Our Thoughts on the Stock Market Correction

The 3% drop in the stock market on February 27th does not change our constructive view for equities for the full-year 2007, but is a reminder of the short-term volatility that one can sometimes endure as a long-term investor. Stock prices had been unusually quiescent since bottoming last summer, with the S&P 500 gaining 18% in an almost uninterrupted advance. The relatively modest pullback (at least so far) wiped out the gains from earlier this year, but the market is still well above the lows of last July.

Perhaps the biggest risk the market faced going into the correction was complacency. After many months with little volatility, investor sentiment had become exceptionally bullish. This can lead to short-term sell-offs in the face of even a little bad news. The precipitating events this time were comments by former Federal Reserve chairman Alan Greenspan that the economy might (not will) tip over into recession later this year, followed by an 8% drop in the Chinese stock market – which had been on a tremendous tear. Once a little fear entered into the US market, it fed on itself, with stocks at one point down over 4% during the day before rallying toward the close.

Our generally optimistic view for 2007 is not based on a particularly strong economy or the requirement that the Federal Reserve aggressively cut interest rates. Rather, we believe that the most likely scenario this year is a slowing of GDP growth to around 2% (this is actually a bit lower than what the Federal Reserve itself is predicting), and only a bit of expansion in corporate profits. The key driver of the market in 2007 is unlikely to be earnings growth, but a belief that stock values will rise for a given level of profits. This trend began late last year. A slowing but not stalling economy with no further interest rate increases is the kind of market environment that has supported an expansion of equity valuations in the past. Also, mortgage rates will continue to fall in response to any weakness in the economy or stock market, providing much-needed support to housing and consumer spending.

Having said that, it may take awhile for the market to find its footing. Past corrections of this size, particularly after a long period of strong returns, have generally not led to a quick rebound in prices. So we may see some more pressure on stocks in the short run, but as the year continues to unfold the overall developments should be positive.

Interfaith Walk for Climate Change(A)

Religious Witness for the Earth is sponsoring the Interfaith Walk for Climate Change to raise awareness for climate change and “to call attention to the urgent and ethical need for…action to address global warming.” The nine-day walk across Massachusetts takes place from March 16-24, 2007, staring in Northampton and ending at a rally at Copley Square in Boston.

The walk will begin at the Unitarian Universalist Society in Northampton at 11am on March 16th and go through various towns, including Newton, Wellesley, and Worcester. Lodging and dinner will be provided each night at various designated worship centers and each night there will be educational programs and songs.

Walkers are welcome for any length of time – from the entire nine days or just one day. Walkers are asked that they register beforehand and check-in at the designated starting point on the mornings they are walking. Registration is open until March 5th and can be completed online (for the registration click here; for a detailed daily schedule, click here). Walkers are asked to make a $20 donation for every day they walk – but no one will be denied the opportunity to walk for lack of funds.

The walk also welcomes volunteers to assist in setting up sites, passing out food, and helping to clean up. Additionally, the walk gratefully welcomes donations from organizations and individuals who would like to help financially support the event. For more information on donating or volunteering, click here.

The Religious Witness for the Earth (RWE) is an interfaith network founded in 2001 by Rev. Fred Small, a minister at the First Church Unitarian in Littleton, MA, Rev. Dr. Andrea Ayvazian, the Pastor of Haydenville Congregational Church in Haydenville, MA and Rabbi Fred Scherlinder Dobb, leader of the Shalom Reconstructionist Congregation of Bethesda, MD. The RWE’s sees “climate change and environmental devastation as issues of justices. RWE invokes the loving spirit, selfless courage, and moral authority of the civil right movement. Through prayer, education, and nonviolent action, we join hands to protect the earth.”

International Panel on Climate Change Releases Its Summary for Policymakers

Last week the Intergovernmental Panel on Climate Change (IPCC), a group composed of scientists from the World Meteorological Organization (WMO) and the United Nations Environmental Programme (UNEP), released its “Summary for Policymakers” in advance of their extensive Fourth Assessment Report on Climate Change that will be released in several parts this year.

Since the Third Assessment Report (TAR) in 2001, scientists’ understanding of climate changes has improved with greater access to information and data. The 2007 Summary reports some major points with regards to the issue of climate change:

· Global atmospheric concentrations of carbon dioxide, methane

and nitrous oxide now far exceed pre-industrial levels. Increased

agricultural production and rising use of fossil fuels are the main

contributors to the rise in these gases.

· The summary has very high confidence (at least 90% certainty)

that the net effect of human activities has been that of warming.

