Moving Forward

Joan Bavaria wrote this column, From the President, for the past 15 years. Joan was passionately engaged with the world on many levels, more than any person I have ever known, and her columns reflected her humanity. From the small to the large, from the individual to the global, her deeply personal columns tied her observations of the world to the need for action and a call for our engagement in creating a better world. Joan died on November 18, 2008 after an extended and courageous battle with ovarian cancer. Our world is much the lesser for her passing, and we miss her profoundly.

Joan’s unending optimism and enthusiasm impelled us forward. In October 2000 Green Cross International President Mikhail Gorbachev and Global Green USA honored Joan with the Millennium Award for Corporate Environmental Leadership.  At the ceremony, President Gorbachev proclaimed that “History is not pre-ordained.” Joan personified that idea. Whatever she faced, I never saw her show the slightest sign of doubt that persistence, dialogue, and engagement could overcome obstacles. She would square her shoulders, beam her engaging smile, and plunge in. She believed that any social structure, any human institution, is susceptible to change – and her life and work is proof of this.

I visited Joan on November 5, the day after the election. She was thrilled that Barack Obama had won. By that time, she was very frail, and she dozed off and on. But every time she roused, she opened her eyes, gave me a huge smile, and said, “WE have a new President!” She also told me, very firmly, that “Isaiah was wrong, you know!” Apparently she had had a conversation with my son Isaiah, now a senior in college, when he was about twelve. He had been despairing of the political and economic climate. She had told him that the world was moving in his direction, becoming more multicultural, more mixed-race, and that we would soon see enormous changes in our political leadership. He told her, with all the certainty of the young, that he would never see a black president in his lifetime. I replied that Isaiah would evidently have to eat some crow, at which she scrunched up her face and said “Crow is nasty! He shouldn’t eat crow – he needs to eat his hat!” Isaiah complied, emailing Joan a picture of himself munching on his cap. She was delighted, printed a copy, and showed it to her visitors after that. How very like Joan – to remember a conversation a decade ago with a young man, to delight in every sign of progress toward a more just and better world, to remind us all of the unlimited need for hope and the boundless possibilities for positive change.

So – we here at Trillium Asset Management Corporation pledge to move forward, chin up, full of optimism and determination to create the opportunity for change!

Overcoming the Class 5 Rapids

This has been quite a year so far for the global economy. The collapse of the mortgage market and much of the rest of the loan market in the U.S. has spread around the world. Energy prices have soared, reacting not just to global demand and supply fears but to the extremely weak dollar (which came about in part because of the mortgage collapse), as this country slowly awakens to the ramifications of our energy gluttony. Food prices, driven in part by the diversion of farmland toward biofuels, have skyrocketed, literally starving whole communities around the world and throwing local commerce into chaos. Those of us who make a living advising others on sound, sustainable investing have the sensation of riding a class 5 rapid.

People are, for a lot of good reasons, afraid – afraid that their life’s savings will be destroyed, afraid that their son or daughter will not find the money to go to college, afraid that the son or daughter will never own a home, afraid that the shortages around the world will result in violence, and afraid that if there is a sure way out of the rapids, it’s not that obvious.

There is no question that lurking behind much of the mortgage crisis is runaway competition in the private sector to build the biggest tower, house, or boat or to simply amass the greatest fortune. This is not new in the world. When I first started learning to invest at the Bank of Boston in 1969, I had a mentor named Harold who bought me a book about the Tulip Mania in Holland. Harold said that if I learned nothing else, I should learn about bubbles and greed and how to avoid them. Having worked in the profession through bubbles and greed for almost 40 years, I admit that both are really hard to avoid. They have a way of sucking you in. Your fear is that you will be left behind. And in fact, during the very end of 1999 I was fired as advisor to two clients who were angry that I had not purchased enough tech stocks in their portfolios. As a long-term financial advisor in a market with a short-term mentality, you walk a very thin line between prudent diversification and being left behind.

