THE EARTH TIMES
OCTOBER 24, 1993
New mutual fund studies by eminent figures
BY JACK FREEMAN AND ASHALI VARMA
A group of individuals with extensive experience in international business and public affairs announced last week that they are examining the feasibility of establishing a “Sustainable Development Mutual Fund.”
The plan is based on evidence that sustainable development has helped the profitability of companies that have embraced the concept, and that their profitability attracts investors-particularly those who are aware of the importance of encouraging economic growth· and
simultaneously protecting the environment.
“It’s an idea whose time has come,” said Maurice F. Strong, Secretary General of the 1992 United Nations Conference on Environment and Development, and currently chairman and CEO of Ontario Hydro, one of the world’s largest utility companies.
Strong has teamed up with fellow Canadian Jim MacNeill, who was Secretary General of the World Commission on Environment and Development, and Theodore W. Kheel, an eminent New York lawyer, mediator, and president of the Earth Pledge Foundation (which, among other activities, publishes The Earth Times).
Said MacNeill: “This is an exciting way to support those who practice what we preach.”
“There are two main criteria for a successful mutual fund,” Kheel said. “The first is the people who run it, and the second is the people who will invest in it.”
Kheel said the committee will call upon experts in the financial industry to create the fund. The New York law firm of Battle Fowler, with long experience in financial matters, has agreed to act as counsel to the committee.
Kheel said the fund, when formed, will support companies promoting sustainable development by buying stock in them and giving them recognition.
“Such a mutual fund will be able to attract investments from government and the business world, from individuals and from NGOs,” he said. “We think that the concept of sustainable development can be encouraged by harnessing the power of the financial markets to it.”
Last year’s Earth Summit in Rio de Janeiro, also known as the United Nations Conference on Environment and Development (UNCED), gave the concept, of sustainable development a global endorsement. The concept had been given strong support in the 1980s by the global commission chaired by Gro Harlem Brundtland, who is now prime minister of Norway. MacNeill is widely credited with popularizing the term -“sustainable
development.”MacNeili said the value of sustainable development was first recognized in ancient times, by the Greek philosopher Aristotle, who promoted it in agriculture and forestry. He said that a sustainable development mutual fund could go a long way toward extending the concept in the future.
Kheel said that the committee will have more announcements to make as it proceeds with its work of helping the proposed sustainable development mutual fund become a reality.
Mutual funds – known as “unit trust” in some parts of the world – can be bought directly from their companies, at banks, and through stockbrokers, and have become enormously popular in recent years.
Mutual funds pool money from thousands of individuals and invest it in diversified, portfolios of stocks, bonds, gold, foreign currency, options, or other securities. These portfolios are designed to meet each fund’s objective, such as growth, income, or conservation of capital.
According to the Washington-based Investment Company Institute, there are more than 4,320 mutual funds in the US today, with total assets of $1.9 trillion. At the start of the 1980s, there were 564 mutual funds. One out of every four American households no invests in mutual funds, said the Institute’s Malin Jennings, with more than 50 billion shareholder accounts.
Of the overall investment in mutual funds, some $700 billion is invested in more than 26 “socially responsible funds.” –up from 16 in 1992, according to Reed Gligorovic of the Calvert Social Investment in “socially resonsible fund” was only $40 billion.
Gligorovic defined these funds as those which invest in companies “that are responsible corporate citizens; companies that don’t just look at the traditional bottom line but also actively seek companies that do positive things with regard to the environment, employee and community care, customer care and the world.”
Right now, she said, the most popular funds seem to be those which invest in companies that are environmentally aware companies.
Kheel said the committee itself will not create the fund, but will enlist others with the appropriate expertise. He said that he was consulting a major international financial institution which could assist in establishing the proposed “Sustainable Development Mutual Fund.” He declined to speculate on when such a fund might be launched.