· The warming of the climate system in unequivocal.

· Long-term climates changes over regional, continental and ocean

basins have been shown.

· Most of the increases in temperature are very likely (>90%) the

result of increased anthropogenic greenhouse gas concentrations.

Noticeable human influences extend to other climate observations,

such as ocean warming and wind patterns.

· If greenhouse gases continue to be emitted at the same or above the

current rate, it is very likely that the 21st century will bring greater

changes those detected during the 20th century.

· There is now “higher confidence” in projected patterns of w arming,

“including change in wind patterns, precipitation, and some aspects

of extremes and of ice.” The warming is expected to be greater over

land and at the higher northern latitudes.

· Even if greenhouse gases were stabilized immediately, warming and

Sea levels would continue for centuries due to the time it takes for

the gases to be removed from the atmosphere.

Addressing global climate change is high on the list of Trillium Asset Management’s advocacy priorities. This year we are the lead filer ofa new resolution at ConocoPhillips calling for a report on how the company will invest in renewable energy. We are co-filers of a resolution at ExxonMobil calling for the company to set greenhouse gas reduction targets for its products and operations. We recently withdrew a resolution at Anadarko when the company agreed to establish greenhouse gas reduction targets by mid-2008. In addition, some of our political contributions disclosure resolutions draw attention to the contradictions between companies’ internal greenhouse gas reduction policies and their membership in trade associations seeking to weaken public policy measures to combat global warming.

Goldman Sachs Corporate Citizenship Chief to Keynote 2007 CERES Conference

This year’s annual Ceres conference, “Advancing Sustainable Prosperity,” will bring to gather a diverse group of company representatives, investors, and leading environmentalist to discuss how business’s can creates sustainable products and solutions. Featured speakers include Mark Tercek, the managing director and head of the office of Corporate Citizenship for Goldman Sachs. Numerous workshops include “Food for Thought: Organics, Fair Trade or Ethical” and “The Collision Between Coal and the Climate: Can Efficiency Save the Day?”

The conference will be held at the Seaport Hotel in Boston on April 25 -26. Reduced rates are available until February 9. Click here to register.

More than 17 years ago, Trillium Asset Management Corporation helped originate and incubated Ceres, a unique coalition that brings together environmentally concerned shareholders, corporations, and environmental advocacy groups. Ceres developed a set of principles that commit companies to improve their environmental practices and publicly report their progress. Trillium Asset Management remains an active member of the Ceres coalition, and is engaged in ongoing environmental dialogues with some of the largest companies that have endorsed the Ceres principles. Our President, Joan Bavaria, was instrumental in founding Ceres, chaired the Ceres board for most of its history, and still actively serves on its board and Executive Committee.

As the director of the Investor Network on Climate Risk, Ceres is constantly working to bring about disclosure from companies about how their business impacts the environment. Last month, Ceres, in association with Calvert, published a first-ever report on how the S&P 500 companies are doing with regards to reporting climate risk to their investors. The study found that only 47% of the companies responded to a request from global survey last year by the Carbon Disclosure Project requesting information about their climate risks and strategies. Last month also saw Ceres president, Mindy Lubber, attending the World Economic Forum in Davos, Switzerland. While she was there, Ms. Lubber blogged about her experience, which was published at World Changing.

Four Leading Companies Widen Political Disclosure(A)

Washington, D.C. – January 24, 2007. In a major expansion of company political disclosure, General Electric (NYSE:GE), Hewlett- Packard (NYSE: HPQ) and American Electric Power (NYSE: AEP) have agreed to report their trade association payments used for political purposes as part of their overall disclosure of political spending with corporate funds. In addition, Home Depot (NYSE: HD) has adopted disclosure of its soft money political contributions. All of the companies agreed to board oversight of their political spending.

Shareholder activists announced the companies’ actions today. The groups, Washington-based Center for Political Accountability (CPA), Trillium Asset Management and Green Century Capital Management, are part of a nationwide campaign to bring transparency and accountability to company political spending.

General Electric (GE), Hewlett-Packard (HP), American Electric Power (AEP) and Home Depot join 15 other major companies which adopted political transparency and accountability policies during the 2005, 2006 and 2007 shareholder resolution seasons. The companies are Bristol-Myers Squibb (NYSE: BMY), Staples (NASDAQ: SPLS), Amgen (NASDAQ: AMGN), McDonald’s (NYSE: MCD), Southern (NYSE: SO), General Mills (NYSE: GIS), Morgan Stanley (NYSE: MWD), Johnson & Johnson (NYSE: JNJ), Schering-Plough (NYSE: SGP), PepsiCo (NYSE: PEP), Coca Cola (NYSE: KO), Eli Lilly (NYSE: LLY), Verizon (NYSE:VZ), Monsanto (NYSE:MON), and General Dynamics (NYSE:GD).

