Mennonite Mutual Aid: Is it Possible to Invest with Ethically?

From The Kalona News in Iowa, an article on Mennonite Mutual Aid's efforts to create ethical investing practices, tools and opportunities:

"For what profit is it to a man if he gains the whole world, and lose his own soul? Or what will a man give in exchange for his soul?"
Matthew 16:26

"The man who has won millions at the cost of his conscience is a failure."
BC Forbes

The American public has been bombarded for the past several years with news accounts of massive Ponzi schemes, predatory lending, unfair labor practices, industrial poisoning of water and air, excessive bonuses, corporate greed, Wall Street manipulations and toxic loans.
All these, along with the cost of the Iraqi War, have been blamed for the meltdown of the American economy. And all of these, says Jeff Swartzentruber, vice president of the MMA Trust Company in Kalona, are inconsistent with Christian principles. What is consistent with these standards, he added, is "stewardship investment."
The concept of stewardship investment is not new. The Religious Society of Friends (Quakers) founded an insurance fund in 1832 to provide life assurance to its members - and excluded investments in "sin" stocks. That insurance fund, now the FTSE 100 company, Friends Provident, celebrated its 175th anniversary.
Through the years, its exclusion of unethical companies expanded to include issues such as climate change, biodiversity and labor.
Swartzentruber says MMA's origins began in the 1930s when the Mennonite Church leaders identified some financial needs of its members, such as assistance with housing loans and sharing resources among Mennonite churches. It eventually morphed into Mennonite Mutual Aid (MMA) - incorporated in 1945. Its services expanded, along with the members its represents. These now include a number of churches that have Anabaptist ("rebaptize") roots and historic ties to the 16th Century religious reformers, among this list are the Religious Society of Friends, Old Order Amish and Church of the Brethren.
MMA's stewardship investing examines both the financial and social records of hundreds of companies, Swartzentruber says, and uses these six guidelines for investments:
* Respect the dignity and value of all
* Build a world at peace and free from violence
* Demonstrate a concern for justice in a global economy
* Exhibit responsible management
* Support and involve communities
* Practice environmental stewardship
There are obvious types of companies that MMA does not invest in because of Mennonite beliefs, said Swartzentruber - manufacturers of alcohol and tobacco products, as well as companies where incomes are significantly generated through military contracts.
MMA does invest in some companies that at first glance might not appear to be live up to these standards, acknowledged Swartzentruber. Since no company is perfect, he said, their stewardship investment strategy also includes shareholder advocacy, which can help steer a company in a more ethical direction through the use of dialogue and other means.
MMA literature states, "Socially concerned, active shareholders in publicly-traded companies are becoming increasingly important. The voice they provide in the development of responsible business practices that provide both social and financial benefits cannot be underestimated."
"As part-owners, we believe it is also within our rights and responsibilities to communicate with corporate management about the practices and activities we believe have a negative impact on communities, individuals, and the environment."
An example is Wal-Mart, said Swartzentruber. Some of the practices of the giant retailer might exclude it from some stewardship investment lists. But through proxy voting and interaction with its board of directors, MMA hopes to have a positive impact on its future practices.
Just recently, Wal-Mart announced plans to develop a "sustainable product index" that will establish a single source of data for evaluating the sustainability of products. The company is beginning with a survey of its more than 100,000 suppliers. The survey's 15 questions will allow the suppliers to evaluate their own sustainability efforts, focusing on four areas: energy and climate; material efficiency; natural resources; and people and community. Wal-Mart will take this information and create a rating label on each product.
MMA is a member of Interfaith Center of Corporate Responsibility (ICCR), which includes nearly 300 faith-based institutional investors. When ICCR asked Pepsi if it was not concerned about the AIDS pandemic in Africa, said Swartzentruber, company officials replied that they didn't think it was within the company's responsibility.
MMA representatives brought it to the floor during a stockholder's meeting, noting that AIDS has a direct impact on Pepsi's African employees, as well as its customers. Pepsi now has a number of HIV/AIDs programs in Africa, Swartzentruber said.
"We don't have all the answers," Swartzentruber admitted when it comes to deciding who should be on their investment list and who shouldn't.
Some are pretty clear, though he said. Exxon is excluded because of its historical environmental record. General Electric is on the no-go list because of its defense contracts--the same goes for Caterpillar. Jack Daniels doesn't make the grade for obvious reasons. It should be noted that the mention of these company names is not meant to disparage, only to recognize a difference in values understanding--each investor must make their own decisions and choices when buying individual equities.
Microsoft does have products purchased by the military, but since they were not developed specifically for military purposes, MMA does invest in the computer software company.
Swartzentruber says there are now a number of firms and funds that follow the stewardship investment philosophy. He pointed to Pax World, billed as the nation's first socially responsible mutual fund that was launched in 1971.
Pax World's website states, "Pax World is at the forefront of a new investment approach: Sustainable Investing - the full integration of environmental, social and governance factors (ESG) into investment analysis and decision making. Pax World is a leading advocate for Sustainable Investing, an emerging discipline based on the financial materiality of ESG factors."
Calvert Investments is another investment management company he says involves stewardship investment. The company describes itself as a leader in sustainable and responsible investing (SRI).
The three SRI approaches Calvert lists are:
* Two distinct research frameworks: a rigorous review of financial performance, and a thorough assessment of environmental, social and governance performance.
á* A thematic approach to solving some of today's most pressing environmental and sustainability challenges.
* An "enhanced engagement" approach emphasizing strategic engagement to advance environmental, social and governance performance in companies that may not meet certain standards today, but have the potential to improve.
In the end what is of importance, Swartzentruber said, stewardship investment is a way to bring ethical considerations, faith-based values, to otherwise soulless corporate entities.