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Gates Foundation Should Invest Its Money Where Its Heart Is
Given the magnitude of the global crises we face, we'd hope the key nonprofits trying to address them would use every appropriate tool to maximize their impact.
Yet, Seattle's own Bill & Melinda Gates Foundation, which does a world of good with its programs, is missing a significant opportunity by not aligning the foundation's investment commitments with its larger social goals.
If the foundation wanted to consider a different approach, it might learn from institutions like California's massive CalPERS (California Public Employees' Retirement System) pension fund, which has combined first-rate financial returns with investments that put its dollars in service of its values.
At present, the Gates Foundation invests solely around trying to maximize returns, arguing that the more it makes, the more worthy projects it can fund. That means it has steered its dollars toward a number of companies that seem to undermine the good work it does with its programs: Exxon/Mobil, in which the foundation has $293 million, has been the prime global funder of institutes and individuals who deny global warming; mortgage company Ameriquest has been sued repeatedly for predatory lending; Tenet Healthcare has paid more than $1.5 billion in settlements for fraud, kickbacks and patient-care lapses.
Earlier this year, Gates Foundation CEO Patty Stonesifer defended the foundation's hands-off approach (except for avoiding tobacco companies) by saying, "It would be naive to think that changing the foundation's investment practices could stop the human suffering blamed on the practices of companies in which it invests billions of dollars."
But the current approach is an opportunity lost to make a broader impact with its $66 billion of capital (counting the pledged contributions from Warren Buffett). And, the financial returns for trying to do the right thing don't have to be lower.
To take the example of the $248 billion CalPERS fund, it has more than three times the assets of the Gates Foundation, while facing the legal and fiduciary strictures of being a public pension system. Yet, it has managed to shift its investments toward companies that take account of social and environmental impacts for a broader bottom line.
In addition, CalPERS has engaged in proactive shareholder advocacy, using the leverage of its holdings to change corporate policies. It helped win better drug access for AIDS patients in poor countries. It improved working conditions for Asian suppliers to corporations where it's invested. It has publicly joined shareholder campaigns to require that Exxon/Mobil shift major resources toward alternative energy and to force the resignation of the director of Exxon's public-issues committee - "due to the company's inaction on the business risks from climate change."
CalPERS is also directly investing close to $1 billion in renewable technologies and in increasing the energy efficiency of the $12.2 billion of buildings and houses in its portfolio and that of its sister fund, CalSTRS (California State Teachers' Retirement System).
Throughout this, they've still earned excellent returns: 12.89 percent over the past five years for CalPERS, and 13.1 percent for CalSTRS. And, according to studies by consulting group Wilshire Associates and University of California, Davis, finance professor Brad Barber, their stands on corporate governance have actually added market value to corporations whose policies they worked to shift.
Their approach has been so successful that the retirement systems of New York, Pennsylvania, Connecticut, Vermont, Minnesota and Oregon are now following suit by developing their own environmental-investment programs.
The Gates Foundation would do well to solicit the perspectives of former California state Treasurer Phil Angelides and former Controller Steve Westly, who spearheaded the most far-reaching CalPERS initiatives.
They'd do well to talk with leaders of other institutions that have followed similar paths. The socially responsible Domini 400 Social Index, for instance, has outperformed the S&P 500 on an annual risk-adjusted basis since its 1990 inception. Last year, 32 pension funds from six continents representing $2 trillion in combined assets agreed to place analysis of environmental, social and governance issues at the core of their investment approaches.
We'll never live in a world where our every choice matches our values. Sometimes you lose potential earnings by not investing in tobacco - or at least until the lawsuits roll in.
But imagine if the Gates Foundation disinvested from Exxon/Mobil and similarly problematic corporations and shifted the money into renewable-energy stocks or program-related investments - or joined public campaigns to change key corporate policies.
Imagine if it shifted even a portion of its investments to provide resources for the kind of world it works to create through its grant-making.
Paul Rogat Loeb is the author of "Soul of a Citizen" and "The Impossible Will Take a Little While." See www.paulloeb.org
© 2007 The Seattle Times Company
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15 Comments so far
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"Gates Foundation for Getting Geeks Laid"
I love the part where Bill Gates is supposed to ask for financial advice from Phil Angelides, the ludicrous former Democratic candidate for Governor of California! Phil really knows how to make things happen! He ran such a brilliant campaign ("I am for family and hard work!") that the Republican looked like more of an environmentalist!
It isn't lack of capital that's holding back the windmill makers... It's lack of demand. Maybe Gates should do a little consciousness raising with the public instead of pouring a huge investment into some company that can't even sell the windmills in its warehouse.
The problems with the Gates Foundation's philanthropic outreach programs go beyond its investment for profit practices. Just take a look at a couple of its education policy efforts:
(1) The notion that providing laptops, or even desk computers, for poor public school children, will make any difference at all in the educations these children receive is ridiculous. Inner city and other at-risk school children are failing for a lot of reasons, but these reasons DO NOT include lack of access to a laptop or to a desktop computer.
