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| Precious metal: Gold has hit record highs in recent months – more than $1,000 per troy ounce – as buyers seek a safe investment. Newmont Mining/AP/FILE |
Invest in gold with a clean conscience?
How conscientious investors can engage with this hot commodity.
from the March 24, 2008 edition
Page 2 of 3
And in Canada, Vancouver-based Ethical Funds is bringing social concerns of its Canadian investor base to the boardrooms of Gold Corp. and Barrick Gold, the world's largest gold producer.
"This is a rapidly evolving field," says Bob Walker, vice president for sustainability at Ethical Funds. "There's a lot to respond to here, on both the human rights side and the finance side, and we think [companies] need to move as quickly as possible.… We hope they'll come to view us as a resource on these issues."
American SR funds, however, are taking a hands-off approach. Jay Falk, president of research firm SRI World Group, says via e-mail that he knows of no US-based SR funds taking an active role in gold-mining issues. That's because gold-mining firms seldom pass an SR fund's social screens due to their checkered track records.
"We see a large business concentration in gold as a serious negative for a company," says Jeff MacDonagh, SRI portfolio manager for Domini Social Investments. "Most of these companies have pretty serious environmental and employee safety problems.… It becomes pretty difficult for an investor who cares about environmental and social issues to hold a company with big interests in gold."
Debate: Avoid bad companies, or try to reform them?
These divergent approaches reflect a longstanding debate within SR investing: Is it better to keep problematic sectors and companies out of a portfolio, or invest with hope of persuading them to do better? Activism has recently been gaining favor: Shareholders last year filed 68 percent more resolutions on social issues (368) than they did in 1999 (219), according to Washington, D.C., research firm RiskMetrics. But gold-mining stocks seem to remain too problematic, too high-priced, or both to inspire SR investment.
Mining companies routinely consult local stakeholders, in part because "your right to expand or operate is affected by your record," according to Carol Raulston, spokeswoman for the National Mining Association, a US-based trade group. She says the industry is nevertheless still grappling with what to do in overseas situations where, for instance, the government issues a mining permit but certain people who live near the site raise objections.
"It all gets wrapped up in what constitutes 'consent,' " Raulston says. "In some cases, it's been very complicated."
By shunning gold-related investments, SR funds have missed out on a bright spot in an otherwise gloomy investment landscape. Before gold prices slid a bit last week, investors seeking refuge from a weakening dollar and a plunging stock market had driven up gold prices by more than 40 percent since September. That has boost the value of gold-related exchange-traded funds and mining companies.
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