Pax World believes that companies that are committed to having a positive impact on the communities in which they operate tend to be better-managed companies. Not only are these companies better able to avoid reputational and legal risks that can result from negative community relations – positive community relations are often an indication of quality management. In fact, a 2008 study by the Boston College Center for Corporate Citizenship found a significant correlation between companies with strong financial performance and those with charitable programs that are focused on local communities.1
Pax favors companies that publicly report on programs and policies designed to support and give voice to local communities. Pax generally avoids investing in companies that have negative community relations histories or where there is no evidence that community concerns are being addressed.
Pax recognizes that community challenges vary greatly depending on industry, country of operation and the size of a given company. For banks that finance international infrastructure projects, adequate consideration of the impacts that project financing may have on local communities may be an area of concern. For companies in the industrial and materials sectors, community concerns may relate to noise, dust or pollution. For international mining companies, community displacement can be a key concern. Naturally, companies respond to these various challenges in different ways. For a company with a large labor force in South Africa, HIV education and treatment programs are important. Where project finance is a concern, bank participation in the Equator Principles2 — industry standards established in 2003 that require participating banks to assess, among other things, the social impacts of their lending decisions — is a positive indicator.
By including community issues in its investment decision making process, Pax believes it can add value for its shareholders and promote corporate stewardship. Pax World mutual funds may invest up to 5 percent of fund assets in community development financial institutions that target underserved regions. These investments may include micro-credit or micro-finance institutions that advance women’s equity or sustainable development. What’s more, through its Global Citizen Program, Pax shareholders have contributed more than $1 million in support of Mercy Corps, a leading relief and development organization.
The issues highlighted above are illustrative and do not necessarily reflect the full range of community issues Pax World may consider in analyzing a particular security for investment.
1Nunnes, Paul. Presentation. Boston College Center for Corporate Citizenship. Chestnut Hill, MA. April, 2008. Accessed 2/4/2009 (http://www.accenture.com/NR/rdonlyres/DC02B745-DD48-4C2E-8EBC-FB5F85D6D93A/0/ALookatHighPerformanceandCorporateCitizenship10Truths2008.pdf)