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Boston Is A Shining City For Impact Investment — Let’s Keep It That Way

The Republican-proposed Financial CHOICE Act would kill the shareholder proposal process and further concentrate power in the hands of a few Wall Street players, writes Pat Miguel Tomaino. Pictured: The Old State House in Boston (Greg Cook/WBUR)MoreCloseclosemore
The Republican-proposed Financial CHOICE Act would kill the shareholder proposal process and further concentrate power in the hands of a few Wall Street players, writes Pat Miguel Tomaino. Pictured: The Old State House in Boston (Greg Cook/WBUR)

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Let’s face it: Boston has become a company town. Our universities and hospitals, which are second to none, employ thousands and fuel our tech-driven economic boom. Walk downtown on a weekday and you’re likely to bump into the harried production assistants and cold cut buffets of the film industry — lured here by tax incentives and Marky Mark Wahlberg. And, now, here comes GE.

But there’s another globally important industry centered in Boston that you may not know about. Socially responsible investing — managing money with a view to ethical and environmental values — is a $9 trillion sector that’s booming in financial centers like New York, London and Shanghai. But the hub of this field (also called “SRI” and “impact investing”) will always be Boston. The local trade group counts more than 20 firms and hundreds of professionals working in all corners of socially responsible investing and research here.

Right now, that time-honored form of socially responsible investing is being attacked by Trump officials and Republicans in Congress.

It’s a natural fit. From Fidelity to State Street, we have raised some first-class investment talent. But Boston was also the epicenter of abolitionism and a hotbed for Unitarians, Quakers, Episcopalians and Catholics who, over the last century-and-a-half, set out to manage their portfolios responsibly while casting out sinful stocks.

Starting in the 1970s, many Boston-based socially conscious investors, such as the Unitarian Universalist Association, helped lead the campaign to push big companies like General Motors to leave South Africa during the racist apartheid regime. Those investors succeeded in large part by exercising their legal right to file shareholder proposals — short resolutions that force corporate boards to consider pressing issues after a vote by all stockholders.

Right now, that time-honored form of socially responsible investing is being attacked by Trump officials and Republicans in Congress. A bill they are pushing this week would undo many of the most important safeguards created in the Dodd-Frank reform following the 2008 financial crisis, including key banking regulations and Sen. Elizabeth Warren’s Consumer Financial Protection Bureau.

The proposed Financial CHOICE Act 2.0 would also ban anyone but the largest investment firms from challenging company management with a shareholder proposal. That change would effectively kill the shareholder proposal process and further concentrate power in the hands of a few Wall Street players at the expense of ordinary investors and other stakeholders.

That would be a huge loss. The early Boston story of aligning investments with values has since evolved into a vibrant community of religious investors, public pension funds, private endowments and financial advisers. We use both constructive dialogue and shareholder proposals to press big business to manage risk and act responsibly. As I write this, socially responsible investors are using proposals to push Wells Fargo on its recent ethical failures, having already convinced the bank to rearrange its board.

Indeed, the shareholder proposal process is an inexpensive way for investors big and small to flag key business risks with a little dose of corporate democracy. It’s no surprise that many companies want to shut it down; executives prefer to rule unquestioned.

The shareholder proposal process is an inexpensive way for investors big and small to flag key business risks with a little dose of corporate democracy.

Over the years, shareholder advocacy has convinced dozens of leading companies to rein in huge CEO payouts, disclose major social impacts like greenhouse gas emissions, and confront the financial risks and moral outrage of sweatshops. A great many of those common-sense measures came from commonwealth investors, making Boston a shining city upon a hill for corporate America.

In the long run, the CHOICE Act would hurt society, the environment and companies themselves. Bostonians should know — and tell Congress — that this misguided bill would hit us where we live.

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Pat Miguel Tomaino Twitter Cognoscenti contributor
Pat Miguel Tomaino is associate director of Socially Responsible Investing at Zevin Asset Management in Boston.

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