(2) Because our education system is not producing enough workers to fill good-paying jobs in the tech industry, Bill Gates himself is lobbying Congress to allow more foreign workers to come into the U.S. to fill these jobs, instead of lobbying Congress to develop sound education policies that would result in more better-skilled workers.
Bill Gates and, by extension, his Foundation did not get where they are today by doing the right thing, but rather by doing the thing most profitable for Microsoft. All that Gates Foundation money is just being used to promote Bill Gates and Microsoft.
I can think of hundreds of ways to improve education for at-risk students that have nothing to do with laptops and desktop computers, and I can think of dozens of ways to invest in American infrastructure, ways that would promote healthy communities with good jobs for its residents. I won't hold my breath waiting for the Gates Foundation to put its money into these productive-for-society areas.
It's not realistic to expect the Gates Foundation to act in a visionary manner.
Unfortunately, neither Bill Gates nor Microsoft succeeded by being visionary, nor revolutionary, nor anything similar. Mythology aside, they succeeded by leveraging other people's/other organization's innovations, by being in the right place at the right time, by focusing more on marketing than technology, and be being more fleet-footed than IBM (not generally hard to do!).
Expect Gates money to move into the area of social responsibility only when there's an perceived opportunity to integrate that functionality into a future version of Windows, or Office, or some other Microsoft product.
The Gates Foundation should use some of their money to compensate computer-users for the aggravation and the lost time routinely caused by Microsoft's unnecessarily cumbersome and too-frequently unreliable functioning.
Almost everything on the internet is compatible with Microsoft, less with Mac, very little with Linux, (probably the best system). We are almost forced to use Microsoft, at least much of the time, because of these restrictions. (If there's a reliable way around it, I'd love to hear about it. I'm still very new to computers, but several people have assured me that this is a real problem.)
LindaS
I fairly recently did 3 years of college work without a computer of my own. (During the last half of that time, I did have a StarWriter word processor to write my papers - an academic task not given to children.)
In answer to the article's topic, who says Gate$ has a heart? All progressives should be running GNU/Linux and dump Windoze now. If you're running Windoze, you're part of the problem.
Is this guy Loeb a complete idiot or is he just on the Microsoft payroll? The Gates Foundation is a tax dodge warmly embraced by another criminal piece of human garbage, Warren Buffet, which allows the mega-rich to control their assets without paying any taxes. Anyone who thinks these greed freaks are "philanthropists" better pull their heads out of their collective asses.
"All that Gates Foundation money is just being used to promote Bill Gates and Microsoft."
Bill Gates is a thief. It's how he made his fortune. What substansial good can be expected to come from this? Many of these "philanthropists" give away money so they can write it off. They often end up making money from their acts of "charity", and it ends up being a drop in the bucket.
Individuals with deep pockets aren't going to repair the world's problems anyway.
Please someone kick me in the head. I'm completely lost. Charity organizations invest in other companies? I always had the idea that they gave money to those who needed it, not to corporations that robbed those most needy?
Heres an idea. Gates could hire an American Electrical Engineer to design and build a solar power generation station using the local unemployed as labor.
If a fair wage was paid, the formerly poor employees could buy computers for their kids. The solar system could be improved and built in many other suitable locations. The power could be sold at a low rate to schools. The kids could study how it works. In other areas wind or other renewable sources could be used.
Lots of winners.
It's interesting that they invest in Exxon/Mobil (a company whose product causes global warming) to make money, and then give it to causes that fight global warming. Am I missing something?
Do our kids really need laptops to play video games?
Anyone who accumulates as much money as Gates is already on the wrong path (and I'm not saying I would be any different maybe, but I hope I would be).
The problem is that most of society still seeks status symbols, even if they are the cause of suffering (our big car results in our soldiers and Iraqis are dying, the coal miners who were trapped etc)
I'm sure it's hard to keep track of all that money at all times, must have to pay a staff to take care of most of the details. There is so much that could be done, and should be done to improve the circumstance of todays world community, so why would Bill not establish that when it comes to investing the "Foundation's" money it is at least equally important that the investments are not contributing to the problems as that they produce profits, and in some instances the profit IS the improvement produced rather than the dollars and cents. At what point is the result of the investment not a pure dollars earned but job accomplished task, such as feeding/educating starving children, providing clean water, even reducing carbon levels even if it doesn't produce a good $ profit. I won't write Bill off just yet, there's a lot he could do if in fact he was inclined to. Lets see if some of us might be able to add a little motivation with some positive direction and our Windows Outlook.
Hmm, lets think what would JESUS do with all of Gates money.
"Gates Foundation Should Invest Its Money Where Its Heart Is"
It is!