damage done by the coal industry. In 2010, in response to public pressure, PNC adopted a mountaintop removal (MTR) policy prohibiting direct financing of the practice. The bank, however, like many other mainstream banks, continues to service coal-mining clients.
Although we have monitored developments for some time, in 2012 we received an email from a concerned Domini shareholder that pushed us to dig a bit deeper. Although our primary source did not report any new coal financing, we contacted the Rainforest Action Network and learned that, although PNC does not appear to be directly financing MTR, the bank had in fact engaged in a number of recent financial transactions with several coal companies that are the largest MTR practitioners.
We were pleased to join Boston Common Asset Management in filing an important proposal with PNC to address the climate impact of the bank’s financial services, including its lending to coal companies. At PNC’s annual shareholder meeting on April 23, our proposal received a vote of 22.8%, an extremely strong vote for a first-time resolution. We look forward to continuing our dialogue with PNC, where we have been stressing our serious concerns about greenhouse gas emissions produced by the burning of coal, as well as the damaging effects of mountaintop removal coal mining.
It is estimated that deforestation is responsible for 15 percent of global greenhouse gas emissions. Indonesia, despite its small size, has become the world’s third largest greenhouse gas emitter due to extensive ongoing deforestation, much of it illegal. In addition, deforestation has devastating impacts on biodiversity and indigenous and other communities that depend upon forests for their livelihoods. Before we can begin to address this problem, we need quality information.
Lowe's adopted a sustainable forestry policy in 2000, addressing its purchases of wood for sale in its home improvement stores. From 2006-2008, we filed shareholder proposals asking the company to report on these efforts. Ultimately, the company did publish a report, but then chose to remove it from its website. Without regular reporting, it is impossible for investors and other stakeholders to determine whether Lowe’s is living up to its stated commitments to protect forests. In 2012, we successfully convinced the company to work with us on a public report providing quantitative metrics and discussing its progress in implementing its wood-purchasing policy. In exchange, we were happy to withdraw our shareholder proposal. We commend the company for its commitment to transparency and for its continuing work to reduce its impact on threatened forests.
RR Donnelley is a leading financial printing firm with a strong commitment to providing its clients with a full range of sustainable paper choices. We applaud the company for these efforts, but continue to encourage them to publish more detailed information on the sustainability characteristics of the paper it purchases for its clients. In response to our 2012 shareholder proposal, which received a strong 26.7 percent vote, the company amended its public reporting regarding their purchases of sustainably sourced paper. In addition to a range of recycled papers, RR Donnelley offers its clients a range of “sustainable” paper, certified to one of three independent forestry certification schemes. Although we support these efforts, we believe that additional information would provide investors with a better understanding of the company’s actual impact on forests. We would like to understand what percentage of their paper purchases meet acceptable sustainable forestry standards, and how these trends change over time. We are also questioning whether it is possible for all of the company’s paper purchases – certified and uncertified – to meet certain baseline environmental standards.
After the company took several steps to address its exposure to illegal deforestation during 2012, we chose not to resubmit our shareholder proposal in 2013. Nonetheless, we look forward to continuing our dialogue with the company to build upon this important foundation.
We also continue to engage with Mondelēz International, formerly Kraft Foods, about its efforts to reduce the environmental footprint of its global purchases.
A key benefit of our investment decision-making model is the ability to make consistent comparisons between companies, and to follow trends over time. We also need to be flexible to address changing circumstances. Domini’s long-standing view on nuclear power has not changed — we believe that its inherent risks dramatically outweigh its benefits.
Tragically, many of these risks came to pass in March 2011 when an earthquake hit Japan and triggered a tsunami, leading to the worst nuclear disaster since the Chernobyl accident of 1986. Tokyo Electric Power (Tepco), the company at the center of this crisis, has been consistently excluded from the Domini Funds, as has General Electric, Toshiba and Hitachi, leading designers of nuclear reactors, including the reactors that failed in Fukushima.
