Issues

Climate Change

Climate change is the blanket term for a variety of processes that have contributed to globally shifting weather patterns. While these processes have occurred naturally for millennia, the term today is generally used to describe anthropogenic (man-made) processes that have contributed to the overall rise in global temperatures. Anthropogenic impacts date back to the beginning of the Industrial Revolution, and since then global temperatures have been rising at almost ten times the rate that they have since the last ice age.1 The impacts of these changes are numerous: rising water levels, decreasing biodiversity, desertification, ocean acidification, crop failures, pest outbreaks, extreme weather events, and more. Beyond the intrinsically devastating damage to flora, fauna and the planet, global warming also puts human populations at risk. One study estimates that if climate change continues unchecked, the number of “climate refugees” (individuals displaced by the effects of global warming) could jump to 200 million by 2050, quadrupling the current refugee population.2 While there is a scientific consensus (97% of experts)3 on anthropogenic climate change, corporate interests are often at odds with this reality, and the ‘climate denial’ movement (funded by a number of large companies) actively lobbies politicians and legislators.4 For example, oil giant ExxonMobil has recently been accused of hiding research dating back to the 1970s that shows that continued carbon dioxide production would damage the earth, as well as funding climate denial research, attempting to discredit climate change research, and attempting to influence public perception of climate change.5

Fossil Fuels

'fossil-fuels'

Fossil fuels, such as petroleum (oil), coal, and natural gas are formed over millennia as natural processes act on organic material. While the most damaging impact of fossil fuels is their combustion and the subsequent creation of carbon emissions, the extraction processes for coal and petroleum also cause considerable damage to the environment: destruction of habitats, removal of local vegetation and vegetative cover, pollution of ground- or surface-water, excessive waste from purification processes, acid rain, oil spills, and more.67 The earth’s reserves of fossil fuels are limited, but it is hard to say when those limits will be reached.

Data: Fossil Free Indexes produces the Carbon Underground 200, which ranks the top oil, gas, and coal companies by the potential CO2 emissions of their reported reserves. The screen does not eliminate all fossil fuel companies - this would affect diversification and is available upon request.

Carbon Emissions

'carbon-emissions'

The greenhouse effect is the process in which certain particles absorb heat reflected from the earth’s surface and keep it circulating below the atmosphere. Humans have both increased the production of greenhouse gasses and reduced the capacity of the environment to absorb them.8 CO2 and other carbon emissions are understood to be the primary anthropogenic cause of global warming.9 Most industries contribute to greenhouse gas emissions - particularly energy/heat generation, agriculture, and transportation, but there is high variance in carbon emissions performance within each industry, including both leaders and laggards.

Data: OpenInvest partners with ET Index and South Pole Group, who are leading data analysts and providers. “Scope 1, 2, and 3” emissions data (direct emissions, indirect emissions, and those “purchased” for heat, energy or steam) is collected for companies across all industries where available. The company is subsequently ranked against its sector peers. When a company fails to disclose its Scope 1 and 2 emissions, it is assumed that it performs worst in class. Scope 3 emissions are complex, and calculating them is a relatively new field. A variety of public filings and sector-based assumptions and calculations are deployed.

Dakota Access Pipeline

'dapl'

The Dakota Access Pipeline (DAPL) poses a serious threat to the water and lands of the Standing Rock Sioux of North Dakota. The DAPL is an oil pipeline designed to carry crude oil from North Dakota to an oil tank farm in Illinois. Construction began in 2016 and is mostly complete except for a portion in North Dakota, where protesters from a local Sioux tribe garnered national and international support to stop further construction. The protesters, or Water Protectors, argue that the pipeline’s projected route under the nearby Missouri River (800 meters from the Standing Rock Indian Reservation) threatens their water and livelihood. They also claim that construction sites traverse sacred lands, which construction workers wilfully ignored and destroyed. While the Obama administration denied the construction permits necessary for the pipeline’s completion in December of 2016, President Trump has recently signed an executive order allowing the companies behind the pipeline to reapply.1 Despite pressure from the U.S. Environmental Protection Agency, the U.S. Department of the Interior, and the Advisory Council on Historic Preservation, the companies responsible failed to consult tribes2 and conduct a full environmental impact survey.34

Data: Researchers with Food and Water Watch compiled a list of financial institutions that have invested in or offered credit to the holding companies that are building the DAPL. We verified all of these references by reviewing 8Ks and other official financial statements.

Deforestation

'deforesatation'

Global forests house approximately 80% of Earth’s remaining terrestrial biodiversity, and serve as the “Earth’s lungs,” sequestering and converting CO2 into Oxygen. They also regulate local water and weather systems. Yet forests are destroyed by humans at a rate of approximately 50 football fields every minute, or 13 million hectares per year - an area the size of the state of Massachusetts. Deforestation is therefore the leading cause of declining global biodiversity (over 50% since 19701), and it is responsible for approximately 20% of global greenhouse gas emissions. While the forestry sector may be the better known cause, agriculture is responsible for 85% of global deforestation, with many of the byproducts ending up in your supermarket.2 Beyond US borders, rainforests, jungles and other valuable wooded areas are threatened for plantations of palm oil, an edible byproduct found in a great number of foods and household products.3 Along with palm oil, three other industries - soy, forest products, and beef - are responsible for approximately half of all tropical deforestation. This situation is intensifying, as demand for food commodities is expected to nearly double by 2050.4

Data: Deforestation is a challenging issue from a data perspective, as most of the impacts are in the supply chains of large companies, where there is very little public transparency. Forest 500, a project of the Global Canopy Programme, identifies the 500 global companies who have the most power to combat this issue in their operations and supply chains. Forest 500 then ranks each company on a scale of 1-5, depending on their anti-deforestation policies and actions (or their lack thereof). Screening for deforestation policies will exclude any companies with a rank of lower than 3.