Sustainable, socially responsible investing should mean that you look at the world and the market with lenses sensitive to a complete social and ecological picture. I was brought up in rural New England by parents very invested in a “waste not, want not” culture. Waste of anything was seen as almost as large a sin as sex or swearing. It’s in my DNA, so when I see people running water down the drain as they wander around the kitchen or allowing food to go bad I have to check myself and realize I am not their parent. I gain some of my greatest feelings of satisfaction when I prod a kitchen appliance into service for decades. My Oster blender is older than my oldest son, who has ten year old twins.

In the U.S., where the mortgage foolishness originated in the vacuum of slack regulation, we have income disparity not seen for a century. College graduates have flocked to Wall Street to make money for decades. Business schools raked in alumni dollars and built sparkling, sprawling campuses with the most up to date equipment while other schools fought to make ends meet. “Making it” as a family too often has meant not just one heavy, over-powered vehicle but more than one, and, often several homes.

In Trillium Asset Management we have often imagined a more sustainable world. Occasionally, over the years, we have discussed the word “sufficiency.” It is very controversial as a concept because it presumes that there is a way to judge what “enough” is. Caught in a competitive, Darwinian economy, people often lose sight of basic needs or fairness and simply compete. Some competition is good and leads to innovation, but at what point do we have sufficient ability to transport ourselves comfortably? How many chairs do we really need? How high a ceiling in our house’s entry hall? How many shoes? Where is it all going to end? Who will be brave enough to jump off the treadmill with pride, not fear? Ever since the Reagan era made it “fun to be rich again,” it has been considered trite to count your blessings, but that is something else we need to learn to do.

If we swallow our fears and look around us with clear eyes, we might realize that we are destroying the very thing that made this country as successful as it was in the twentieth century – the middle class – and have blinded ourselves to the incredible wealth that we enjoy relative to much of the rest of the world. It is common to measure generational progress by asking the question “are you better off than the last generation?” Perhaps we should also ask “what have you done to make the world better off?” or “what have you contributed to the community around you?” Ironically, if the world and communities are stronger, you and your children should be too.

I recently read a book by Swedish novelist Henning Mankell called Chronicler of the Winds. Set in war-torn Africa, it follows street kids and vividly describes their existence. One of the boys, age 10, muses “If anyone had asked (sic) what was the fundamental need of every human being, I would have known the right answer at once: a roof and an ID card. That was what a person needed, in addition to food, water, a pair of pants and a blanket. It was by having a roof over their heads and ID cards in their pockets that human beings differed from the animals.”

Socially responsible investors have worked hard for humane, fair and environmentally sound practices within companies around the world. This deliberate, patient work has reaped positive results that our readers have witnessed over our 25 years of activism. The current bubble/deflation economy threatens to undermine these values and goals as fear of losing everything permeates the media and corners are cut to save money. I believe that we need to affirm our basic values and stand proud and tall and continue to fight for them. We have choices to make – let’s make the right ones.

Actually, I believe, too, that we may have begun to turn the corner. Out of the darkness often comes the light. If we are listening, we might hear the truth about the planet’s limitations. We will continue to compete and innovate toward energy conservation, local food supplies and whatever it takes to help the global community. If we as socially responsible investors hold to our values and stand tall, I believe we can and shall overcome the class 5 rapids. I also believe we will remain adequately clothed, housed and fed!

The Current Sub-prime Tsunami

I bought my first house for $32,000. My father loaned me the money for the 20% down payment, which was $6,400. The financing bank was a local one, and did not sell the mortgage. But that was a long time ago, not just in years but in the evolution of the world of finance and real estate.

