In February, the Domini Social Equity Fund removed Wal-Mart from its portfolio. The decision to dump the Fund’s 1.2 million shares of Wal-Mart stock was prompted primarily by concerns about the company’s labor and human rights policies abroad.
Domini had initially sought to alter Wal-Mart’s practices through shareholder activism. Last year, Domini, along with a coalition of investors from the Interfaith Center on Corporate Responsibility, asked the company to implement an independent third-party monitoring system to ensure that its overseas factories meet basic labor and human rights standards.
When Wal-Mart rejected the idea, the company was dropped from the Domini 400 Social Index, a benchmark for measuring the performance of socially responsible investment funds. The Domini Social Equity Fund replicates the composition of the Index, which is maintained by the social research firm Kinder, Lydenberg, Domini & Company (KLD).
In its report, KLD pointed to a factory in China where workers are “indentured servants held under prison-like conditions” making handbags for Wal-Mart and another in Bangladesh where women work 12-hour days, seven days a week, for just nine cents an hour.
Although sweatshops were Domini’s primary consideration in dumping Wal-Mart, other issues—including its treatment of employees, anti-union tactics, and impact on small towns and local stores—were also a factor. In its semi-annual report to investors, Domini said it had been inundated with calls and letters from investors opposed to owning Wal-Mart stock. “These letters and emails were an important indication that Wal-Mart no longer meets baseline criteria accepted by the social investment community,” the report notes.
The Domini Social Equity Fund is one of a growing number of socially responsible mutual funds. These funds screen out companies according to one or more criteria, such as the manufacture of weapons or tobacco. Several major social funds, including those offered by Citizens Funds, the Calvert Group, and Pax World Funds, do not hold Wal-Mart stock. Calvert excluded the company because it is a major retailer of firearms. Citizens Fund opposed Wal-Mart’s anti-union tactics and history of workplace harassment and discrimination.
Other socially responsible funds, including TIAA-CREF Social Choice Equity and Dreyfus Premier Third Century, continue to hold Wal-Mart stock.
Socially responsible stock funds eliminate only the least responsible corporations (as defined by the fund’s particular criteria). Another option for citizens concerned about how their investments impact their communities is Community Investing, an umbrella term for a broad range of investment vehicles that funnel capital into such things as loans for small businesses and affordable housing.
