Women's Money Wisdom

Episode 238: Investing with Human Rights in Mind with William F. Schulz

• Melissa Joy, CFP® • Season 4 • Episode 238

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Curious about how corporate responsibility and ethical investing can help shape a better future? Join Melissa Joy, CFP®, as she sits down with William F. Schulz, former Executive Director of Amnesty International USA, to uncover how ESG (Environmental, Social, and Governance) investing has the potential to impact both business and society.

In this episode, Bill shares insights from his memoir Reversing the Rivers and discusses the pivotal moments in history that have fueled the rise of ESG investing—from the fight against apartheid to addressing the challenges of labor trafficking. Together, they explore why ethical practices in supply chains are not only morally right but also beneficial for long-term business success.

Melissa and Bill also dive into the performance and misconceptions surrounding ESG investing, comparing the returns of Vanguard’s ESG Investment Index (ESGV) with the Vanguard 500 Index. They break down the ethical considerations in industries like for-profit prisons and worker safety, and take a closer look at the growing prominence of responsible investing in Western Europe.

Listen and Learn: 

  • How corporate responsibility has evolved and influenced the rise of ESG investing 
  • Why ethical supply chains are both a moral and financial necessity for businesses 
  • The performance of ESG funds versus traditional index funds 
  • Misconceptions about ESG investing, including its impact on industries like for-profit prisons 
  • How responsible investing is gaining traction in Western Europe and beyond 

 

This episode is packed with actionable insights to help you align your investments with your values, navigate ethical considerations in finance, and make informed financial decisions that support both your goals and the greater good.

Resources:  

  • Learn more about William here  
  • Order William's book "Reversing the Rivers"

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://pearlplan.com/

Melissa Joy:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show.

Melissa Joy:

I know that many people, as investors, wonder what is their money doing? Is it helping or hurting the world? It's a common conversation that we have with people who are investing with us, and so today I want to take that conversation over decades and talk about the evolution of human rights and investing, and with that we can talk about a story of ESG investing in a way that's quite practical, and I'm bringing back our special guest, William F Schultz. Bill has been a former guest on the podcast recently where we talked about his experiences as executive director of Amnesty International USA, and he's also a friend of Pearl Planning, and so we will make sure to link to that show, because I think it would be great if you were able to listen to both. And then we're going to carry on the conversation to talk about some of the economic impact of changing corporate attitudes and policies, as well as women in leadership. So, bill, welcome back to the podcast.

William F. Schulz:

Thank you, melissa, always good to be with you.

Melissa Joy:

When we talked about recording an episode, we decided to break it into two because there is just so much that we are able to to cover and I know there is even more. Anyone who's listening. If you didn't hear my plug for Bill's memoir in our last episode, I guess we could start just there, because I really want people to consider reading the book. Can you tell us a little bit about your most recent publication?

William F. Schulz:

Yes, Well, I served for 12 years as executive director of Amnesty International USA, which is the largest, the oldest, in some ways the most influential human rights organization, and that was a very demanding period for human rights. Right after I became executive director, the Rwandan genocide occurred in 1994. We went through all of the issues here in the United States around the response to 9-11, including the torture that the US was engaged in at Abu Ghraib. It was a very complex and controversial era, and so I have recently written a book which is called Reversing the Rivers a memoir of history, hope and human rights, about those 12 years, from 1994 to 2006, that I was in the midst of the maelstrom, as I put it, both here and overseas, and it's available from Penn Press, the University of Pennsylvania Press.

Melissa Joy:

Well, we'll make it easy for you to find it if you're listening, because we'll have it in the show notes. But one of the things that impressed upon me was the conversation about different levers that can be pulled to influence action when it comes to human rights. And you know those levers. You knew heads of state, you were working with celebrities, but you also know that money talks and sometimes it's corporations that can have an impact. Can you tell me the differences between those kind of areas of opportunity or the way the world works when it comes to influencing change?

William F. Schulz:

Yes. Well, I would say that the drivers there are about a half a dozen drivers of political and social change, and now environmental change as well. Often it starts at the grassroots, with aggrieved people, with people who have themselves experienced various human rights violations. It includes, of course, national governments, including the US, which can be very influential in that respect. It includes international instruments, especially through the United Nations or the international judicial system. It can include non-profit organizations, the NGO world as well, but it also can profoundly and importantly include business corporations.

