SRI
I think I'm more optimistic about the role that Socially Responsible Investing can play in activism and corporate reform, but this is an interesting piece at TNR by Dartmouth '03 Bradford Plumer.
Here's the typical take:
For most corporations, after all, there's no real penalty for being shunned by the socially responsible community. Virtually all SRI mutual funds--and most public pension funds--now screen out tobacco companies, but Philip Morris and RJR Nabisco have no trouble raising capital elsewhere. SRI may be increasingly popular, but the $2.29 trillion in assets screened by the community is just chump change in the $136 trillion global capital market--most of whose investors worry only about making a profit. For every health-conscious fund that wants to dump tobacco stock, there are dozens of investors willing to buy.
Right. But, much more interestingly:
The other problem, as Aaron Chatterji and Siona Listokin recently argued in an article for Democracy, is that codes of conduct and voluntary initiatives often amount to nibbling at the edges rather than significant reform. [...]In the end, government action is often the only thing that can dramatically alter corporate behavior. Concerned investors are less likely to stop Ameriquest from preying on low-income neighborhoods than well-designed legislation and tough law-enforcement. The Times chastised the Gates Foundation for investing in pharmaceutical companies that often price retroviral drugs too high for the AIDS patients the organization is trying to help. But persuading drug companies to be altruistic won't work as well as reforming an intellectual property regime--supported by Big Pharma--that makes it harder to sell cheap generic drugs in Africa. Of course, Bill Gates's company (itself no angel) relies on those very trade laws to maintain its monopoly in operating systems--yet another reminder that things are never so simple.
[...] Both SRI and shareholder activism can still do a world of good, by pushing for modest changes and raising awareness about corporate wrongdoing. But it has real limits. One final anecdote: Last week, Exxon announced that it would stop funding attacks on the science of climate change, but it seems to have done so not because of pressure from activists but rather out of fear that Democrats in Congress are going to shift the global warming debate--and the company doesn't want to be left behind. In all things, the messy business of politics still matters.
Well, yes.
$2.29 out of $136 trillion might be chump change, but one out of every 8 dollars in the US is SRI, and as SRI firms continue to grow, so will their influence.
(Read the whole piece here.