History of Responsible Investment
It should come as no surprise that modern responsible investing has its roots in the turbulent 1960s.
In 1962, Rachel Carson wrote Silent Spring and millions of North Americans learned about the negative environmental and human consequences of pesticide use.Civil rights, women’s liberation, labour rights and the Vietnam War fuelled a decade of increasing awareness and protest.
In 1973, the YWCA of Canada and the churches published Investment in Oppression, a report that showed how foreign investment in South Africa supported apartheid. Two years later, the churches founded the Taskforce on the Churches and Corporate Responsibility (TCCR) to use church influence to make Canadian companies more responsible.
International attention increasingly focused on apartheid and responsible investors refused to invest in companies that did business in South Africa and sponsored shareholder resolutions urging companies to withdraw from the country. Canada’s responsible investors were front and centre.
The following piece was written by responsible investment industry pioneers Moira Hutchinson, Bob Walker and Eugene Ellmen in celebration of the life and contributions of Nelson Mandela.
Insights on the Battle to Marry Morality and Money
As the world lays Nelson Mandela to rest, we are reminded of the huge contribution he made to the people of Africa and to the global cause of human rights. But the anti-apartheid struggle he led also helped to bring about a transformation in our notion of money, lifting the veil on the social and moral importance of investment.
It was a revolutionary insight that has helped to create a massive change in how we do business and finance.
In Canada, one of the most important groups in this change was the national churches, led by the Taskforce on the Churches and Corporate Responsibility (TCCR). From its launch in 1975 through to Mandela’s release from prison in 1990, TCCR spearheaded church shareholder opposition to apartheid, working alongside other NGOs and the labour movement.
The tool that TCCR focused on was the power of investment, leveraging the pension and endowment funds of the churches to bring about disinvestment from South Africa.
“The churches’ endeavour to bring into harmony their social teachings with their responsibility as investors had sharpened their awareness of the social impact of corporate activity and of their own shared responsibility,” wrote Renate Pratt, TCCR’s founding Coordinator, in her definitive book, In Good Faith: Canadian Churches Against Apartheid. “In other words, the churches were becoming proactive shareholders.”
TCCR Wins Some Battles
Progress was slow, but TCCR did win some battles.
After Canadian banks refused to discuss their South African loans for many years, in 1978 Royal Bank halted loans that it judged to be supportive of apartheid, and in 1980, Toronto Dominion became the first Canadian bank to announce an unconditional halt to all new loans and renewal of loans. Other banks followed suit.
In 1982, TCCR filed what is believed to be the first minority shareholder proposal in Canada. It went on to challenge Alcan, Massey Ferguson, Falconbridge and other Canadian companies operating in South Africa. TCCR won numerous concessions, including the historic sale by Alcan of its interest in Hulett Aluminum in 1986.
TCCR also saw public policy as a key part of its work, urging the Trudeau administration to adopt sanctions, and encouraging the Mulroney government to strengthen its support of sanctions.
Public policy continues to be a strong focus of ecumenical work today through KAIROS: Canadian Ecumenical Justice Initiatives, which brought together TCCR and other church coalitions in 2001.
Through these actions, not only relating to South Africa, but also on other human rights and environmental issues, TCCR helped to change the public perception of finance and business. By making the case that investment includes moral responsibility and opportunity for social and environmental progress, TCCR was able to lay the foundation for the responsible investment industry of the future.
The Emergence of Responsible Investment
In 1986, a full decade after TCCR was launched, the first socially responsible mutual fund, the Ethical Growth Fund, hit the market. Now, there are dozens of such funds, part of a much bigger responsible investment industry including pension funds, asset managers and financial advisors.
The Social Investment Organization [renamed the Responsible Investment Association (RIA) in 2013] estimates that there is more than $600 billion managed under responsible investment guidelines in Canada.
As well, shareholder activism has become commonplace. Some mutual funds and coalitions of shareholders have continued the role once played by TCCR and help churches, unions and other responsible investors to engage with companies, and where necessary, sponsor shareholder resolutions on a variety of issues, including climate change, executive compensation and shareholder rights. Recently, the focus has moved to such topical issues as hydraulic fracturing and sweatshops in Bangladesh.
Further, in the 1970s and 80s, religious communities in Canada and elsewhere developed vehicles for investing in poor communities around the world in a concept that now finds its contemporary expression in impact investing.
Changing the Language of Business
By bringing a moral intelligence to investment, TCCR contributed to a language change in business. The language moved from a strict definition of financial risk and return to a broader understanding of how business interacts with society and the environment. The current consensus is that business is dependent on its societal foundations, and subject to a social license to operate.
Similarly, we now understand that business must take responsibility for its externalities, as in the current debate on climate change. These ideas are now understood within the comprehensive framework of ESG (environmental, social and governance issues).
All of us are indebted to the struggle of the Canadian churches and their international counterparts in support of Nelson Mandela and the African National Congress 40 years ago. This struggle played a large role in laying the foundations for modern responsible investment and sustainable business.