Coalition of Investors Urges Senate To Support Clean Air Act Rule

Letter To Senate Signed By 34 Investors With Over $200 Billion Under Management

Krull & Company is proud to be among a coalition of investors calling on U.S Senators to uphold a recently established Environmental Protection Agency Clean Air Act Rule. The investors are urging the Senate to oppose Senator James Inhofe’s (R-OK) effort to prevent the EPA from implementing the Mercury and Air Toxics Standards for power plants. The rule would require significant reductions in power plant emissions, mostly by upgrading and retrofitting the older facilities that had been grandfathered by the original Clean Air Act.

The investor letter makes the case that the Mercury and Air Toxics rule will not only improve health and protect the environment, but will also create jobs. Experts estimate that the capital investments required to comply with these two Clean Air Act rules will add nearly 1.5 million jobs, or nearly 300,000 jobs per year on average over the next five years. Investment in air pollution control projects will create construction and manufacturing jobs with an impact across an industry supply chain with over 175 companies in 37 states.

“These rules will drive improved public health and create high-paying construction, installation, engineering, and manufacturing jobs, while retrofitting outdated, high-polluting power plants,” says Stu Dalheim, Vice President for Shareholder Advocacy at Calvert Investments. “We believe the electric power industry is well-positioned to comply with the rules without threatening electric system reliability.”

The coalition of investors points out that most of the largest coal-based electric power companies have stated that they are prepared to meet the requirements of the new rule, having made significant investments and improvements already. Given the major health benefits predicted and the economic activity that the required investment in power plant upgrades will generate, the EPA must be allowed to move forward with the rule, argue the investors.

The letter was coordinated by Calvert Investments, a member of the Investor Network on Climate Risk (INCR), a project of the non-profit organization, Ceres. Other signatories to the letter include a number of other INCR members, such as Walden Asset Management, Domini Social Investments LLC, and F&C Management Ltd.


Is there a moral obligation to address climate change?

We recently became a signatory of the National Climate Ethics Campaign’s Climate Moral Obligation Statement. We do believe that we have a moral and ethical obligation, as the wealthiest nation in the world, to do everything we can to address the issue. This is not only for our nation, but also for nations that don’t have our resources; for this generation and for generations unborn.

As socially & environmentally responsible investment advisors, we see this as both an obligation and an opportunity. We want to own companies that are being proactive about reducing their climate impact, and use our shareholder clout to push other companies to integrate climate responsibility into their strategies.

Visit the Climate Ethics Campaign’s website here…

Here’s the text of the Statement:




We, the undersigned current and former elected officials and representatives from the business, labor, youth, financial, mental health, physical health, conservation, racial justice, civil rights, and faith communities of the United States, recognize that climate change is a real, dangerous, and rapidly worsening problem with deep moral implications.

Although reducing carbon pollution will have costs, it will also produce incalculable benefits. Our response must therefore be driven not solely by near-term economic or national self-interest. We must also acknowledge and act on our long-standing moral obligation to protect current and future generations from suffering and death, to honor principles of justice and equity, and to protect the great Earth systems on which the wellbeing of all life, including ours, depends.

We call on every citizen to act on these moral principles without delay. Individually, and collectively as a nation, we must rapidly reduce carbon pollution by significant levels, prepare for the consequences of an already warming planet, and insist on public policies that support these goals and create a just transition to a low-carbon economy. The risks of inaction are exceedingly high. The benefits of acting on these moral principles are even greater.

The Moral Obligation to Prevent Suffering and Protect Human Life

The most fundamental of our guiding moral principles is that it is wrong to unjustifiably cause human suffering or death. Climate change-related impacts are already harming and killing people here and abroad. Unless carbon pollution is rapidly reduced, the resulting natural disasters, floods, diseases, illnesses, water and food shortages, and environmental degradation, along with associated rising violence and social breakdown, will injure or kill millions more every year.

Climate change-induced suffering from food shortages and the dramatic spread of disease and illness will be especially significant. Millions of people worldwide will be affected. Suffering will also result from the job losses and disruptions to families and communities caused by the billions of dollars in direct and indirect annual costs of climate impacts, as well as from the escalating market volatility, supply chain disruptions, and other impacts businesses will experience.

