Coke and the Pitfalls of Socially Responsible Investing

"We invest in better companies," says a brochure advertising the "socially responsible" Citizens Trust group. The brochure concludes "we like to think we represent a new breed of mutual fund company -- one that brings an enlightened, human approach to the entire process."

But what does it say about "socially responsible investing" when Citizens Funds, one of the largest and most experienced of the mutual funds founded on the practice of this selective kind of investing holds 335,400 shares of stock (valued at nearly $20 million) in the Coca-Cola Corporation?

Citizens Index Fund, largest of the five funds in the Citizens Index group, boasts a diversified portfolio of more than 300 stocks. Coca-Cola is one of the fund's leading stocks, accounting for almost 2.5 per cent of its total investment.

"Socially responsible" is variously defined, but isn't it quite a stretch to dignify Coca-Cola with this label?

Like all soft drinks, Coke is flavored sugar water, empty calories without food value, a product that owes its success to legendary extremes of misleading, moronic marketing. Not merely useless, Coke and other soft drinks promote tooth decay and displace fruit juices and other healthy drinks in the diets of the millions who fall prey to their ubiquitous worldwide ad campaigns.

Besides being unhealthy products that are disingenously marketed, soft drinks contribute massively to the ocean of nonrecyclable litter that disfigures more and more of the planet with each passing year. And like most of its competitors, Coca-Cola, the world's "leading" soft drink company, actively opposes the container deposit laws that have significantly reduced litter in the ten states where deposits are required.

Coke has also reneged on promises it made in 1990 to begin using bottles made of recycled plastic, and, despite determined efforts mounted by activists, plastic Coke bottles are still made almost entirely out of virgin polymers. Coke claims that using recycled plastic is uneconomic and technically unfeasible, but FDA-approved technology is available that Coke could use to manufacture bottles with 25 per cent recycled plastic content at an added cost of about a tenth of a cent per bottle. The Domini Fund (which owns about $36 million worth of Coke stock), and several other socially conscious investment funds have urged Coke to begin using significant amounts of recycled plastic in its bottles. Coke's response, that it is "experimenting" with recycled plastic in its bottles is pure p.r smoke and mirrors, but Domini, Citizens Funds and other "socially responsible" funds continue to hold big blocks of Coke stock.

Coke has other sociopathic characteristics. Like Pepsi and other competitors, it contracts for the exclusive right to sell its unhealthy products in schools, where they can do the most harm. Coke's CEO and other top executives receive enormous salaries, stock options and other megaperks, and Coke's "soft money" bribes are among the highest paid by any corporation to buy influence from members of Congress and other elected officials

In short, Coca-Cola is a "classic" example of a corporate bad actor. Citizens Index defends its massive investment in Coke by noting that the company has won an EPA award for protecting the ozone layer, that "its compliance with environmental laws is better than the industry average", and that it promotes diversity through affirmative action and assists minority communities in a variety of ways. But Coke's environmental record is mixed at best, and the soft drink "industry" could certainly make its maximum contribution to planetary and human health by electing to stop producing its pernicious line of junk drinks. And Coke courts minorities and low income communities because it wants to sell more soft drinks in these communities. Conning the poor and minorities into buying products that are bad for them can hardly be deemed socially responsible.

Complicating the picture, Coke now faces a $200 million lawsuit filed by minority employees and contractors which could result in a national boycott of Coke products.

The portfolio of Citizens Funds includes other bad actors, no doubt, including Pepsico, outlaw utility US West, and Citizens Funds' largest holding, Microsoft (700,800 shares valued at almost $82 million).

Why does the group of funds that many investment counselors consider the most accomplished practitioner of "socially responsible" investing hold stocks like these? Why aren't these funds invested in solar electricity development, fuel cells, affordable low income housing, pollution abatement, recycling, land mine detection and removal, and other positive technologies, products and businesses? Aren't these the kinds of enterprises that should be supported by investment funds that portray themselves as "socially responsible"?

Socially responsible investing, from its beginnings as an upstart niche in the market, has moved into the mainstream, with nearly half of all investments, by some calculations, now touted as being socially, environmentally, or otherwise "responsible". Investors whose holdings are managed by purportedly responsible funds such as Domini and Citizens Funds may want to take a closer look at the companies their money is supporting. Once they know whose stocks they own, they may want to consider asking fund managers to do some switching, dumping outfits like Coke and Pepsico, which contribute nothing but problems to society, and replacing them with stocks in companies that produce products or services that can truthfully be called socially responsible.

Soft drink stocks may offer those who invest in "socially responsible" mutual funds good rates of return, but such investments undermine the concept of socially responsible investing and turn it into a bad joke. Investors who put their faith in self-styled "socially responsible" investment groups should not have their good intentions betrayed by investments in junk companies like Coca-Cola.

Larry Lack is a writer and organic farm inspector based in Portland. Ore. The opinions are his own.
Home Page

News | Current Issue | Back Issues | Essays | Links

About the Progressive Populist | How to Subscribe | How to Contact Us

Copyright © 2000 The Progressive Populist