The Business and Human Rights Resource Centre has posted a new research paper by Liz Umlas, independent researcher and former KLD senior research analyst. “Human Rights and SRI in North America” was prepared to inform the mandate of Professor John Ruggie, the Special Representative of the United Nations Secretary-General on business and human rights.

The following is the introduction to the Executive Summary of “Human Rights and SRI in North America.” Click here to download a PDF of Liz’s paper.

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In his first week in office, President Obama proposed major overhauls of environmental and financial regulations. These changes have long been championed by investors concerned with companies’ environmental, social and governance (ESG) performance, and few were surprised that a new regime has brought a new policy agenda.

In this time of recession and scandal, however, some familiar faces in American business – including former SEC Chairman Harvey Pitt and Wal-Mart’s Lee Scott – are also setting a different tone. Mr. Pitt has announced ten lessons that investors should learn from the current crisis, while Mr. Scott has committed the world’s largest retailer to “a sustainability program to remake the entire company.” These are welcome moves, but ESG investors should ask whether this new attitude will outlast today’s crisis mentality.

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[Note from the Editor: Gary Moore was a senior vice president of Paine Webber before founding his own firm as “counsel to ethical and spiritual investors.” He has written five books on the ethical management of money and has been a financial commentator for UPI. He has very graciously permitted us to post his perspective on the Madoff case. Also see a link to his organization at the end of this article. The following is Mr. Moore’s work. – AP]

Bernie Madoff has apparently perpetrated a fifty billion dollar Ponzi scheme that has devastated investor confidence, as well as several charities in Palm Beach. A hedge fund operator in my hometown of Sarasota has apparently perpetrated another swindle of three hundred and fifty million dollars. It too has affected hundreds, as well as the Y on whose board I serve, and several other charities. The more things change…

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The day after the Inauguration, the Wall Street Journal marshaled an impressive array of leaders – from Newt Gingrich to Al Sharpton to The Nation’s Katrina vanden Heuvel – to give advice to the new President. The sustainable and socially responsible investing (SRI) community has also recently offered its counsel on investing, corporate governance, and health care policy.

The Social Investment Forum called for “New American Leadership” on many of these issues in a comprehensive January 14 letter to the incoming Administration. For a concise summary of the six-page letter, see this article in Financial Advisor.

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On November 26th, the Secretariat of the United Nations Principles for Responsible Investment (PRI) held a webinar on its Ethical Trading Initiative. The PRI call on investors to incorporate environmental, social and governance (ESG) factors into their investment practices, and to work together for better reporting and disclosure of ESG performance. (KLD is a charter signatory of the PRI. For more information, see the About PRI page at KLD.com.)

The Ethical Trading Initiative is a PRI-led coalition that works for better labor and environmental practices throughout the global supply chain. The Initiative is a recognition that investors alone cannot raise global ESG standards. Real progress demands that manufacturers, distributors and retailers commit to industrywide improvements. Shareholder activists play a vital role in this effort, which requires coordination on a massive global scale.

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Sustainable Investing: The Art of Long-Term Performance, a collection of articles from 22 contributors including co-editors Cary Krosinsky and Nick Robins, was released in the fall of 2008. SI challenges investors to look beyond what contributor Steven Lydenberg calls “the fast-paced speculative nature of today’s financial markets.” Socially responsible investors (SRI) have been striving to meet this challenge for decades, and now current events have exposed the financial system’s myopia as an urgent global crisis.

If it had been released last year, this book would have been a valuable primer on how some investors integrate environmental, social and governance (ESG) factors into their strategies. In the winter of 2009, however, Sustainable Investing now offers answers to questions the whole world is asking. Consider this diagnosis from a January 3 New York Times article by Michael Lewis and David Einhorn:

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At BusinessGreen, Danny Bradbury reports that even as Apple launches new “green” products, the company is resisting shareholder requests for better sustainability reporting. Apple’s board has asked its shareholders to vote against a resolution calling for the company to measure and disclose its environmental impact in a formal corporate social responsibility (CSR) report. The resolution is proposed by environmental advocacy group As You Sow, who also called on Apple to design its computers for end-of-use recycling in 2007. Mr. Bradbury writes:

“The [current] resolution would require the company to publish a CSR report detailing its approach to greenhouse gas emissions, toxics and recycling by July this year. The report would also require Apple to define ‘sustainability,’ and would include a company-wide review of policies contributing to sustainable operations.

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While new taxes are always a difficult sell, a carbon tax program that disbursed some income to utility customers could be politically palatable. Entrepreneur Peter Barnes proposed such a “cap and dividend” program to Congress in September, and the stalled economy has increased the appeal of any plan to send cash directly to struggling voters.

The cap and dividend concept combines a tax on carbon producers with tangible benefits for utility customers. The program would tax fuel producers if the carbon released from the use of their product exceeded a defined limit. If a coal mine’s carbon output exceeded this limit—the “cap”—its taxes would go up. The producer would then pass along its increased costs to coal-burning utilities, encouraging those companies to develop alternatives. The customer rebate—the “dividend”—is a recognition that raising the price of fossil-fuel power would raise the retail price of all power, at least until new sources come on line. (The Carbon Tax Center provides a helpful FAQ on the concept.)

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