Report Title:

Socially Responsible Investment

WHEREAS, Socially Responsible Investment (SRI) is the rapidly growing practice in the United States of basing investment decisions on considerations of societal values and concerns as well as financial returns, thus balancing the investor’s financial aims and needs with an investment’s impact on society by the operations of the corporation or entity in which the investment is made; and

WHEREAS, distinct but related aspects involved in an SRI strategy are: (1) avoiding companies whose record conflicts with the investor’s values; (2) seeking out companies whose record is consistent with the investor’s values; (3) targeting investments directly into communities; and (4) taking an active role as a shareholder in influencing corporate policies; and

WHEREAS, socially conscious investors will often include in their investment portfolios corporations with positive records on product quality, consumer relations, environmental performance, corporate citizenship, and employee relations, while screening out corporations involved in industries such as alcohol, tobacco, gambling, military weapons, and nuclear power; and

WHEREAS, investments that are sound from a fiduciary standpoint and which also promote equality of opportunity, environmental protection, and other causes critical to Hawaii’s long-term future, have what is known as a "double bottom line" return; and

WHEREAS, SRI has its roots in the colonial era when abolitionist Quakers refused to invest in any business associated with slavery, and blossomed in the 1970’s, influenced by strong social movements focusing on the environment, fair employment practices, the military-industrial complex, and the rights of minorities and women; and

WHEREAS, in the 1980’s, anti-apartheid activists brought the idea of socially responsible investing into full public view by insisting that their schools and churches stop investing in companies which did business in South Africa; and

WHEREAS, this very successful campaign to remove foreign capital from South Africa marked a powerful new era for SRI; and

WHEREAS, the SRI movement has rapidly increased its strength since the early 1990s as the financial world became more aware of the force of social movements; and

WHEREAS, the Social Investment Forum, a Washington group that surveys the investment landscape, has indicated that in 1999, about $1 of every $8 of investments under professional management—some $2 trillion overall—was directed toward socially responsible investment, which is eighty-two per cent above 1997 statistics; and

WHEREAS, a large number of new SRI mutual funds have been created as increasing numbers of investors have chosen to put their money into socially screened funds; and

WHEREAS, the growth of SRI among the union pension funds, educational endowments, and not-for-profit foundations which control substantial resources has been hampered by lingering false perceptions that socially responsible investments will not fulfill the trustee's fiduciary responsibility to achieve a reasonable rate of return on the fund's corpus; and

WHEREAS, as SRI funds have become well established, they have demonstrated their financial soundness over the last five years, showing that not only are social and environmental concerns not a handicap in investing, but that social and environmental values and standards can actually correlate with superior financial performance; and

WHEREAS, studies by investment firms ranging from Spare, Kaplan, Bischel & Associates, to Merrill Lynch demonstrate that, in recent years, SRI stocks have outperformed non-SRI stocks by up to two per cent per year; and

WHEREAS, SRI can have significant beneficial consequences for the State of Hawaii in that SRI can help promote the growth of mercantile entities presently doing business here and who engage in business practices that enhance and promote Hawaii’s fragile environment and contribute to the well-being of Hawaii’s population, and can also be helpful in attracting other businesses that engage in similar practices; and

WHEREAS, the Senate of the Twenty-First Legislature of the State of Hawaii, wishes to encourage our State's financial institutions, financial advisors, banks, trust companies, trustees of our State's funded and landed trusts, trustees of the State of Hawaii Employee's Retirement System, and all other individuals and entities handling and managing financial investments, to become more familiar with the principles of SRI and to apply those principles to their financial advice and decisions; and

WHEREAS, the Senate of the Twenty-First Legislature of the State of Hawaii appreciates and recognizes the value of SRI to the State, and wishes to foster and encourage wider discussion, understanding, acceptance, and practice of SRI in the community; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-First Legislature of the State of Hawaii, Regular Session of 2001, that the Senate encourages participation in the Bottom Line 2001 Conference, particularly by the Chief investment officer, administrator, and trustees of the State Employees Retirement System, to attend the summit and to apply the principles of SRI in their investment practices and decisions, and encourages other investment counselors and money managers to also apply SRI to their investment portfolios; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to conduct research on SRI by examining the laws and practices in other states, and current reports and studies in the field; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to submit a report of findings and recommendations to the Legislature no later than twenty days prior to the convening of the 2002 Regular Session; and

BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Governor, the Employees' Retirement System, the Department of Business, Economic Development, and Tourism, the Chamber of Commerce of Hawaii, Responsible Markets, the Native Hawaiian Advisory Council; and the Director of the Legislative Reference Bureau.