Over the past century, the U.S. has been the world’s largest overall contributor to climate change, generating about 30 percent of the total energy-related CO2 emissions that are destabilizing the climate. Today, we continue to produce far more emissions on an annual basis than any other nation except China. Even if the costs are high, we must avert one of the worst violations of human rights the world has ever seen by acknowledging our contribution to the climate crisis and significantly reducing our emissions.

The shift to a low carbon economy can create millions of good jobs that support healthy families and communities. This requires a ‘just transition’ that spreads the investments in solutions and the benefits of new approaches equitably, enables whole industries to make the changes needed, provides adequate resources for workers and communities adversely affected by the shift and ensures that all Americans have a democratic voice in their workplaces and their communities in how those decisions are made.

The Moral Responsibility to Honor Principles of Justice and Equity

Those who suffer the most from climate change are not the same people who now benefit greatly from the overuse of fossil fuels and other natural resources. As a matter of justice and equity, we have a moral obligation to reduce our carbon pollution in order to prevent suffering and death among people who have contributed little to climate change but who are, at least initially, most impacted: those living in the Arctic; people in less developed, hotter regions of the world; low-income and working-class communities; communities of color; women as well as children in the U.S.; and future generations everywhere.

In addition, even as we reduce our emissions we must do our part to ensure that vulnerable populations and nations have the financial and technological capacity to prepare for and adapt to the consequences of a warming planet and grow clean energy economies.

The Moral Obligation to Honor and Protect the Processes that Make Life Possible

Because we have a moral obligation to protect human life and prevent suffering and injustice, and because Earth’s gifts have intrinsic value, we have a responsibility to protect the ecosystems and organisms that provide the air we breathe, the food we eat, the water we drink, the materials we use to sustain life and prosperity, and the natural beauty that lifts our spirits.

Whether we believe that the Earth and its great abundance is a product of natural processes or, as millions of people nationwide believe, that the Earth is the gift of the Creator, or both, our obligations are fundamentally the same–we must be good stewards of what we have inherited. Humanity is not in command of creation, but merely part of it. To disrupt the climate that is the cornerstone of all life on Earth and to squander the extraordinary abundance of life, richness, and beauty of the planet is morally wrong.

We Already Have the Know-How and Tools

The people of our great nation have the spirit, knowledge, and tools required to reduce climate change. The greatest obstacle is lack of human will. History is watching us. Our legacy will be determined by what we do now and in the next few years.

We call on everyone in the U.S. to act on their moral principles now by rapidly and significantly reducing greenhouse gas emissions in their homes, places of work and government.

We call on every citizen to actively prepare for the consequences of climate change.

Moreover, we urge every citizen to insist that their government adopt policies to foster emission reductions and prepare for climate change, and to provide sufficient resources to build the capacity of the most impacted people worldwide to do the same.

This is not just about avoiding harm. Acting on our moral principles will foster the growth of a sustainable economy that creates millions of good jobs in clean energy fields, supports healthy families, and builds vibrant communities. That, itself, makes this imperative.

The need for action is urgent, the possibilities enormous. Please join us in heeding this call.

Your Investments Making A Difference

We’ve partnered with Calvert Investments for years. They are the leading socially & environmentally responsible investment manager out there, and manage millions of dollars for us.

As such, they are invited to be heard on a number of topics related to responsible business. A part of the Dodd-Frank bill included restrictions on conflict minerals. Here is their testimony before the SEC roundtable on conflict minerals.


Statement of Bennett Freeman

Senior Vice President, Sustainability Research and Policy

Calvert Investments 

Securities and Exchange Commission Roundtable on Conflict Minerals

October 18, 2011

Commissioners and staff: I am pleased to have the opportunity to make a brief statement on behalf of Calvert Investments to this roundtable on certain issues related to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding conflict minerals.  Calvert Investments is one of the nation’s largest families of sustainable and responsible mutual funds based in Bethesda MD, with current assets under management close to $13 billion and nearly half a million investor accounts in the U.S.