We are constantly evaluating and updating our key performance indicators. In the wake of this tragedy, our team developed an approach to evaluating how Japanese companies were responding to these new and rapidly changing circumstances. Food contamination was one particularly pressing risk we highlighted. We wrote to Japanese retail food manufacturers and retailers with a set of questions about their efforts to protect Japanese consumers from radiation contamination. We discovered a significant divergence of practices, which led to the exclusion from our Funds of Toyo Suisan Kaisha and Yakult Honsha, two food production companies with facilities close to the site of the nuclear disaster. Yakult Honsha is known for providing dairy products to schoolchildren and Toyo Suisan Kaisha’s products include processed seafood using codfish captured in Japanese waters. Neither company’s safety measures were sufficient to alleviate our concerns.
By contrast, ÆON reportedly strengthened the radiation inspection programs on its food products by setting radiation standards two times safer than the national standard, and expanding the items subject to testing. If the company were to find excessive levels of radiation, its 1,000 retail stores would suspend purchasing those products until they fall below the company’s thresholds. The company also discloses inspection results on its website and updates its testing results several times a month. This information was welcomed by Greenpeace Japan.
Fujifilm launched an impressive set of programs to support disaster relief and reconstruction efforts in Japan, leveraging multiple company divisions, including its medical systems, logistics, pharmaceuticals and radioisotope divisions. The company’s consistent record of effective environmental risk management and reduction allowed the company to provide a comprehensive and meaningful response. The company dispatched medical teams with diagnostic equipment to support medical facilities in the affected area, provided drugs to the Japan Medical Association with emphasis on pediatric medicines, and worked closely with NGOs to execute disaster relief operations. A factory owned by one of the company’s subsidiaries, located in Fukushima prefecture, led decontamination activities and provided radiation level monitoring for the community. The company’s decontamination operation uses much stricter levels than the government, with a zero tolerance for any levels of radiation residue.
I’ll admit that I’ve never been particularly careful about honeybees. As a kid, I’d catch them in jars and threaten my younger brother with them. As a gardener, I find it fun to stare hard and watch as they bob in and out of the blooms, covering their legs especially with yellow pollen. I don’t worry about getting stung. It doesn’t take much to start noticing the difference between wasps and honeybees. The honeybees are fuzzy. They don’t want to sting you.
My garden has been a bit of a haven for bees and for butterflies. I like to watch them, so I always try to have something flowering to tempt them in. But last year, it was July before I had any good bees. That was really late and I was really worried. It has been a number of years since I’ve seen bats in my yard. They used to come swoop around each summer evening, putting on a show for me. I don’t want to lose bees, too.
I’ve been reading that there is an international phenomenon of colonies of bees just dying. A scientist at Harvard recently wrote a study that implicated the pesticides used on many crops. Of course, the company making the pesticide said the study was full of holes. One line of thinking was that maybe cell phones were the cause. But a few countries in Europe stopped using the pesticide in question a couple of years ago and their bees came back.
That strikes me as a pretty big coincidence, if true. In fact, this is beginning to feel as if we’re experimenting on the planet, and that makes me mad.
When do we stop experimenting this way? It’s been 50 years since Rachel Carson published Silent Spring. Her revelations about the impacts of DDT showed that that pesticide was devastating. Fifty years later, we haven’t admitted that sometimes it is a lot better to prove safety before approving products for widespread use. It’s a commonsense argument, but there are those who worry more about the economic impact of not using the newfangled product. This makes no sense to me. The line of reasoning pits a known economic benefit against an unknown cost. Should the cost be, as it was with diethylstilbestrol, or DES, that for at least three generations those exposed develop cancers, are born with intersexual characteristics and now appear to have permanently affected DNA chains? And the benefit there was not to the mothers-to-be. They took it to ease nausea, but it didn’t do much about that. The only benefit was corporate profit.
Back to the honeybees. I did some looking around and there is a lot of information about the bee collapse and the economic costs of it. Almond growers, blueberry growers, orange growers… in fact, any farmer with a crop that flowers needs bees. Trucks with hives drive around the country bringing bees from place to place, charging farmers for the service. The estimates you read are mostly about the $15 billion worth of American crops that depend on the honeybees. Then there are the honey business and other support businesses. That seems like a lot of economic impact, but it is being ignored so far.
The jury is out on this one. In the end, it may be that colony collapse disorder is the result of solar storms or some other oddity. But I’m ready to bet that when we get to the bottom of this we are going to find out that the cause is rushing ahead with some great new product without regard to the broader implications of using it.
