Up From Wall Street: The Responsible Investment Alternative by Thomas Croft is a book that should be read by all working North Americans, concerned with the reckless loans and short-term stock market bets that nearly plunged the world’s economy into chaos. The book is especially relevant to those working at and those seeking to influence pension plans. While investment of plan assets must be made solely in the interest of plan participants and beneficiaries, Croft reminds readers that as deferred wages, “it makes sense for trustees to invest these funds in ways that advance the interests of beneficiaries more broadly.”
The first part of the book is an expansive but easily digested primer on incorporating environmental, social and governance (ESG) analysis into investment strategies, current best practices and the role of organizations such as the United Nations in promoting responsible investment practices. Croft familiarizes readers with concepts and practices such as economically-targeted investment, capital stewardship, the “Lanoff letter” that basically okayed consideration of “incidental benefits” for ERISA funds, targeted investments and micro-finance. He also provides links to several excellent information sources, as well as an extensive body of notes and references.
Croft does and excellent job of explaining the rise of “financialization,” short-termism and how buyout and hedge funds “provided some of the black powder that quickened the landslide.” Trustees, union, and members of funds who want to influence them will benefit substantially from the chapter, “Action Steps for Trustees: How to Talk Back to Experts.” Here Croft lays out how to get fund consultants to expand their horizons to include consideration of investments that can earn high risk-adjusted returns over the long-run, which also help sustain employers and communities. The chapter includes 12 steps with specific advice, such as “Ask your consultant to independently verify the sources and amount of returns from private equity funds… disclose cash in/cash out documentation.”
Part two of the book is a “field guide” that provides information on six responsible private equity and venture capital funds. Each fund is profiled for structure, capacity, products, impacts, financial performance, experience of principals and at least a case study or two of the firm’s investments. Yes, you can make money while doing good. These firms have proven that and continue to do so through the financial melt-down.
On a personal note, I met Tom about twenty-five years ago when we were both trying to address plant shut-down issues in California. It is great to see him continuing this work as Director of the Heartland Labor/Capital Network and with the help of the Heinz Endowments. Read more about author, Tom Croft as he chats with United Steelworkers President Leo Gerard about the book at the Hill’s Congress Blog, Talking with Responsible Pension Investments Expert Thomas Croft, 12/28/09)