As a sustainable and responsible investor, Calvert values companies’ prudent management of risk in their global supply chains and has been particularly concerned in recent years by the use of certain minerals to fund the continuing bloody conflict in the Democratic Republic of the Congo (DRC).  That is why we have joined other investors and shareholder advocates in a multi-stakeholder group also including major companies and human rights non-governmental organizations (NGOs) to promote responsible sourcing in the DRC.  Together we have supported the legislation that was enacted as Section 1502 to curb the use of such minerals to prolong the conflict—and we have worked together since then to support the development of a rule that will ensure its full and swift yet effective and reasonable implementation.  In Calvert’s case, we have drawn on our longstanding experience both in assessing human rights-related risk and the management of that risk across global supply chains—as well as on our expertise in evaluating appropriate and credible disclosure of such risk assessment and management.

Calvert has taken the opportunity to state our views on aspects of the prospective rule on six prior occasions over the last year together with:

  1. A group of socially responsible and faith-based investors in “SEC Initiatives under the Dodd Frank Act: Special disclosures Section 1502 (Conflict Minerals)” submitted on November 16, 2010;
  2. Several of the same investors together with companies and NGOs (referred to as the “ multi-stakeholder group”) in “SEC Initiatives under the Dodd-Frank Act- Special Disclosures Section 1502 (Conflict Minerals)” submitted on November 17, 2010;
  3. A similar group of investors in “Comments Regarding File Number S7-40-10 on Conflict Minerals Disclosure” submitted on March 2, 2011;
  4. The multi-stakeholder group of investors, companies and NGOs in “Comments Regarding File Number S7-40-10” also submitted on March 2, 2011;
  5. Several human rights NGOs in a letter urging that the final rules allow no delays in implementation, including delays in reporting requirements, submitted on July 29, 2011;
  6. The multi-stakeholder group of investors, companies and NGOs in “Additional Comments Regarding File Number S7-40-10 on Conflict Minerals” submitted on August 22, 2011.

Let me turn now to the two sets of issues that are the focus of this first panel—scope of the rule and tracking the supply chain—consistent with these previous submissions but highlighting specific issues of particular salience to the content of the final rule.


I will address in turn two key issues that concern the scope of the rule—first the appropriate entities to be covered and second, the process of disclosure.

Entities to be Covered

We believe that the entire supply chain must participate to develop effective tracking systems for conflict minerals.  If certain issuers that use these minerals were exempted, that would prohibit both the development of such systems and also the flow of information required for investors to gain a full understanding of issuers’ exposures to these minerals.

We believe that reporting standards should be consistent with the statutory language of Section 1502 and should therefore apply disclosure rules equally to all stipulated conflict minerals—namely tin, tantalum, tungsten and gold.  For example, gold has been a key contributor to conflict financing in the DRC. Therefore, in our view the provision of special conditions or exemptions for gold or any other mineral would weaken the intent of the disclosure rules.  Greater transparency in the gold supply chain is critical to an investor’s ability to evaluate company sourcing practices in the DRC.

We believe that all companies across the value and supply chain should be covered by the rule—from “mine to product”—to ensure the greatest possible degree of transparency for investors and consumers alike.  As investors, it is critical that we are able to assess standardized disclosures from all companies that may use these minerals in their products.

This wide spectrum of coverage should include foreign private issuers that file reports under Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”).  Such entities should be required to file a “Conflict Minerals Disclosure” report as part of its annual report if it meets the requirement of “person described” in the Act.  We also recommend that entities with Over-The-Counter American Depository Receipts (OTC ADRS) that file an annual report with the SEC should also be required to file a “Conflict Minerals Disclosure” report.

Furthermore, we believe that smaller issuers should not be exempt from the disclosure rules.  As investors in large, mid and small cap companies that have exposure to these minerals, we want to be able to assess conflict minerals disclosures on a consistent basis across our holdings, regardless of size.  We also want to be able to assess the disclosures of issuers which sell generic products under their own label (private label manufacturers) to ensure the integrity of their supply chains and in turn diminish risk in our portfolios.

We also believe that distinctions should not be made between an issuer that solely produces minerals from a mining reserve and an issuer that produces, concentrates and refines conflict minerals.  Both types of mining issuers should be subject to the disclosure requirements under the proposed rule.

Finally, the rule should not allow a de minimis threshold, namely exempting products that contain only a small amount of these minerals.  While such a threshold may appear reasonable since some products such as cell phones may contain only small amounts of a metal such as gold, the volume adds up in large quantity of units (1.6 billion cell phones were sold globally in 2010).  Even a small portion of an end-product containing one or more of the four stipulated minerals can represent significant value to armed groups perpetuating the bloody conflict in the DRC.  Therefore, a de minimis threshold would risk significant dilution of coverage of the law and, we believe, run counter to the original legislative intent.