The move by GE, HP and AEP to disclose their politically-related trade association payments is part of a growing trend by companies to provide a fuller picture of their political spending. Last month, General Dynamics became the first company to agree to report and have board oversight of its payments to trade associations that are used for political purposes. Previously, company disclosure and accountability was limited to political contributions made with corporate funds, popularly known as soft money.

“GE, HP and AEP are to be congratulated for recognizing the importance of much broader political disclosure. Through their agreements, they are establishing a new best practice. This will encourage companies to pay much closer attention to how trade associations use their money politically and will give shareholders a fuller understanding of how their money is being used,” said CPA Co-Director Bruce Freed. “The Center applauds Home Depot for recognizing its responsibility to make public and account for its political spending with shareholder money.”

Shelley Alpern, Director of Social Research and Advocacy at Trillium Asset Management, said, “These resolutions have clearly touched a sensitive nerve. Nearly every company we have approached has been interested in complying. Many are realizing that they have as much to learn from gathering the information as we will learn when it is disclosed. It is a very positive step forward for good governance and political risk management.”

Andrew Shalit, Director of Shareholder Advocacy at Green Century Capital Management, said, “Companies often push back on requests from shareholders, but in this case we’re seeing the majority of companies agree with our assessment. Full disclosure and oversight of political contributions is a basic good business practice. It costs very little to implement, it increases public confidence, and it reduces the risk of abuse.”

AEP pledged to ask its trade associations receiving more than $25,000 in annual AEP payments for the portion of the company’s payments used for political and lobbying purposes. (The $25,000 threshold may be reanalyzed in 2009.) The company said it will include the dollar amounts reported by the associations in its annual sustainability report.

HP said that it would include in its annual report the company’s soft money political contributions along with its political payments made to trade associations “and any other [corporate] payments used for political purposes.”

In its Statement on Political Contributions, GE committed to asking each association that reported that it has or will spend $25,000 or more of GE’s money on non-deductible lobbying or political expenditures to tell the company the amount used for political campaigns. “We will include in our political contributions report any responses we receive to such request,” GE said.

Current campaign finance law allows corporations to make donations in many states and to political committees commonly known as 527s, but not to federal candidates. However, companies aren’t required to disclose political contributions made with corporate funds or payments made to trade associations that are used for political purposes. Moreover, associations aren’t required to disclose the specifics of their political spending or their membership. This secrecy leaves institutional investors and individual shareholders in the dark about the use of company resources for political activities.

GE, the world’s second-largest company, and HP, a leader in information technology, adopted their new policies following discussions with Trillium Asset Management. AEP, one of the top public utilities, adopted its policy following discussions with Trillium and Green Century Capital Management. Green Century had filed a political disclosure resolution with Home Depot, the world’s largest home improvement retailer, in the current and most recent proxy seasons. The resolution at Home Depot was cofiled by the As You Sow Foundation and Progressive Investment Management.

In its Hidden Rivers report released in May 2006, the Center found that trade associations helped companies conceal and spend over $100 million in corporate funds in 2004. This spending, the report noted, poses serious risks to company economic interests and reputations and to shareholder value.

For the past three proxy seasons, the Center, a non- partisan, non-profit advocacy group, has been leading a shareholder campaign that includes 19 institutional investors and allied groups to get companies to agree to political disclosure and accountability. For the 2006 proxy season, shareholder votes on CPA-model resolutions averaged more than 21 percent. The resolution received more than 20 percent of the vote at 15 companies, and over 30 percent at five companies.

Starbucks Phasing Out GMO Milk(A)

Since 2001, working with As You Sow and members of the Interfaith Center on Corporate Responsibility (ICCR), Trillium Asset Management has asked Starbucks to stop sourcing milk from cows treated with the genetically engineered recombinant Bovine Growth Hormone (rBGH). Over that time, advocacy groups like the Organic Consumers Association and Food and Water Watch have issued similar challenges to Starbucks. Now the company has announced it will use only rBGH-free milk in its stores in many Western States and New England, boosting its use of rBGH-free milk from 27 percent to 37 percent of its milk purchases right now. The company is working to ensure all of its milk purchases are rBGH free as it can secure supplies, but has not set a definitive time table for reaching that goal. For more details on this announcement, click here.

