Social Investment Policy
The Hewlett Foundation's broad purpose is to promote the well-being of humanity. Alternatively stated, our objective is to generate maximum social benefit from our financial and human resources. The Board believes that the Foundation creates substantial social benefit through its grants and related philanthropic activities.
The Foundation's Approach to Social Investing
Organizations may also express their social priorities through their financial investments, through mechanisms including proxy voting, negative screening, positive screening, and mission-related ("double bottom line") investments. When considering a social investment initiative, the Foundation will assess the expected social benefit relative to the possible investment return forgone and also consider the resources required to develop a policy, assess alternatives, make the investments, and monitor progress and results. The Foundation's assets are invested by carefully selected outside managers. Most of these managers are given wide discretion relative to the underlying investments they choose. This discretion includes making decisions with respect to economic sectors, geographies, degree of maturity of individual companies, etc. The Foundation is cognizant of the fact that many of these managers selected by the Foundation see the greatest investment promise in companies with enlightened managements that recognize that sustainable practices and sound employment policies are in the best long-term interest of their companies and shareholders. The rising importance that investment managers and company managements each give to these policies is leading to a convergence between the portfolios of social investors and mainstream investors.
Current Social Investing Activity
Among the various avenues to try to generate social return through investing, the Foundation has investigated proxy voting the most fully. We were attracted to this strategy because it appears to be having an increasing influence on management decisions, is unlikely to degrade investment returns, and can be accomplished (we are hopeful), with minimal administrative burden. Among the social issues raised early in the 2007 proxy season, two were congruent with specific Foundation interests. These were global warming and sustainable forestry, which both happened to be within the Environment Program's areas of focus or expertise. (1)
In general, the Foundation is not attracted to either positive or negative screening. Typically, the reasons why a company might be positively or negatively screened are highly subjective and are subject to significant differences of opinion among reasonable observers. In addition, as mentioned above, mainstream and socially driven portfolios are gradually looking increasingly similar.
One exception, where the Foundation does choose to screen, is tobacco. This product, even if used as intended, has deleterious consequences for both individuals and society. Consequently, where the Foundation is able to do so, it excludes from its portfolio the stocks of any companies for which manufacture of tobacco products is a significant contributor to sales or earnings.
Given the Hewlett Foundation's programmatic concerns and expertise and our investment processes, we believe that we can be most effective in voting proxies that implicate climate change or forestry practices. Recognizing that many companies' activities either directly or indirectly have an impact on this issue, the Foundation may selectively choose to exercise proxies when doing so is seen to have a particularly beneficial impact.
(1) Further investigation in early 2007 revealed that proxy resolutions relating to global warming or sustainable forestry had been filed with seventeen public corporations. While these stocks were held in several portfolios in which the Foundation had invested, none of them was in a separate account where the Foundation could direct the proxy vote. If this condition changes in future years, the Foundation will decide how to vote on these issues.