Even as we who make our living in financial services struggle to understand the dimensions and impact of the current sub-prime tsunami that has rocked markets around the world, there are thousands of lives that are tragically altered, and their stories do not make headlines dominated by the huge mortgage companies, banks and brokerage firms that created the greed-driven implosion and now whine about their own fate. For many of the hapless homeowners facing much higher payments than they’d bargained for within a disappearing housing market, there is no local bank with which to bargain. Their mortgage might well be “owned” by a large institutional investor as one miniscule part of a bond or other instrument sold by a broker.

One of the stories proved close to home when a friend told me that her mother and sister had received an “acceleration notice” for the mortgage on their suburban house, which is worth around $300,000 and has a mortgage of $130,000 and a home equity loan of $40,000. The 75-year-old mother lives on $500 social security, and the sister was recently laid off from her job – the mortgage and home equity loan together cost $1,662. They have missed two mortgage payments, and now they are told they owe the entire mortgage amount – payable immediately. They are lucky – their house is worth more than they owe, and they’ve put it on the market, but there are no buyers, because few banks are willing to lend. It’s likely that the house will be auctioned for the amount of the mortgage, leaving my friend’s mother and sister with none of their equity in the house. The combination of unscrupulous brokers and too easy money created real victims.

Ours, however, is an age of stark contrast and an income gap that is as wide as it’s ever been in this country. The New York Times reported in April that “in 2006 the top 25 hedge fund managers earned $14 billion – enough to pay New York City’s 80,000 public school teachers for nearly three years……unlike the dot-com billionaires who saw their fortunes collapse with the tech bubble, the gains on hedge funds….are huge cash payouts that most managers then reinvest in their funds.” Even as the crisis continues to unfold and people are fighting to hold onto their precious homes, these same hedge fund managers are fighting to hold onto tax breaks that allow them to bring home billions of dollars a year.

Although, undoubtedly the latest greed-driven crisis will run its course in the gargantuan global financial system, the greed itself remains. The challenge for those who believe in sustainable, responsible investing is ever greater.

Animal, Vegetable, Miracle

Here’s something to think about: “The 2006 “Broccoli report” showed that broccoli produced in Sweden led to 60% less greenhouse emissions than imported broccoli. And 99% of all broccoli that is consumed in Sweden is imported, with Spain and and Ecuador as major exporters. Interestingly enough, transporting the broccoli from Ecuador produced about 40% of the greenhouse gas emissions of transporting Spanish broccoli even though the broccoli from Ecuador is transported 12,000 km compared to 3,200 km for Spanish broccoli. Ecuador’s broccoli is shipped by boat to Rotterdam, by feeder boat to Gothenburg, Sweden, and then by truck to Stockholm. Spanish broccoli travels by truck the entire way.

The report also calculates the economic costs of broccoli from different sources. Switching entirely to Swedish-produced broccoli would cost more than twice as much as the current mix of 1% Swedish, 33% Spanish, and 66% Ecuadorian and Guatemalan.” [1]

Last evening my husband and I attended a sold out book signing in Cambridge, Massachusetts, starring Barbara Kingsolver, her daughter Camille and the new book she has written with her husband, Steven, and Camille. The book, Animal, Vegetable, Miracle[2] is the true story of the family eating only locally around their farm for a year. The book jacket says “This is the story of a year in which we made every attempt to feed ourselves animals and vegetables whose provenance we really knew…and of how our family was changed by our first year of deliberately eating food produced from the same place where we worked, went to school, loved our neighbors, drank the water, and breathed the air.” The book, is the true story of the family eating only locally around their farm for a year.

The book is also full of well researched facts about agriculture and animals and commentary on how unsustainable our system of food production, transportation and consumption really is. Barbara is a skilled and funny writer and reader – the plot around turkey sexuality and reproduction is dramatic and riveting. Her core messages – we’ve got to do something about the way we eat because the way we eat defines much of our life. I highly recommend this wonderful book.