William F. Schulz:

I would say that the movement for responsible investing and the movement for social responsibility, while it goes back at least 50 years, has not really emerged in its prime until the last 20 years or so, and in part that was because corporations found themselves in some embarrassing situations. Certainly, around apartheid, for example, and the fall of apartheid, there was a lot of pressure on corporations that had invested in South Africa to divest of their holdings there. In 1994, ken Sarawiwe in Nigeria was an activist in the Delta region of Nigeria who was standing up for the Ngoni people and asking that Shell Oil, which had invested in the Delta region, that Shell Oil, do what it could to make sure that profits were spread beyond the corrupt government in Nigeria and Sarawak was ultimately executed, and that was a very serious mark against Shell Oil, because it had failed to step up in that respect. And then, of course, the whole area of labor trafficking, of the fact that retail industries until the last 20 years or so did not monitor their supply chain very adequately to see whether children were being used utilized in some of the factories that were supplying their products. That of course had a profound influence and for a while it darkened the name of Nike in that respect.

William F. Schulz:

But I would say that over the last 20 or 25 years, many corporations have stepped up in very important ways and recognize that this is not just a moral obligation but that human rights are good for business. And if we understand one thing about international investments, we know that without a free press, for example, to expose corruption in a country, without an independent judicial system to enforce contracts fairly in a country, overseas system, to enforce contracts fairly in a country overseas, without a recognition that rules have to be transparent, that a corporation can't operate in China if it doesn't know what the rules are, all of those, I think, as well as, of course, the understanding of reputational damage that can occur if corporations become associated with some human rights crimes. All of that, I think, has convinced business to be far more proactive, and certainly in the retail field, we've seen monitoring take place. Sometimes it's not adequate, but often retail corporate entities recognize that they need to monitor those supply chains, that they don't want to be involved with what is modern day slave labor in effect in many of the factories in places like Bangladesh, and so they've taken seriously that obligation.

William F. Schulz:

Sometimes corporations will even quietly intervene directly with governments if they realize that their own investments are being implicated in some kind of a crime, and occasionally, of course, they will pull out of a country. We've seen that happen in Russia in recent years with the Ukrainian war. American corporations recognized and of course in some ways they had to, because it became illegal in certain respects to invest in Russia. Had to because it became illegal in certain respects to invest in Russia. But I think most corporations recognized that they didn't want to be associated with Vladimir Putin and his war in Ukraine, and so they divested themselves of those businesses, sometimes at a loss, yes, but often with a recognition that it in the run is more expensive to stay and damage your reputation, your ability to understand contracts, to have them enforced equitably than it is to get out, and so I think there are any number of important ways in which corporations can, and in many instances, have stepped up to the plate in terms of at least being another leverage point for the enforcement of human rights.

Melissa Joy:

It's so interesting because I think in the 80s and 90s using apartheid as an example, 70s or 80s then it was more of an institutional flavor of pressuring institutions to divest versus individual investor influence perhaps. To divest versus individual investor influence perhaps, and the examples that you're using more recently, the impact to a brand if they are perceived to have, or do have, child labor in their supply chain, things like that is at the store, the decisions to make purchases and things like that, and I think that has been a shift, whereas in the past just access to investments too, were primarily in pension funds, for example. So you know those were controlled by larger entities versus your individual 401k accounts where you're making decisions through you know your institution, but they are your accounts, not in a commingled name.

William F. Schulz:

That's right. I think that we're lucky in this country to have a lot of choices. When we go to the grocery store, we have a lot of choices. When we seek an investment portfolio, we have a lot of choices and most surveys have shown that a significant percentage of Americans, if they know that one brand is associated with something abhorrent and they have a choice, they're going to take another brand or they're going to invest in another corporation. I think that this is a recognition. There are even some people, a significant percentage of people, who say they will pay a little more for an athletic shoe, for example, if they know that that company is taking its human rights responsibilities seriously. Not everybody will do that, but it doesn't take everybody to affect the bottom line of a corporation and if a significant number of people are willing to do it, that will be an important message sent to that corporation.

Melissa Joy:

Well, perhaps we could talk about a disconnect that you just mentioned. So if, on individual consumer decisions, people are given the choice, they in closely related to socially responsible investments, or responsible investing, as you mentioned, has a bad name. In some cases it's tied up into political bickering. In fact, when I have clients that want to do ESG investing, there's extra disclosures that make it sound like you're kind of signing away your performance possibilities and of course we can't predict performance. But the irony, as I was preparing for this conversation, is I just pulled up, you know, the last year of ESGV, which is Vanguard's ESG Investment Index. So it's an index we could have a conversation about how impactful it is because it's, you know, beauty's in the eye of the beholder. But I compare that to the Vanguard 500 Index. Both invest in around 500 companies, both invest in larger US companies and you know the presumption that is kind of the narrative is you will pay in your performance for the investment in something that's better, that's good for the world, and then the tongue in cheek, nextcheek, next answer is why don't you just be charitably inclined and make more money and then give that to charity instead, which is a head-scratcher to me sometimes.

