Our Decision to Exclude Facebook from Our Funds

Every company in a Domini portfolio is subject to continuous review to ensure it continues to meet our social, environmental and governance standards for investment. In the wake of revelations about the unauthorized disclosure of some 80 million Facebook users’ data to Cambridge Analytica to produce political advertisements for the 2016 presidential election, our Impact Review Committee took another look at Facebook and chose to exclude the company from our portfolios. We followed that decision with a letter to Mark Zuckerberg, explaining our rationale and suggesting several “first steps” the company should take to restore trust. 

We have noted a range of concerns about Facebook for some time. This time, however, was different. We made this decision in response to what we believe to be a crisis of governance and accountability at Facebook, with significant societal ramifications. In applying our standards, we seek to understand the key sustainability challenges each company faces, within the context of its business model. Facebook presents significant challenges to that assessment, as it virtually stands alone in terms of the nature of its global reach.

The announced departure of the company’s Chief Information Security Officer, Alex Stamos, along with reports of an internal dispute regarding disclosure of Russian trolls, was particularly telling for us. According to The New York Times, Mr. Stamos’ requests for greater access to senior management were reportedly denied, and his role diminished. It became clear to us that this was a governance crisis. 

Although Facebook has been presented with a number of unprecedented challenges in recent years, we view Facebook’s latest crisis as a crisis of its own making. Much attention has been paid to the fact that Facebook is free, placing advertising at the center of its business model. We do not view the company’s business model as inherently problematic.

The problem, we believe, lies in a governance structure and decision-making framework that is inadequate to provide appropriate checks on the strong incentives to monetize user data that are created by that model. Facebook’s problems, we believe, are founded on a lack of sufficient attention to consumer privacy and data security, compounded by inadequate governance to ensure independent and effective oversight of decision-making, particularly when consumer privacy concerns, or the public interest more generally, may initially appear to present obstacles to growth.

In addition to endorsing a set of governance recommendations made by the New York City Comptroller’s Office, including the separation of Chair and CEO, our recommendations include public disclosure of the annual independent privacy audits required by the FTC’s 2011 Consent Decree, and a suggestion to take up the recommendations of the Ranking Digital Rights project, a respected independent organization that ranks ICT sector companies on a set of free expression and privacy indicators. RDR found that Facebook disclosed less information about options for users to control what is collected about them, and how it is used, than any other company in its 2018 Index of 22 companies, including Chinese and Russian companies.

Domini is a founder of the Global Network Initiative (GNI), a multi-stakeholder organization focused on addressing threats to freedom of expression and privacy presented by government requests to Internet and telecommunications companies that interfere with these fundamental rights. Domini serves on the GNI board with Facebook and other ICT sector companies. Our decision to exclude Facebook from our portfolios was not connected to Facebook’s obligations under the GNI, which relate to a different set of human rights threats. Facebook continues to be in compliance with the GNI principles.

Through the GNI network, we have opened dialogue with Facebook on these issues and, despite our decision to exclude Facebook from our portfolios, hope to pursue these discussions, along with other concerned investors. 

Facebook has taken some hopeful steps in recent weeks to begin to address this crisis. We hope that, in time, the company will reform its governance and decision-making practices to the point where it will once again be eligible for inclusion in our portfolios. 

An investment in the Domini Impact Equity Fund is not a bank deposit and is not insured. The Domini Impact Equity Fund is subject to market, sector concentration, style and foreign investing risks. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing security regulations and accounting standards limited public information possible changes in taxation, and periods of illiquidity. You may lose money.

This information is provided for educational purposes only, and should not be considered investment advice with respect to any of the holdings listed. The composition of each Fund’s portfolio is subject to change. View the most current list of the Domini Impact Equity Fund, Domini Impact International Equity Fund and Domini Impact Bond Fund's holdings.

The Domini Funds maintain portfolio holdings disclosure policies that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio investments held by the Funds.

Carefully consider the Fund’s investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Fund’s prospectus. Please read the prospectus carefully before investing or sending money.

The Fund is distributed by DSIL Investment Services LLC (DSILD). Domini Impact Investments LLC (Domini) is the Fund’s investment manager. The Fund is sub-advised by Wellington Management Company LLP. DSILD and Domini are not otherwise affiliated with Wellington Management Company LLP. 4/18

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DSIL Investment Services LLC (DSILD) distributor, Member FINRA.

Domini Impact Investments LLC (Domini) is the Funds’ investment manager. The Funds are subadvised by unaffiliated entities.

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