At Domini Impact Investments, we take a comprehensive approach to the promotion of environmental sustainability through our mutual funds. Our concerns span industries and sustainability issues. We are not just alternative energy or ‘clean tech’ investors, although these are certainly part of our investment considerations. Our approach recognizes that all industries face environmental challenges to one degree or another.
Our investment process is guided by our Global Investment Standards, which provide a framework for our research. Our environmental standards focus on five primary areas:
- Renewable and alternative energy sources;
- eco-efficiency and resource conservation;
- recycling, safer technologies, and lifecycle design;
- pollution control and abatement; and
- long-term environmental sustainability.
We believe that companies that address the long-term environmental challenges of their industries will benefit the environment and their shareholders by increasing efficiencies and reducing potential liabilities and conflicts with communities.
Environmental challenges play out in dramatically different ways across industries. For most industries, identifying “best practices” in sustainability is our preferred approach. For these industries, we favor those companies that are making the greatest progress in addressing their industry-specific challenges.
For a limited number of industries, we believe that even best practices are inadequate to address intractable environmental issues. We therefore exclude these industries from our fund portfolios entirely. For example, we exclude substantial owners of active nuclear power plants due to concerns over safety and radioactive waste storage, and we exclude companies that are substantial owners and producers of oil or natural gas reserves and are included in the Integrated Oil & Gas or Oil & Gas Exploration & Production Industries as defined by the Global Industry Classification System (GICS), as well as companies significantly involved in coal mining due to financial, environmental and moral concerns associated with fossil fuels' contribution to climate change. We also avoid investment in major producers of synthetic pesticides and agricultural chemicals.
Beyond applying environmental standards to our investment process, we also seek to help bring about changes in corporate practice by communicating our environmental concerns to the companies that we own by consistently voting for shareholder proposals addressing environmental issues, and by filing shareholder proposals and entering into direct dialogue with corporations on matters of concern.
Over the years we have filed shareholder proposals on an array of environmental issues, including climate change, sustainable forestry, toxic chemicals use, and environmental justice. We also weigh in on public policy matters affecting the environment when appropriate and are active in several coalitions of concerned investors and environmental organizations, including Ceres, the Investor Environmental Health Network, the CDP, and others. We frequently collaborate with environmental organizations in these efforts.
A few examples of our corporate engagement work:
- We helped convince Kimberly-Clark, one of the largest paper-based consumer products companies, to commit to sustainable forestry practices.
- In 2005, after a long-term dialogue with social investors including Domini, JPMorgan Chase hired its first Director of Environmental Affairs and adopted a comprehensive environmental policy that addressed global warming, illegal logging, protection of habitats, and the concerns of indigenous peoples.
- In 2004, Limited Brands, the parent company of Victoria’s Secret, was targeted by Forest Ethics, an environmental NGO, for the impact of its catalog business on threatened Canadian forests. Domini engaged in dialogue with the company and filed a shareholder resolution. We also used our position as a shareholder to enable an Alberta community spokesperson to attend the company’s annual meeting to address the CEO and board of directors. Her impassioned speech on the effects of deforestation helped to change company policy. In 2006, the company agreed to use more wood fiber certified by the Forest Stewardship Council, increase the recycled content of its paper, and reduce the use of paper in catalogs.
We believe in a comprehensive approach to the environmental challenges of our time that seeks incremental change while urging exploration of revolutionary alternatives. We recognize that, as investors, our ability to produce meaningful change is only one part of the larger efforts that must be made throughout our societies. However, it is our hope that increasing awareness that the way you invest matters will amplify the voice of the responsible investing community. As corporations learn that their shareholders care deeply about these kinds of global changes, they will increasingly focus on ways to help address the substantial environmental issues we face as our rapidly developing societies move into the 21st century.