Melissa Joy:

But over the last 12 months, the ESG investment is up 26.3%. This is as of May 3rd and is not predicting future returns. Compliance disclosure there versus 24.85% for the Vanguard 500 index. Nothing's predictive there and that's you know. I would say those performances are almost the same, but the one that was better had the ESG flavor. And since 2018, when that investable ETF was available, and since 2018, when that investable ETF was available, the ESG performance up annualized 11% versus 10.54 for the Vanguard 500 index. That's just one example. I just think it's not a binary choice when it comes to predicting returns or paying a price the cost of returns. Cost of returns if you were to choose to try to incorporate your personal values including human rights or justice in some cases into how you articulate your portfolio.

William F. Schulz:

And the kind of figures that you just cited, melissa, are very close to the kind of figures we were citing 20 years ago, not so much with an ESG portfolio, which is a more recent phenomenon, but with particular investments and taking in greater account the impact that various corporations were having. These kind of funds have existed for a long time and they have often shown that they have very competitive returns to them, and that is an important thing, because, while, of course, any of us are potentially willing to take a small fall or a small diminished return on investment, for our consciences and our morals, none of us want to take a huge dip in the return on investment, as opposed to a 500 fund, for example, and the fact that these are competitive is very important from a practical, but also from an ethical point of view.

Melissa Joy:

I think one of the things that I think about as well is there's a different perception internationally to responsible investing versus in the US. So and I use an example I went to visit a friend who was living in Switzerland and as soon as we got off in the airport there, ubs, which is one of the biggest banks there or the biggest bank, had a big sign about responsible investing. It was like the first thing I saw kind of billboard size in the airport and that's just not the way it works in the US and you know that is not a socialist economy, that's a very capitalist economy which is extremely like show me the money. So I think it's interesting and I wonder if you could relate your perceptions for the way things are perceived here versus elsewhere.

William F. Schulz:

Oh, absolutely Sad to say, this is not the only example in which the Western Europeans, in particular, have been far ahead of the Americans in terms of their advancement of human rights, their protection of the environment and so on. Not to say that they are perfect by any means, but it is certainly true that this is much more in the conversation and, you know, part of the issue here is a matter of educating people. Yes, there are certainly controversial questions about whether to invest. We're seeing that today on the campuses, and I know we're not going to get into this, but we see today the call for divestment in Israel and in companies that are invested in Israel.

William F. Schulz:

Well, that's very controversial, but when you're talking about slave labor or child labor, when you're talking, as we were years ago, about apartheid, when you're talking about toxic chemicals in the air or the water that a corporation may be responsible for, these really are different questions. These are questions that gather a huge amount of agreement. A I'm serious about this. One of the ways that I can put pressure on a corporation, and one of the ways, then, that I can convince a corporation to put pressure on the wrongdoers, whether it be a government or non-governmental actors or other corporations is through my investment portfolio. That's an important piece of education, and people like you who offer ESG are in a very important position in terms of educating people about those possibilities.

Melissa Joy:

I wanted to bring a few other examples that I thought of that may not be top of mind for people, but would be helpful in context of what you may or may not want to invest in. Some indexes or some investment funds have access to for-profit prison industries, and so that is, you know, brings in a question of labor in terms of does the corporation benefit from the labor of people who are incarcerated? And or, you know just, should you be making money off of incarceration? Other examples include worker safety. Should people go to work, for example? I think of in the Midwest meatpacking locations. Or I also think of when opioids were free and running rampant in communities. What kind of profits were going through companies and would you like to contribute to the opioid crisis? As I prepared for this, too, I thought it would be interesting because there has been such an evolution.

