A Quaker immigration divestment list and the growing scope of ESG data

As more clients seek politically infused portfolios and products of all bents, a Quaker organization launched a new database tracking the immigration impact of publicly-traded firms.

The American Friends Service Committee revealed the findings earlier this month of its research on which companies the organization accuses of “profiting from border militarization and the surveillance and criminalization of immigrants.” After its board approved a new framework in June, American Friends identified more than 60 companies through databases of federal contracts, Department of Homeland Security documents and other sources, said Noam Perry, an economic activism associate with the organization. American Friends is divesting from 25 of them in its $240-million portfolio and encouraging others to follow suit.

Many financial firms that American Friends cites for providing credit and loans to private prison companies appear on the divestment list alongside large defense contractors, though some dispute the organization’s findings as inaccurate and politically motivated. The new data joins the rapidly growing collection of ESG criteria and impact products designed with an expanding array of screens based on factors such as racial equity, Catholic beliefs, Veganism and conservative principles. The Quaker organization’s Investigate project maintains a database of 434 firms operating in categories it groups under the labels “prisons, occupations and borders.”

“The reason we do this is because this information doesn’t exist elsewhere,” Perry said in an interview. “We have two main audiences. We have investors or investment professionals, and we have social justice campaigns that we work with that use this information. Investors should already get this information from the data providers that they use. They don't have this. … If the movements keep calling for divestment and investors can't have the information about what to divest from, then it's a moot call.”

American Friends’ formula
The companies cited by American Friends fall under three different types of firms: those building and maintaining walls and other security infrastructure and equipment at the border between the U.S. and Mexico; a group involved with surveillance of immigrant communities; and a third collection of companies that detain or deport immigrants. The financial firms listed for divestment are: Citizens Financial Group, First Horizon, HSBC Holdings, Pinnacle Financial Partners, Synovus Financial and Thomson Reuters.

Besides the credit and loans for detention firms cited by American Friends for the other financial firms, the organization says Thomson Reuters “provides systems and databases to the US immigration authorities for tracking and targeting immigrant communities.” Other firms on the divestment list include Aramark, CoreCivic and The Geo Group, the latter two of which are often the recipients of the capital from the financial firms making the divestment list.

American Friends invests “in alignment with our mission, as well as with the Religious Society of Friends’ beliefs and testimonies, which include peace, simplicity, integrity and justice,” General Secretary Joyce Ajlouny said in a statement. “An ethical investment policy does not harm returns; in our experience, socially responsible investing has created more competitive and sustainable returns over the long run.”

Industry News

LPL, Ameriprise, Cetera, plus record SEC actions, record annuity sales and "How Not to Suck at Money"

November 19, 2021 3:35 PM

Representatives for Pinnacle Financial declined to comment. In a display of how seriously firms take their listing on various ESG screens, though, several of them took the time to refute the Quaker organization. Of the 25 companies on the divestment list, four sent statements in response to emails seeking comment on the American Friends research:

• CoreCivic manages more than 100 prisons, detention centers and other facilities as the world’s largest private prison corporation, according to American Friends. In reaction to the group’s findings, CoreCivic’s director of public affairs, Ryan Gustin, sent a fact sheet from the company’s website. “Our sole job is to help the government solve problems in ways it could not do alone — to help manage unprecedented humanitarian crises, dramatically improve the standard of care for vulnerable people and meet other critical needs efficiently and innovatively,” Gustin said in an emailed statement.

• As the second-largest private prison firm, The Geo Group manages immigrant detention centers in the U.S. and internationally, according to American Friends. In reply, the firm’s manager of corporate relations, Christopher Ferreira, noted that the company doesn’t make federal policy and its employees “take great pride in providing compassionate care” to anyone in their custody, he said in an email. “The divestment efforts against our company are based on deliberate lies advanced by radical and politically motivated activists about our role as a long-standing government services provider,” Ferreira said.

• Aramark prepares food and handles other logistical services in prisons and immgration detention centers, using the labor of incarcerated people in certain cases, according to American Friends. In response, Aramark spokesman Chris Collom noted in an email that corrections agencies assign people in prisons to certain duties such as landscaping, laundry and kitchen labor and the firm has no control over the staffing or their pay. “We do not contract with ICE,” Collom said, referring to U.S. Immigration and Customs Enforcement. “We also recognize that there are many misconceptions about our work in correctional facilities and would like to proactively address them.” 

