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SocialFunds.com names toxic chemicals in products one of top 5 socially responsible investment stories of 2007


SocialFunds.com, January 08, 2008


by Anne Moore Odell

New alternative energy and green funds fuel expansion of socially responsible investing; climate change is pushed to the forefront; community development organizations flourish despite the subprime mortgage debacle; consumers demand healthy products and work environments; and SEC limits shareholder rights.

SocialFunds.com — In 2007, socially responsible investing gained momentum through the passion of shareholders, the demands of the consumers worldwide, and companies, governments, and non-governmental organizations working toward common goals around the globe. Mainstream media and investors trumpeted what SRI investors have known for years: businesses need to address climate change now. When toxic toys hit the shelves around the holidays, the mainstream media picked up on another topic where social investors have been active: improving product and workplace safety. When the subprime mortgage scandal made the front page, community development organizations and investors continued working to promote and offer fair lending practices. Shareholder activists faced a setback, however, when the SEC limited their rights to nominate directors. With the SRI movement leading the way, it is no surprise that so many green, alternative energy and socially responsible funds and indices were introduced in 2007.

4. From Factory Floor to Store, People are Demanding Safe Products

Toys were flying off the shelves this holiday season, but not into the hands of children. The huge toy recalls from Mattel and other manufacturers highlighted the growing dangers of toxic components in consumer products. Issues regarding toxic chemicals not only threaten a company’s brand image, but the health of consumers and workers alike.

Concerns over toxic chemicals in products come from recent scientific studies of the effects of chemicals on the body. The common plastic ingredient phthalate has been linked to underdeveloped reproductive organs in males. Nano-particles can enter the bloodstream and cause tissue damage. Polyvinyl chloride (PVC) can contain toxic metals like lead and cadmium and the waste products of PVC are toxic due to the chemical properties of chlorine.

Shareholders worked with companies that produce everything from foodstuffs to household products to automobiles to reduce toxics in products. The Investor Environmental Health Network (IEHN), a group of investment managers that work with their portfolio companies concerning the toxic chemicals in their products, reported that proxy votes in 2007 in favor of shareholder resolutions on sustainability reporting and toxic chemical reporting were very strong. In 2007, shareholders submitted thirteen resolutions concerning chemicals in products, up from ten the previous year.

IEHN also reported that many resolutions regarding the safety of products and toxic reporting were withdrawn as companies made commitments to act, including Apple on PVCs and brominated flame-retardants, Sears on PVC, Mohawk Industries on PVC and CVS on regulating cosmetics.

Over 500 personal health care and cosmetic companies have signed the Campaign for Safe Cosmetics’ pledge Compact for Global Production of Safe Health and Beauty Products. When companies sign the pledge they promise to replace hazardous materials with safer alternatives within three years.

Three major reports on toxic chemicals were released at beginning of the year including IEHN’s report, entitled “Beneath the Skin: Hidden Liabilities, Market Risk and Drivers of Change in the Cosmetics and Personal Care Products Industry,” and Innovest Strategic Value Advisors’ report called, “Cross-Cutting Effects of Chemical Liability from Products” that examines four major industries and the loss of market share if companies don’t address toxic chemicals in products.

The third report, “Toxic Chemicals, Asian Investors are at Risk,” was released January 2007 by the Association for Sustainable & Responsible Investment in Asia (ASrIA ). This report looks at Asia’s lack of response to chemical reforms passed in other areas of the world. The report warns investors that Asian companies could face loss of market share unless they start to address chemicals found in products.

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