Melissa Joy:

Some of the oldest retail investments that were available that had this flavor of impact, I think of the Capital Group, had a strategy that was requested by nuns because they wanted to not have access to alcohol and tobacco in their portfolios, going back to the 1940s. And nowadays, though, there's a little more democratization, the ability to build investments and, at the end, since this is our podcast, is the women's money wisdom podcast. I'd love to talk about the role of women in human rights in general, but I have three strategies that I kind of wanted to pull out to just talk about some recently available strategies and, ironically, in a world where asset managers, portfolio managers, are about one to 2% women, all of these strategies have portfolio managers and or creators who are women. But one is called JSTC. Justice is the ETF and it's an Adesina Social Index. They have focused on the impact of investments in communities in terms of safety environment. Terms of safety environment, the toxic, you know kind of pollution that you described, bill, as well as focusing on BIPOC access within companies as well as their impact in communities. And they certainly are focused on, for example, for-profit prisons, and a past episode of the Women's Money Wisdom podcast included the group that created the strategy and that's one kind of interesting. Each of these examples are ETFs, so they just are a little bit easier to create and distribute.

Melissa Joy:

A second example is a good friend, perth Toll, who is of Chinese descent.

Melissa Joy:

She was a financial advisor at Fidelity who spent time in China visiting family and did not want, when investing in emerging markets, to have 30 to 40 percent of her investments going into China, where there is limited access to human rights and a lot of, of course, government control and other issues, and there just weren't options out there like there are more today because of strategies like hers, and so she created an index that helped to seek to invest in emerging markets that had more freedom, more capitalism.

Melissa Joy:

And a final example is a strategy that does invest, similarly to our traditional indexes, it doesn't remove things, but then they work to improve governance and social access to companies through their voting. So they will team up with institutions in order to try to impact and change from within, and that strategy is called vote. So, like you said, all run by women. But these are newer strategies that are becoming available and we don't just choose them based on what we think they're doing. We like to choose them based on how we think they can perform as well. So very interesting kind of area of evolution in investments in general that's coming at the same time that in some places, esg may have a bad name, although the results are not necessarily earning that reputation.

William F. Schulz:

Those are very exciting opportunities and your reference to the last the voting reminds me that 40 years ago, when I was working with the Interfaith Center on Corporate Responsibility, often it was the lay religious women within the Catholic Church who were the most vocal in the stockholder meetings and in terms of making the concerns of consumers known to the corporations in one fashion or another, and they often had a very profound impact.

William F. Schulz:

So I think these are wonderful and exciting examples. You know, milton Friedman is famous for having said that the only social responsibility a corporation has is to return the greatest profit for its shareholders, recognizing that their own interests are implicated in having a clean environment around us. None of us are going to survive if the environment is degraded to the point where we can't live, and the same is true in many respects of some of the other concerns that ESG raises. So I'm delighted and excited by these opportunities, and I'm not at all surprised that they are led by women, because my experience in the human rights movement while, of course, the majority of human rights political prisoners or prisoners of conscience with whom I worked were men that women had an enormous and have an enormous impact on all elements of social change, and that certainly includes human rights.

Melissa Joy:

Well, I think that one of the lessons that I apply whether it's in financial planning, financial decision making or investing, they're interwoven is what is your time frame? And the longer you can have a time frame, often the more success. The less impulsive, the less impatient. It's not just the quarterly results, it's the results over time in terms of investments, because we don't tend to invest in things that we only want to own for months. We want to invest in things that we would prefer to own for years if given the choice. And so to me, some of that vision in the long term, if you add governance, social and environmental considerations, it helps to change your perspective to the longer term. You're looking at how a company will behave in 10 years and you can still look at their quarterly results and the impact economically of today. But I do think the alignment of being encouraged to think longer term is a benefit and certainly a tailwind when it comes to the general way investors go about choosing their investments. With that lens an added under-discussed benefit.

William F. Schulz:

That is true in investing and it's true in social change. We know that famously, martin Luther King, quoting Theodore Parker, said the arc of the universe is long, but it bends toward justice. And Spinoza said always take the view from eternity and recognize that you're not going to have immediate success or, in this case, immediately good results in all cases, but over the long haul the view looks far more promising.

Melissa Joy:

Well, I think that we could have this conversation all day. I love the work of philosophers, the work of social change agents can dovetail with conversations about investing and in reality, investments are an integral working part of the economy. They're a way for you to give back to yourself and earn money for yourself, but they also are what makes the world tick, makes the economy tick. So having the discussions about the reality of how they impact things, discussions like this, I think, just bring more of the story that needs to be at the table into conversations. So thank you for the opportunity to discuss this as a human rights expert and for me just as an investor. So I appreciate it, bill.

William F. Schulz:

Thank you for the opportunity to spread the good word.

Melissa Joy:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.

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