I used to think my mother was funny. Way back when, we went to a new store with a new parking lot. She complained, “Why do they have to make such an ugly parking lot? It wouldn’t kill them to put in some trees and shrubbery.”
“In a parking lot?” I giggled.
“Just because you need it doesn’t mean it has to be awful,” she retorted.
Now I think she was prophetic. We may need ways to progress, but we don’t need to degrade our environment to do so. We don’t need to be awful. Haven’t most of us enjoyed a lazy summer day watching the bees dip in and out of flowers? Haven’t most of us been treated to hot water, lemon and honey to cure our ailments? Fifty years after Silent Spring, 25 years after the California Condor Program, can we take a moment to assure ourselves that we are preserving the wonders we now enjoy?
As a kid on Cape Cod, I'd get really frustrated with a ground-dwelling bird that lived all around us. The Virginia quail (or bobwhite) had the most annoyg call. At dawn it would start in, tentatively, "Bob? Bob White?" This would repeat until you thought you'd lose your mind. While I still spend much of my summer on Cape Cod, I haven't heard a bobwhite in 20 years.
During long summer days, I'd crawl around the boulders and pull out handfuls of mussels, bring them home and feast. I can't find them anymore. Nor do scores of conchs roll up after a storm. And I could swear there are far fewer lightning bugs in the evening.
I love the natural world and want to protect it. That's why I felt so angry with myself recently. I was on an airplane and a man next to me told me he was an electrical engineer and noticed I like numbers, too. I said I was playing Sudoku and it didn't require math. But he said no one understands simple math: Vice-President AI Gore's formula was wrong and there was no climate change. The storms were no worse than usual. We were all being played for chumps.
I didn't fight back. I hadn't spent the time memorizing a few salient facts: My experiences informed me that everything is changing but I couldn't quantify it. So here's what you need to know if this happens to you. All this comes from the Environmental Protection Agency (EPA) website.
Each year the Audubon Society conducts a Christmas bird count, which show that bird migrations have shifted. Bird species in North America have moved their winter locations north by an average of35 miles since 1966, with a few species shifting by hundreds of miles. Next Plant hardiness zones have shifted. Large portions of the U.S. have seen shifts northward by one zone since 1990. Gardeners rely on these charts to know what will survive in their regions. The EPA site shows the changes. It is startling.
The time between last frost and first frost has long been measured. In the U.S. West, the growing season is 20 days longer now. In the eastern U.S., it's six days longer.
Glaciers worldwide have lost more than 2,000 cubic miles—yes, miles—of water since 1960, which has contributed to the observed rise in sea levels. The average global absolute sea level increased at an average rate of 0.06 inches per year from 1870 to 2008. From 1993 to 2008, average sea levels rose at a rate of 0.11 to 0.13 inches per year-almost double the long-term trend.
And as we are all experiencing, the storms are worse. A larger percentage of precipitation comes in very intense, one-day-only events. Eight of the top 10 years for extreme one-day precipitation have occurred since 1990. (These figures pre-date the tornadoes of 2011.) Furthermore, the heat is worse. The percentage of the U.S. affected by heat waves has risen since the 1970s, with an alarming rise in very high nighttime temperatures.
Now I know a few facts that prove to me that the climate is changing. They aren't as useful as the charts one sees, but anyone can use them. My airplane buddy probably wouldn't care about the EPA, but it does have documentation about climate change on its website. My airplane buddy wouldn't care what the Securities Exchange Commission thinks. But it acts like it believes in climate change, releasing guidelines on when to report risks concerning climate change: "Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business."
The Investors' Network on Climate Change includes 100 institutional investors, with assets totaling $10 trillion. Investors managing trillions are not generally chumps. And they formed a coalition to address the challenge of a changing climate. Yep. I guess I'm a believer in climate change. Socially responsible investors have used climate change criteria in stock selection, filed shareholder resolutions to ask for climate change risk reporting and spurred the growth of green funds. We've tried to be a voice of responsibility to the planet, our only home.
I don't dare hope for a reversal of damage done; I doubt the Bobwhite, mussels and conchs will be abundant on Cape Cod. But when strangers on airplanes spout off, it is sobering. I only hope Americans will wake up so we can change our ways in time.