More Banks Addressing Environment(A)

Last week Wachovia joined the growing number of banks adopting environmental policies that affect not only their internal operations, but also their lending and financial products. With input from Trillium Asset Management and other socially responsible investors, Wachovia becomes the latest in a series of banks to adopt new environmental policies, including Citigroup, JP Morgan, and Goldman Sachs. While some of Wachovia’s new policies don’t go as far as some of these other banks commitments, the company has made commitments to reduce its own greenhouse gas emissions and encourage its borrowers to do the same, and it has joined the growing chorus of companies acknowledging that federal action to stem climate change is needed. Click here for a page with links to Wachovia’s new environmental policies and specific commitments.

On a separate note, last year Trillium Asset Management and the Service Employees International Union co-filed a shareholder resolution asking Wells Fargo to address the risks of climate change. Since then, the company has taken some positive environmental steps. In the most recent development, last month Wells Fargo became the largest corporate purchaser of green power in the U.S. with a three-year commitment to purchase 550 million kilowatt hours of renewable energy credits. The company has also created a new Environmental Advisory Board and launched some new green investment products, including mortgages that encourage energy efficiency. However, the company remains under fire from environmental groups like Rainforest Action Network for financing companies engaged in mountaintop removal coal mining and other environmentally damaging activities. We’re seeking a meeting with the company before deciding whether to re-file our resolution this year.

“GLOBAL WARNING”(A)

There’s been a debate burning for years on the causes of global warming. But according to scientists, the debate is over. New evidence shows man is contributing to the warming of the planet, pumping out greenhouse gases that trap solar heat. And, they say, the North Pole, which has been frozen for 100,000 years, is in the process of melting. Much of this new data was compiled by American scientist Bob Correll, who led a study called the Arctic Climate Impact Assessment. According to the study, the seas are rising, hurricanes will be more powerful (like Katrina) and polar bears may be headed toward extinction. So what does the melting Arctic look like? Scott Pelley recently traveled North with Correll to see first hand. His report will air on 60 Minutes, Sunday, Feb. 19, 7PM ET/PT on CBS
Further details will be posted on CBS website,

“Good growth” versus “Bad growth.”

Adam Seitchik, Chief Investment Strategist at Trillium Asset Management, was recently interviewed by the Christian Science Monitor on the topic of “good growth” versus “bad growth.” Adam discussed a wide range of issues, including the environmental challenges of growth, the pervasive problems with traditional growth measures like GDP, and research on what kinds of economic growth are linked to human happiness.

Trillium Asset Management Assumes Role of Sub-Advisor for Green Century Balanced Fund(A)

Boston-based Green Century Capital Management, an environmentally responsible investment advisor, has chosen Trillium Asset Management Corporation to serve as the new sub-advisor of its Balanced Fund (pending shareholder approval). The Trillium team is led by Adam Seitchik, vice president and chief investment strategist; Eric Becker, vice president and a smaller cap equity specialist; and Cheryl Smith, vice president and a bond specialist.

“The fund’s strategy has changed significantly,” says Morningstar’s Analyst Report, referring to the impetus behind the change in sub-advisors. “Seitchik and his team follow a risk-conscious approach that combines an all-cap-blend stock portfolio with a high-quality bond portfolio. The new managers’ more conservative and mainstream approach should result in a portfolio that’s in keeping with the expectations of most moderate allocation fans.”

“This partnership really supports our mission,” Seitchik says. “We seek to make progressive use of the capital markets, while meeting the financial, social and ecological goals of investors. We are delighted that by sub-advising the Green Century Balanced Fund, our services are now available to a broader group of individuals with a commitment to environmentally oriented investing.”

The Balanced Fund holds over $50 million in assets, investing in a combination of stocks and bonds in environmentally responsible corporations of various sizes. One hundred percent of the net profits earned by Green Century for managing the fund belongs to the non-profit advocacy groups that founded the company in 1991.

“Our primary goal is to offer a balanced fund with solid core holdings, targeting environmentally conscious investors that are seeking an all-in-one fund,” says Ethan Berkwits, vice president of marketing for Green Century. “Trillium provides a long and successful track record in social and environmental investing, and has continually exhibited its dedication to incorporating both environmental and financial factors into its investment decisions.”

Through shareholder advocacy and research, both Green Century and Trillium champion many causes, including preservation of the National Arctic Wildlife Refuge, more robust chemical security, greater disclosure in corporate political contributions, food safety and reduction in greenhouse gas emissions.