• Citizens Bank issues credit and loans to CoreCivic, according to American Friends. The firm’s head of external & CEO communications, Peter Lucht, said he couldn’t comment on specific client relationships. However, “I can tell you that we maintain a commitment to lending to companies that conduct their business in a socially responsible manner,” Lucht said. “If we determine that is not the case, we are prepared to exit those relationships.”

Crowded landscape
Researchers and managers across political ideologies and types of shareholder campaigns are using different approaches in the way that their formulas choose stocks to rule out of portfolios. Concerns that companies are “greenwashing” by overstating their sustainability or other impacts have led some to question whether ESG ratings are useful to advisors at all. At the same time, professionally managed assets incorporating ESG criteria surged 43% to $17.1 trillion between 2018 and 2020, according to the U.S. SIF Foundation. Most of the in-flow has come from pensions and other institutional clients, according to Michael Young, the manager of education programs with the nonprofit consortium of companies and organizations.

“Advisor uptake is still a huge opportunity,” Young said. “If you're an advisor who's not doing this, you're probably in the majority. So there's still plenty of room to go.”

The information and products span nearly any religion or political bent. Assets held in mutual funds managed by the Knights of Columbus Asset Advisors topped $1 billion in early November. Less than two years after its launch, the SP Funds S&P 500 Sharia Industry Exclusions ETF has attracted more than $100 million in client assets while using a formula based on the guidelines of the Accounting and Auditing Organization for Islamic Financial Institutions. In late September, a manager created a fund based on an index of betting, alcohol and drugs companies called the B.A.D. ETF.

Other funds come from the opposite side of the political spectrum as American Friends. About a year after its opening, the American Conservative Values ETF has reached $31 million in assets while excluding 27 large publicly traded firms it says are “deliberately funding or supporting liberal political objectives.”

The fund’s founder, William Flaig, describes the product as an investment preference rather than an investment thesis, and he says his team notices some common equities across ideology while it “constantly” checks other databases for more information about companies’ activities.

“It's not hard for me to see a world where the American Conservative Values Fund is boycotting the same companies as someone else,” Flaig says. “The more we slice and dice things, I think it's more likely that divergent viewpoints are going to dislike the same company or like the same company.”

ESG

Banks, tech firms and wealth managers fail ESG screen

August 12, 2021 12:00 PM

Firms in common
For example, Bank of America, AT&T, J.P. Morgan Chase, Salesforce and Amazon each appear on the conservative fund’s boycott list and the group of more than 60 firms that American Friends says are getting business from border security, immigrant detention or surveillance. On the other hand, Microsoft showed up on the American Friends’ list, but it’s also one of only six publicly traded firms to appear in the top 10 stocks listed on the “Racial Justice Scorecard” and “Workplace Equity Scorecard” released this month by As You Sow. The nonprofit organization promotes corporate environmental and social responsibility through shareholder advocacy and other means.

After its initial launch last year tracking 100 firms, the research encompassing another 900 is already displaying a major trend of companies that have committed to releasing demographic data to the public that they share with the U.S. Equal Employment Opportunity Commission. At least 81 out of the first 100 tracked by As You Sow plan to share their demographic figures, compared to just 20 last year.

The change is “a reflection of a shifted cultural understanding and expectation from the broader investor community” and an acknowledgement among the firms that the metrics are important to their business, said Meredith Benton, a workplace equity consultant to As You Sow who’s the founder of a firm called Whistle Stop Capital. At this point, the group decided to rank firms based on their willingness to disclose information rather than on their actual workforce demographics. In contrast with American Friends, it doesn’t have a divestment list.

“It's really a massive step forward, and we wanted to recognize that,” Benton said of companies disclosing their data. “We also expect, given what we know about society as a whole, that some of these companies have numbers that will be improving over time.”

American Friends worked with students from its Economic Activism Summer School and legal and financial research firm Empower to build its list of firms as part of its immigration campaign. Then, the organization whittled down the group to 25 with a three-part criteria measuring the degree of harm, the extent to which a firm is directly taking part in detention or surveillance and how responsive they are to public exposure and criticism about it, according to Perry. After about three years of research relating to immigration, he said the results have been promising.

“My financial advisor keeps being surprised about how much this doesn't affect returns. Actually, I'm outperforming their other portfolios,” Perry said. “There's a moral imperative. I personally don't want to be invested in deportations, mass surveillance or taking of children.”