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December 10, 1999
TIAA-CREF Stands Firmly Against Positive Screening
by Phillip Johansson
Despite a three-year campaign by the same participants that brought about the Social Choice
Account, TIAA-CREF asserts, "it ain't broken, so why fix it."
SocialFunds.com --
TIAA-CREF (The Teachers Insurance and Annuity Association-College Retirement Equities Fund) is the
nation's largest private pension system, managing over $250 billion ($US) in assets for 2 million
employees, principally in higher education. Since 1996, The Campaign for a New TIAA-CREF has been
urging the fund to devote a small fraction of its assets into community development and other
positive models of social and environmental responsibility, and met staunch resistance.
 TIAA-CREF's Social Choice Account was
established in 1989, after a five-year campaign by concerned participants calling for a socially
responsible alternative. Ten years later, the Social Choice Account (SCA) is the nation's the
second largest socially screened fund, with over $3.5 billion invested employing screens for
tobacco, alcohol, nuclear energy and weapons, the military, and environmental pollution.
But social investors are now demanding more proactive approaches to bringing about social
change, including community development investing, venture capital, and positive screens for
companies progressive in the areas of employee relations, consumer safety, and the environment. SCA
participants are among them, and are joining the Campaign for a New TIAA-CREF to demand that the
fund devotes 5 to 10 percent of its assets to such positive models.
"Our hope is that if
indeed TIAA-CREF invests in these companies, it will make them stronger so they can serve as models
for other smaller start up companies and community development schemes," said Neil Wollman,
co-chair of the campaign. "Also, since they are so big and influential, if TIAA-CREF invests in
some of these positive models, maybe other pension funds, or universities, would invest small
amounts that way too."
But TIAA-CREF doesn't choose to see it that way. Although it has
set an outstanding example for negative, or avoidance, screening through its Social Choice Account,
it is resistant to going further out on the social investing limb. In particular the fund managers
assert that the SCA has performed well, and there is no general call for a change in its
management. Further, they charge that the research to identify progressive companies involves
"extremely complicated questions."
"We think it's a little bit nebulous what would
constitute a positive screen, as opposed to a negative screen," said Tom Pinto, Public Relations
Manager at TIAA-CREF. "Our obligation is to provide participants with the greatest return possible
within the investment risk parameters of the fund they chose. Obviously with 2 million
participants, you can't fulfill the specific investment desires of the everyone on an individual
basis."
But what do SCA participants really want? A TIAA-CREF statistical survey conducted
by a third party found that 81 percent of participants supported positive screening, or investing
in companies with outstanding social and environmental records, rather than merely negative
screening.
Participants in the campaign, including Wollman, several New York professors,
and Steve Schueth, president of the Social Investment Forum, met with several of the top officers
of TIAA-CREF in November to discuss their differences. But none of them were prepared for the
resistance they would face.
"They kind of tried to blow us out of the water," said
Wollman. "By agreeing to meet, we thought they were going to negotiate with us in some sense. We
actually had more of a direct confrontation with them, and that really showed the nonresponsiveness
on their part."
In answer to many of TIAA-CREF's arguments, the campaign has a knack for
pulling quotes from the institution's own literature that support their goals. For instance, a
pamphlet states that "in some cases TIAA makes loans to firms directly engaged in socially
beneficial activities, such as... the manufacture of pollution control equipment," exactly the
positive models demanded by the campaign, yet which TIAA-CREF claims they cannot identify.
In response to the "extremely complicated" questions raised by positive screening, the campaign
cited several funds that seem to manage this, including one from a consulting firm that advises for
the SCA. The campaign even enlisted managers from several other funds to offer support to TIAA-CREF
in adding positive screens to its portfolio.
"We've made all the arguments, and clearly
that's not going to sway them," said Wollman. "It's going to take pressure: we have circulated
letters, petitions, but I think the big thing is getting positive coverage in the Wall Street
Journal, Worth magazine, and other places. That's what made them willing to meet for an hour."
The final frontier for putting pressure on TIAA-CREF will be in their pocketbook, encouraging
participants to move their pension funds to more proactive vehicles. Whether participants are
successful or not in founding alternative retirement funds, and the campaign offers the name of an
interested broker to work with, just knowing that their clients could potentially slip away will
put added pressure on TIAA-CREF to respond to their wishes.
"We're not looking to make a
social statement with the SCA account, nor are we looking to bring about any social change,"
asserts Pinto of TIAA-CREF. But the Campaign for a New TIAA-CREF plans to be pushing them in that
direction, potentially investing a very influential $350 million in positive models of social and
environmental responsibility.
http://ares.manchester.edu/department/PeaceStudies/njw/disclaim.html
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