How filthy is your 401(k)? 

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What To Do
While state retirees’ money is locked away in a trust fund they can’t easily manipulate, some private-sector workers are “captive” to investment decisions made by their employers as well, Cline said. Most businesses offer employees only traditional mutual funds for 401(k) plans and many companies offer a “match,” or extra funds invested by the employer on the employee’s behalf. But, to get the match, the employee has to invest in the list of mutual funds offered by the company. Rarely in Utah does that include an SRI option, he says.

City Weekly employees’ 401(k)s, for example, are managed by Lincoln Financial Group, a traditional investment firm without any SRI options. Lincoln´s options for CW employees include significant investments in companies accused of human-rights abuses like Chevron, companies that may face sanctions for operating in Iran like Gazprom and Royal Dutch Shell, environmental offenders like Massey Energy Company who’s often criticized for mountain-top removal in the Appalachian Mountains, and drugstore chain CVS whose shareholders accuse the company of selling toxic cosmetics in the United States that are illegal in Europe. Lincoln account manager Angie Mounsivais responded to City Weekly’s inquiries by saying, “I’ve been told we have not had any questions like that, and we haven’t discussed [SRI] within our marketing team, but I think they’re going to look at this to see what we could include.”

Employees in that situation should simply ask their employer to offer an SRI mutual fund. “If you ask, ‘Can we have a fund like this?’ generally, the answer is going to be ‘Yes.’ There’s no reason not to. … That’s how you do it. You´ve just got to ask for it,” Cline says.

But, he warns, it’s not prudent for a worker to put all their retirement money in one mutual fund, SRI or otherwise. Diversifying your portfolio, he said, decreases risk. That means employees may be able to invest some of their money in SRI, but creating a completely SRI retirement portfolio can be difficult without several SRI options.

That’s OK, Cline says, “because it’s better than doing nothing.”

But is it better than doing nothing? Do corporations become more responsible because of SRI?

Sometimes, the results of SRI are direct and obvious. For example, in May, the Sisters of St. Dominic of Caldwell, N.J., submitted a shareholder petition demanding that oil-giant Chevron Corporation document the carbon content of all products the company makes. Other faith-based investors joined the sisters, but a vote was never taken because Chevron opted to comply with the sisters’ demands voluntarily.

Other examples of shareholder activism meet considerably more resistance. Chevron has fought against the National Jesuit (Catholic) Committee on Investment Responsibility for five years, resisting that and other groups who demand a corporate human-rights policy. Chevron has been accused of numerous human-rights abuses and environmental disasters worldwide, each chronicled in a 2009 report sponsored by labor and environmental groups titled The True Cost of Chevron.

The Utah Retirement System owns approximately $32 million in shares of Chevron, according to its 2008 annual report%uFFFD(pdf), making it the seventh largest investment the system makes in an individual company.

While Newman expressly opposes divestment schemes, he says URS does engage in shareholder proxy votes regarding corporate policy. He could not discuss specific examples of so-called “shareholder activism,” he says, not because it’s private information—but because “I just don’t remember.” But, Newman said, “We’re not a key player. Our voice is relatively small.”

At just over $15 billion, URS is dwarfed by the California Public Employees Retirement System, known as Calpers, the largest public pension fund in the country, which controls about $173 billion and warmly embraces SRI principles. And though $32 million invested in Chevron is a lot of money, that represents less than a one-tenth of one percent stake in the company, whose market capitalization is about $143 billion.

But size isn’t everything. Connecticut Treasurer Denise Nappier, for example, heads the $20 billion Connecticut Retirement Plans and Trust Funds. In September, she released an annual report%uFFFD(pdf) of how the system helped change corporate policies, bragging about “breakthroughs on climate and energy policies.”

When asked about the Connecticut report, Newman said other state-trust fund leaders use shareholder meetings to grandstand: “Some of these other people are politicians trying to make political statements, using those to get their name known, or may have political aspirations beyond where they already are.”

To what extent divestment changes corporate behavior is less clear.

Shareholder fights are like elections— one share equals one vote—with clear winners and losers. Divesting means not voting at all and the impact is more difficult to quantify.

In 2000, Calpers sold all of its tobacco stock—more than $500 million—and estimated it would lose about $30 million in the process through broker fees and selling when share prices were low. Six other states made similar moves. While that didn´t destroy the tobacco industry, the divestment push “added to ongoing, effective campaigns to denormalize and delegitimize the tobacco industry,” concluded Wander and Malone in a 2006 paper. At the time, the California state treasurer said divestment was not to be politically correct, but to remove the state from exposure to tobacco lawsuits— several of which were brought by California municipalities, and even the state itself.

Meg Vorhees, the deputy director of research at Social Investment Forum, says good corporate policy and long-term business performance are intertwined.

“One idea you hear often among SRI investors is that corporations basically need to operate with the consent of society. When you violate the public trust, you may have problems running your business,” she says. “You may find you’re under more pressure from regulators; you’re slapped with lawsuits; or if you’re looking to expand, your bid isn’t considered as favorably as the competitor that has a better reputation.”

Vorhees pointed to the KLD Domini 400 index and its performance over the S&P 500.

Cline concurs: “The data show now that not only are [SRI funds] equal, they’re better. They’re outperforming simply because it’s good to be green. It’s good business.”

In regard to Iran, two U.S. congressmen in May sent a letter to Royal Dutch Shell Group, an Anglo-Dutch oil giant, warning the corporation that its continued involvement in Iran could cost it. A bill to impose sanctions against companies doing work in Iran has stalled in Congress, but Rep. Dan Burton, R-Indiana, one of the letter writers, is working to get that bill passed. He warned Royal Dutch Shell what would happen if sanctions are put in place. “The potential losses to Royal Dutch Shell could be staggering,” the congressman wrote.

That could harm the URS, which has nearly $13 million invested in Royal Dutch Shell, and another $42 million invested in other companies also doing business in Iran’s oil sector. A bill passed by Congress Oct. 14 explicitly allows states and municipalities to divest from Iran, minimizing the risk of court fights.

Are investors, in any small way, responsible for the behavior of corporations they are invested in? For example, if Utahns invest in Royal Dutch Shell, which in turn sells refined petroleum to Iran, which in turn enables the regime to train insurgents who then harm American soldiers, do the Utah investors bear any personal responsibility? Newman wouldn’t answer that question. “It doesn’t matter what my opinion is,” he says.

Cline, a self-described “old hippie,” was willing to answer.

“I guess the answer is, of course, yes, they do,” Cline says solemnly. “But you know, it’s really just a matter of how much you’re paying attention to your world. … A lot of people just aren’t aware. But once you are aware, you should ask, ‘Now what should I do?’”