I grew up in a small town in Northwestern Massachusetts. My family was into food. My grandfather ran a bakery that distributed baked goods around and beyond the town, right to people’s houses. Later, my father purchased the bakery and serviced local hospitals, schools and a bustling retail store in which I worked from my early teens. My father also grew organic vegetables, which my mother, my sisters and I put away in freezers or in jars. This wholesome, somewhat isolated life was not completely appreciated by me as a teenager. But much later I can see that, as a society, there are value decisions we can and must make, and those old habits seem pretty smart.. .
Barbara’s experiment is one of many attempts around the world to define a “new” and more sustainable consumption pattern that in some ways might resemble something very old. Some of these alternatives might be downright pleasant.

[1] The Energy Report, Stockholm Consumers’ Association, 2006

[2] HarperCollins, 2007

Performance

The sky is falling in on the current political administration, but it’s not sitting still. Quite. George W. Bush and company are now attempting to take leadership on issues that they have been fighting against or ignoring for years — issues like global climate change and executive compensation. The trouble is, “leadership” in this case means acknowledging an issue previously denied and then re-framing the solution to fit a particular agenda.

It’s important that the various solutions to both climate change and executive compensation are fully debated in the public and that the long-term ramifications are completely understood, lest we shoot off on yet another trajectory that we will find ourselves cleaning up years hence. Using food for fuel is NOT the only answer to our energy problem, for instance.

On the issue of executive compensation, the Bush administration now advocates (rather loudly) that the time has come for executives to be compensated for “performance.” I shudder at that word, which in modern times has produced everything from Viagra to ergogenic supplements to insider trading. But assume for a minute that there is no substitute for the word – let’s just define “performance” in a way that is “sustainable”. Too often, “performance” for a Chief Executive is synonymous with positive stock price action, no matter the reason. This is not just an incomplete measure, it’s dangerous.

As I write this, Carl Icahn is attempting to gain a seat on Motorola’s board of directors. Icahn made his billionaire fortune in large part because of Michael Milken’s junk bonds. If you were in the industry in the eighties you might remember him – hardly a hero. Now, with his money intact (not being one of those who actually went up the river in the eighties) he owns casino properties, pieces of big things everywhere, and at one point tried to take over Marvel Comics. Icahn’s goal with Motorola is to use all their cash (that’s all their cash) to buy back shares to make the stock go up, since weak earnings have driven it in the other direction. As of year end that looks like around $6.5 billion, some of which might be better used to develop and market a hot new cell phone. By the strict, conventional “shareholder value” yardstick, massive share repurchase alone might make possible windfall compensation for Motorola CEO Ed Zander (who earned a relatively modest salary and bonus of $3,500,000 in 2005 plus stock awards) in a time when Motorola is suffering from lack of competitive product in a highly fickle market.

But I digress. My point is that in awarding executive compensation, if companies measured sustainability of the corporation (defined by its role in protecting its own community and the Earth on which it resides in addition to financial success), – the word “performance” would take on a new and long-term brilliance.

Christmas Lights(A)

The ushering in of 2007 is behind us, with all the promises and parties, and the removal of holiday lights from lawns, bushes, trees, rooftops and windows. Not to be missed by some of us are the giant inflated Disney-like lighted characters that die rather messy deaths during the day and come to life at night. We asked one owner of four such characters why she has them crowding her lawn and she candidly said “to keep up with the neighbors”.

A good friend of mine (with tongue in cheek and undoubtedly blinded by an exuberant neighbor) sent these scary statistics about Christmas lights found in a blog: “Americans buy six hundred trillion trillion miles of Christmas lights, enough to stretch to the outer limits of the known universe and back eighteen times. All those lights suck a lot of power – in fact, total power consumption from Christmas lights is five times the entire energy output of the sun since the beginning of time.” This is obviously a joke, but just observing some of the gaudier houses and imagining them multiplied across the country makes me wonder if it’s possible. A partial answer to the energy use problem is LED (Light Emitting Diode) lighting – PG & E sent a flier to its customers last fall to demonstrate the cost savings of LED holiday lights – it’s often true that saving energy also saves cost.