Disclosure Process

We understand that companies need a reasonable period of time to develop and implement systems to comply with the rule and disclose progress.  But this brief period should be one of continuous and rapid improvement during which issuers work with governments, NGOs and industry peers to develop infrastructure to determine and trace the origin of minerals from mine through smelter to product.  We understand that initial reporting will be uneven.  Yet the objective should be to trace and disclose such origins with increasing transparency, consistency and credibility year-by-year across the value chain.  We are encouraged by certain factors: that internationally accepted due diligence guidelines are already in place; that many companies are already using supplying chain audit systems; and that on-the-ground training and monitoring systems are rapidly developing.

Investors such as Calvert need to be able to distinguish companies that are working on responsibly sourcing their minerals as soon as possible after the rule is finalized.  Therefore, we request that companies be required to disclose the steps they are taking to develop and implement systems to comply with the rule.  We would also like to see SEC guidance on the form such disclosures should take in order to ensure useful early data for investors


Turning to the challenge of tracking conflict minerals across the supply chain, Calvert believes that responsible supply chain risk management is essential to investors and consumers alike in order to ensure the integrity of a company’s operations and reputation in an era of heightened global exposure and expectations around these issues.  The situation in the DRC that compelled the enactment of Section 1502 presents inescapable risks to companies whose supply chains touch  conflict minerals, and in turn present supply chain management challenges which are indeed complex given the number of intermediaries that may be involved.  Yet these challenges can be addressed with a rule that takes into account established international standards as well as the experience that many affected companies have gained by facing broadly similar challenges elsewhere around the world, even as some of the factors they face in the DRC are unique.

Two such challenges stand out in our view that can benefit from a strong, clear rule: due diligence and third party auditing.

Due Diligence

Comprehensive rule-making that holds companies to a high due diligence standard together with robust third party audits will allow investors to assess a company’s willingness and ability to avoid sourcing conflict minerals funding armed groups in the eastern DRC.  Accordingly, we recommend that the rule refers to specific due diligence standards that are consistent with international standards and best practice.  Reference to the OECD Due Diligence Guidance and Supplements for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas in particular would bolster confidence in a reliable, comprehensive due diligence process and at the same time enhance efficiency by basing it on such an established standard.

We recommend an independent third party audit of the due diligence report to include a review of management systems and processes.  We also encourage issuers to develop such due diligence on a cooperative industry-wide basis to enhance efficiency and to provide a comparable basis for evaluation.

Finally, we believe that due diligence should be prescribed across all “regulated persons” referred to in the rule, including gold.

Third-party auditing

Calvert and other investors with long experience in assessing supply chain risk—for example with respect to workplace standards as well as product content—view third-party auditing as an essential element to ensure compliance and enhance the credibility of a given standard, whether legally mandated or voluntary.

Given that the main intent of Section 1502 is to stop the flow of revenues from minerals sales to armed groups, we believe that a particular focus for supply chain auditing should be on smelters’ tracing documentation and mechanisms.  Further discussions would be helpful to determine the best way that various assurances can be provided while minimizing cost and burden to companies. For example, the concentration of many affected companies at the smelting/processing phase may be the basis of efficient third-party auditing approaches.

We also believe that there should be a smelter auditing protocol which is performed by an independent third party.  When it is determined that incoming minerals originate from DRC or neighboring countries, the third party audit should also include specific information consistent with the OECD Guidance referred to above in connection with due diligence.  Although some companies in the electronics sector have already begun to set up a system to audit smelters, involvement from other industries is necessary to ensure the integrity of the information that issuers are able to report adequately to the SEC.

Companies already have processes in place which monitor their supply chains, such as RoHs, REACH, and ISO compliance systems. These can be adjusted to audit and monitor for conflict minerals.  Several leading companies have already taken steps to monitor conflict minerals in their supply chains.  Examples include the work by AMD to link its conflict mineral monitoring to RoHs compliance and Motorola’s to its Solution’s for Hope program.