LGBTQ Workplace Treatment

'lgbtQ'

While the battle to legalize gay marriage dominated many of the conversations about gay rights in recent years, workplace rights and protection against workplace discrimination have always been major concerns for LGBTQ activists. The goal is to protect individuals from bias in hiring, promotion, job assignment, termination, compensation and harassment on the basis of their sexual orientation or identity. In the United States, protections vary greatly by state, and sixteen states have no protections at all.1 Yet companies can individually protect the rights of employees and even customers. While some are making positive strides towards including LGBTQ individuals in every protection and privilege, there is a tremendous gap between corporate leaders on the issue and the rest of industry.

Data: To create LGBTQ-friendly portfolios, OpenInvest selects companies rated 100% by the Human Rights Campaign’s Corporate Equality Index. The criteria evaluates their treatment of LGBTQ employees, with parameters including sexual orientation and gender identity in the company’s non-discrimination policy, domestic partner benefits, transgender-inclusive benefits, organizational LGBTQ competency, and public commitment to the LGBTQ community.2

Tobacco

'tobacco'

A report by the World Health Organization describes the activities of the tobacco industry between 1950 – when its research first made connections between cigarettes and cancer – and the late 1990s as “the most astonishing systematic corporate deceit of all time”. Despite both external and internal research to the contrary, tobacco companies denied that tobacco was carcinogenic, cigarettes were harmful and that nicotine was addictive. In 1996, Jeffrey Wigand, vice president of research at tobacco giant Brown & Williamson, blew the whistle on the company’s attempts to increase the addictiveness of cigarettes by adding additional chemicals like ammonium to the nicotine already present. In the ensuing legal battles, over a thousand documents from various tobacco companies were released, showing the lengths to which tobacco companies went to hide 1) the damaging effects of tobacco and secondhand smoke, 2) the addictive effects of nicotine and 3) their attempts to advertise to children and teenagers.1 Tobacco is responsible for 1,300 deaths per day in the United States.2 In 1998, the four biggest tobacco companies in the US (Brown & Williamson, Lorillard, Philip Morris and R.J. Reynolds) signed the Tobacco Master Settlement Agreement with the attorneys general of 46 states. As a result, the companies were protected from future lawsuits but in return were required to pay annual sums to the states to help them care for individuals harmed by smoking and also curtail their marketing efforts.3

Data: OpenInvest screens companies that derive more than 5% of their revenues from tobacco sales, as well as tobacco producers.

Donald Trump

'trump'

Many Americans feel upset, disenfranchised, and frightened by the election of Donald Trump to the American presidency, as well as his subsequent selections for cabinet positions. President-elect Trump has a history of misogyny1, racism2, disbelief in proven climate science3, disregard for veterans4 and the disabled5, and a troublesome amount of personal business interests6. This screen is for those who believe the above issues may interfere with his judgement as Commander in Chief and would like to take a stand.

Data: This theme both overweights and excludes companies. Companies who openly refused to back Trump or removed their support for the Republican Party once Trump was chosen as nominee are overweighted. Companies whose executives supported Trump during his candidacy are excluded. This screen also excludes the retailers who are boycotted by the #GrabYourWallet campaign for selling products that bear the Trump name (though you can choose to re-include those companies on the individual inclusion/exclusion page). Various news sources were used, and you can see our citations here.

Weapons Manufacturers

'weapons'

Gun violence is one of the most high impact issues facing American society today: 2015 witnessed nearly 13,000 gun deaths (36 per day), including homicides, unintentional shootings and suicides.1 Last year also witnessed 372 mass shootings (more than one per day), killing 475 and wounding 1,870.2 Ironically, these tragic events typically cause a spike in gun sales and actually increase the value of gun and ammunition companies.3 Globally, Americans own the most guns per capita, and they are ten times more likely to be killed by guns than individuals in other highly developed nations.4 Heavy lobbying from the National Rifle Association (NRA) and gun companies, and a fervent commitment to the 2nd Amendment right to bear arms, has stymied congressional efforts to regulate guns or their sale.5

Data: Weapons, firearms and manufacturers, as well as companies who earn more than 5% of revenues from sales of the above, are screened out.

Women in the Workplace

'women-in-the-workplace'

Women have spent centuries fighting for equal rights and respect in public and private spheres. While legally women have equal rights to men in the US, they still face disparities and discrimination in the economy. Two well-recognized issues are representation and equal pay. While women now comprise 47% of the workforce, only 4% of S&P 500 companies have female CEOs1 - and only one company out of those 500 has achieved gender parity on its board.2 A significant overall wage gap also remains. The Institute for Women’s Policy Research found that as of 2015, women still only make $0.79 for every $1.00 made by men, a gap that grows if the woman is a minority.3 While some research disputes this gap, the reasoning is usually that women work in traditionally lower-paying industries and occupations like healthcare and administration.4 The IWPR study notes, however, that society continues to segregate these jobs and industries by gender, and that jobs done mainly by women earn roughly 66% less than jobs done mainly by men. Other battles include paid family leave, job security during and after pregnancy, and contraceptive coverage included in company healthcare plans. For example, the United States is the only developed nation that does not mandate that companies offer paid maternity leave.5

Data: There is currently limited transparency into companies’ performance on gender in terms of hiring, pay, and other relevant factors. As a proxy, 2020 Women on Boards has made a list of companies with women on their boards, with a goal of increasing the percentage of women on boards to 20% by 2020. Screening for Gender Equality selects only companies with at least one woman on their board. We will continue to raise this requirement, as well as add additional indicators, as progress is made and as more data becomes available.

Disclaimer

Data partners and sources have provided ESG data but have no input into investment or portfolio construction decisions and do not necessarily endorse any specific investment approaches.