Socially responsible Pax seeks investment ‘flexibility’

The Portsmouth-based Pax World Funds wants shareholders to agree to move away from the mutual funds’ 35-year-old “fundamental” restrictions in social investment policies, opting for more “flexibility” and a wider range of social criteria.

If the proxy sent out last week is approved, the granddaddy of socially responsible investment funds will no longer automatically exclude companies that sell alcohol or run gambling operations. It also will soften its criteria against investing in defense contractors and tobacco companies. In addition, the company would ease restrictions on its funds – particularly its high-yield fund – taking part in a number of more profitable, if more risky, forms of investment vehicles.

Citing federal law, Joe Keefe, chief executive officer of Pax World Management Corp. – investment manager of Pax World Funds — would not comment on the changes. The proxy statement released Aug. 4 said that the “modernized modified social screening process will allow a more proactive and engaged approach to socially responsible investing and will make the social screens more relevant and meaningful in a changing world.”

The Q & A section of the proxy focused primarily on the elimination of the “sin stock” screens of alcohol and gambling. While the company was not planning on investing in casinos, eliminating such “zero tolerance” policies would enable it to make investment decisions based on a “company’s entire social responsibility profile,” it said, including a number of factors that were not considered before.

Among the new factors are climate change, sustainable development, global human rights standards and non-discrimination based on sexual orientation. The firm also would formalize cooperate governance, community and product integrity screening policies.

Ending the absolute restriction against alcohol will enable the company to consider investing again in Starbucks, which Pax reluctantly pulled out of in March 2005 after the retailer started offering spiked coffee.

Currently, the funds can’t invest in companies that “to any degree, engaged in manufacturing defense or weapons-related products or companies that derive revenue from the manufacture of liquor, tobacco and/or gambling products.”

If approved, the new policy would “avoid investing in companies that we determined are significantly involved in the manufacture of weapons or weapons-related products, the manufacture of tobacco products, that are involved in gambling as a main line of business, or that engage in unethical business practices.”

The proxy adds, “Companies in which our Funds invest do not necessarily meet all of Pax World’s social and environmental criteria, nor is any company perfect when it comes to corporate responsibility.”

If the proxy passed, Pax also would be easing restrictions – particularly in its high-yield fund — against investing in hedge funds, real estate securities, commodity contracts, purchasing securities on margin or investing in companies less than three year old, and in oil, gas and mineral exploration.

Pax World has $2.2 billion in total assets under management. – BOB SANDERS