We understand the need for the SEC to convene this roundtable given the complexity of issues at stake in this rule-making process and the acute concerns that have been expressed by some parties.  We have confidence that these issues, however difficult, can and should be resolved on the basis of the comment period already concluded, supplemented by this timely roundtable and the diverse parties and viewpoints it has brought into sharper focus.  We look forward to the issuance of a rule—consistent with the legislative intent of Section 1502—that will give confidence to investors such as Calvert in the responsible sourcing of minerals from the DRC.  And we appreciate the opportunity to convey the perspective of Calvert Investments in this important and urgent process.

Firms of Endearment

I had the great opportunity to speak to the Golden Isles Investment Group today at The Lodge on St. Simons Island. This is a group of ladies who take investing very seriously. They come from a variety of backgrounds, but work together to make decisions that are best for the group.

Before the talk, I gave the group an assignment to read the book, Firms of Endearment by Raj Sisodia, Jag Sheth and David Wolfe. My goal was to have a discussion about responsible investing, not to just preach about it.

The premise of the book is that corporations are not only accountable to shareholders, but to all stakeholders. “Stakeholders are part of a complex network of interests that function in a matrix of interdependencies. Each stakeholder tends to thrive best when all stakeholders thrive. No stakeholder group is more important than any other. To see matters otherwise is like saying that the heart is more important than the lungs. Life depends on both being healthy.”

So, they believe that there are five stakeholders that, when given equal treatment, make a company (and an investment) better. The five stakeholders are (using the acronym SPICE):

  • Society
  • Partners
  • Investors
  • Customers
  • Employees
They consider Society to be the ultimate stakeholder.
They use the term ‘concinnity’ when they discuss Partners. It means, “a skillful blending of the parts achieving an elegant harmony.” Collaboration is more profitable than exploitation!
Investors greatly benefit when all five stakeholders are focused on – their examples vastly outperformed the market as a whole.
Happy Customers are good customers. You don’t need to mislead people to sell to them. Foster a sense of love, trust and empathy. Follow Daniel Pink’s concept of High Touch.
And finally, well-paid and trained Employees, who have a sense of purpose and meaning, and who are part of a team are good for the company! This is common sense, folks.
So, we discussed the book today, and had great discussions, feedback and ideas. I wish the ladies of the Golden Isles Investment Group much success in their investing endeavors!
Get your copy of the book and give me your feedback!

Kohls Makes Commitment to Green Building

Photo Courtesy USGBC

It is so good to see when a company like Kohls, a major national retailer, makes a commitment to build all new stores as LEED-Gold certified. Considering that buildings are our number one consumer of energy (mostly derived from fossil fuels,) this will amount to a tremendous reduction in emissions. In addition, it will save the company millions of dollars simply through energy efficiency. That’s good management!

Read the story here…

Traditional Investors are Embracing Shareholder Advocacy

In this recent post by Mindy Lubber, the President of CERES, she makes some great points about how mainstream investors are using shareholder advocacy to effect corporate change. The issues range from climate change proposals to political contributions to CEO impropriety. Please share your comments!

Read Mindy’ article here…

Today’s Market Commentary – Time To Buy?

The markets have now officially given back all that they’ve gained over the past year, dropping into negative territory for the past 12 months today. Fear pervades the markets and an attitude of “sell sell sell!” abounds. But that’s not what we’re going to do.

Our portfolios have been rather conservative over the past couple of years – allowing us to ride out the downturn in 2008 and maintain stability ever since. It is time to begin adding more equities (stocks) to our portfolios and take advantage of low valuations. Currently the portfolios have:

  • Core Conservative: 26% Equity
  • Core Balanced: 36% Equity
  • Core Aggressive: 49% Equity
Like I said, traditionally, these are all VERY conservative portfolios. We’re going to begin by adding between 4 and 8 percent to the equity allocations. In addition, we will be hedging this increase with an increase in alternative investments while moving out of longer-term bonds to make up for the difference.
While there is still some inherent risk in the markets, including the Greek default (which is probably going to happen either way,) there has been much positive news coming out recently that the market has ignored: Manufacturing and auto sales numbers are up; unemployment numbers have come in better than expected and several others. If we are in a recession now, the news is probably already reflected in the price of the market. It may be the unpopular thing to do, but doing the unpopular thing is what saved our portfolios back in 2008 when we reduced equities by 50%. And it may be the exact right time, but we’re close.
To summarize, we will be increasing our equity percentage in all portfolios, prudently, to take advantage of these depressed stock prices. Please let me know if you have any comments or questions.