Our thresholds for exclusion are generally determined by such factors as percentage of revenues, magnitude of involvement (market leadership), or ownership. Companies that don’t meet these thresholds may still be excluded, but are evaluated case-by-case, based on the absolute size of their involvement, the trend of their involvement, and the prominence of their role in their subindustry, along with the company’s overall environmental and social record.
The capital markets are highly effective mechanisms for raising funds for a wide variety of products and services, but we do not want to invest in products that have the potential to cause incalculable harm. We therefore exclude corporations substantially involved in weapons and civilian firearms production and nuclear weapons production, as well as the owners of nuclear power plants. The dangers of weapons of mass destruction and the international arms trade are among the greatest we face today, and we view the spread of nuclear power technology as tied to the proliferation of nuclear weapons, in addition to presenting significant risks to human health and the environment.
We exclude companies in the energy sector involved in oil and natural gas exploration and production, coal and uranium mining, oil and gas storage, transportation, refining, and related service providers. We also do not approve electric utility companies that have either announced plans for new construction of coalfired power plants or started new construction after the Paris Agreement was adopted in 2015. Further, we do not approve electric utilities that have over 50% of installed capacity from coal-fired generation. We have made this decision considering the financial, environmental, and human health concerns associated with fossil fuels and in recognition that an increasing portion of the responsible investment community has found divestment a productive avenue to further debate on this, one of the most important and difficult issues of our time.
We exclude for-profit prisons and immigration detention centers due to the significant civil and human rights concerns that occur as a result of their business models, particularly for marginalized communities. The for-profit prison model incentivizes imprisoning the greatest number of people for the longest duration at the lowest cost to increase growth and profits.
We also exclude companies that are significant manufacturers of alcoholic beverages or tobacco, or significant providers of gambling goods and services. For these companies, effective marketing often means exploiting customers’ addictions to these products or ignorance of their risks. This is not a business model we believe our investors wish to support. In addition to these industry exclusions, we have generally avoided major producers of synthetic pesticides and agricultural chemicals. This is due to environmental concerns related to this business.