The Politics of SRI

It is surely, unmistakably, an election year. Wherever you are, politics will find you this year. If you are a federal employee hoping for an SRI option in your retirement plan, politics has found you, too. See below....

US SIF LETTER TO THE EDITOR, THE WASHINGTON TIMES

August 2, 2012

"Unsustainable investments: Democrats look to divert more money to liberal causes," (July 31) includes unfounded, inaccurate claims both about sustainable and responsible investing (SRI) and the recent GAO report on including an SRI Option in the Federal Thrift Savings Plan (TSP).

Over $3 trillion, or one in eight dollars, under professional management in the U.S. followed sustainable investing strategies at the beginning of 2010, growing more than ten times the rate of the broader universe of professionally managed assets over the previous five years.  An increasing number of investment managers, mutual funds, financial planners and advisors, pension funds, foundations and other asset owners engage in SRI.  Many corporations already offer SRI options to their employees.  More than half of all states and many cities offer SRI options in defined-contribution retirement or public educational savings plans.  The GAO report states that SRI demand is "…a global phenomenon and is growing in popularity in the US."

  Additionally, the information in the GAO report, while including some challenges common to adding any new fund to a plan, notes that many institutions with an SRI option find that the cost, performance and administrative aspects of adding an SRI fund are in line with conventional funds.  Specifically, the GAO noted that in 2010, "the costs of SRI institutional grade mutual funds were similar to their non-SRI counterparts." The GAO's regression estimates showed that SRI stock mutual funds performed better than their non-SRI stock counterparts in the 5- and 15-year timeframes.   

Providing an SRI option for federal employees allows them to have access to the same kind of investment options offered to millions of other public sector and private sector employees.

  Lisa Woll
CEO
US SIF: The Forum for Sustainable and Responsible Investment
Washington, DC  

THE WASHINGTON TIMES EDITORIAL

Unsustainable investments - Democrats look to divert more money to liberal causes By THE WASHINGTON TIMES Tuesday, July 31, 2012

            Spending other people's money is what the left does best, so it's no surprise congressional Democrats would come up with a scheme to bankroll pet causes with cash from retirees. In 2009, the Democratic-controlled Congress passed a law encouraging the Thrift Savings Plan (TSP) to come up with new investment options. Rep. Gerald E. Connolly, Virginia Democrat, wanted to know whether greenbacks could be steered toward "socially responsible" firms.

That would be a bad idea, the Government Accountability Office (GAO) concluded in a report released Thursday. About 4.5 million federal employees have $308 billion in the government's 401(k)-style retirement program, which allows employees to put their assets into several index funds that vary in potential risk and return.

One fund invests in Treasury securities, offering the least risk. Another invests in bonds and other asset-backed securities. The most popular option tracks the Standard and Poor's 500 Index, investing not in any one particular firm but in the broader market.

"Socially-responsible" patronage directs dollars toward firms that meet criteria laid out in the United Nations document, "Principles for Responsible Investment." These values are kept vague for obvious reasons, but in practice the idea is to set up a system to reward corporations for such things as speaking out against the evils of global warming, promoting alternate lifestyles and "contributing to their community" with donations to liberal causes. There's no room for anyone involved in, say, nuclear power or national defense.

The Thrift Savings Plan surveyed its members and found there was no demand for a socially responsible fund. In other private-sector retirement programs that did offer a save-the-polar-bears option, as few as 0.5 percent of members chose it. When people are in control of their own money, they're not looking to hug a tree — they're looking to get the best bang for their buck.

That's not what they get from purportedly environmentally conscious, fair-trade firms that insist on only using recycled paper. GAO tested its current portfolio against the best-performing, socially responsible index fund and found the liberal stocks would have resulted in "lower returns and higher volatility" compared to the broader market. Over 10 years, the lefty stocks averaged a 12 percent return compared to 33 percent for common stock.

It'd be a much smarter move to create a fund from politically incorrect companies like the two publicly traded U.S. firearms manufacturers. Smith and Wesson stock grew from $2.35 in January 2009 to $10.10 per share today. Sturm, Ruger and Co. jumped from $6.27 to $49.43 over the same period, not counting $1.93 in dividends.

This politicized investment idea, however, was never about sensible investing or returns. It was always about encouraging companies to toe the liberal line using the savings of retirees as an incentive.

The Washington Times