I am quoting below a piece of a newsletter that I receive monthly from the Greenleaf Financial Group, an organization whose values I support and whose opinions on financial matters I can trust. I often go to their site for information and guidance when making financial decisions.

While I find the behaviors described in their article to be alarming, I don't really find them surprising. I do wonder, though, how much power the organization has over the companies that they invest in? It would do them well to develop a set of criteria for analyzing their investments on moral grounds as well as financial grounds--that alone would be persuasive to companies to shape up a bit.

Obviously it doesn't serve the Gates Foundation well to lose money by investing in weak companies, but perhaps a portion of their capital could also be used to help out companies that *want* to do better in a moral sense... Beyond a lack of meeting of the minds between the business folks and the idealistic folks, there is also a fundamental issue of education--neither side is actually educated in the facts and the realities that encompass and motivate the other side. Denial is king here for both sides, and changing this wouldn't be all that difficult for Gates. Even in the world of idealists, money has power--it buys expensive medicines for people who can't afford it, it pays for kids to go to school *and* eat lunch, and it pays for the real-world things that people need when they help out in a non-profit setting (does doing good always have to mean doing it for free--for most who want to do good, they simply *can't* do it for free full-time--rent must be paid at some point).

To be picky about the allocation of funds puts MAJOR pressure on companies that want those funds. Here's the thing, for those of you who aren't familiar, stocks are like auctions. The more people want to buy ownership in the company, the more the stocks (ownership) cost. People or businesses that have a lot of ownership in a company also have a lot of votes in the shareholder's meetings, and they usually have some power when it comes to encouraging the company to do things--after all, if the shareholders all start selling their shares, people will think bad things about the company, the stock values drop, and the capital that that organization has to work with is less than before. In other words, this is a VERY BAD THING for the companies. And in more words, this means that the Gates Foundation has indescribable amounts of investing power which can make or break companies and which can be used quite persuasively.

The article that's mentioned in the newsletter:
L.A. Times article about Gates Foundation

The newsletter article:

The Failures of the Gates Foundation

When the LA Times reported that more than 40% of the Gates Foundation investments contradicted -- if not counteracted -- the foundation's stated mission, the Gates Foundation quickly announced they would review their investments. A few days later, they reversed their statement, suggesting that the only guideline for investment decisions is maximizing potential return.

Why is this so problematic? At more than $60 billion in assets, the Gates Foundation is the largest in the world and, as such, has the potential to literally change the world. The foundation's assets are, in fact, larger than the gross domestic products of 70% of the world's nations. To preserve its tax-exempt status, the foundation must grant at least 5% of its assets every year. The other 95% is invested.

Simple math tells us that if the 95% piece works against the 5% piece, then there is little hope for the goals of the 5% piece.

Indeed, the Gates Foundation has contributed $218 million to polio and measles immunizations and research worldwide. But it has $423 million invested in Exxon Mobil, Chevron, Royal Dutch Shell, Eni, and Total of France, which are blamed for numerous health and environmental degradations from oil spills, as well as toxic byproducts such as benzene and mercury from unregulated, improper oil development and resultant pollution. Respiratory illnesses, chronic health problems, and cancer found in humans throughout these regions are lowering immunity, giving rise to the very diseases the foundation is working to prevent.

If only the Gates Foundation would use its entire endowment in support of its mission. Besides stock screening, foundations of all sizes who own companies can insist on better corporate practices through proxy voting and shareholder engagement. Foundations are granted tax exempt status not to maximize return, but because their assets will be used to improve the world. As a fiduciary, their responsibility is clear. If they are only doing this with 5% of their assets, then perhaps only that 5% should be tax exempt.