Socially Responsible Fund Family Fined For Buying Socially Irresponsible Stocks
July 31, 2008
Apparently the tree huggers at the Securities and Exchange Commission were a little annoyed when they noticed that holdings in certain Pax Word socially responsible funds didn't seem up to the touchy-feely earth-friendly marketing hoopla on Pax World's site, according to this Wall Street Journal article:
"Pax World Management Corp., one of the best-known 'socially responsible' investment firms, settled Securities and Exchange Commission charges that it violated its own rules against purchasing shares in companies involved in such businesses as defense, alcohol, tobacco and gambling.
The settlement -- in which Pax agreed to pay a $500,000 fine -- marks the first time the SEC has taken action against a purportedly socially responsible fund for failing to live up to its mission. The SEC said it uncovered the problems in a routine examination.
...The SEC alleged that, from 2001 through 2005, Pax World Growth Fund and Pax World High Yield Bond Fund failed to screen 41 stocks and bonds at all to see if they met socially responsible criteria.
Of those securities, 10 violated the funds' written restrictions. Regulators didn't reveal the securities' names, but Portsmouth, N.H.-based Pax said they included Anadarko Petroleum Corp., an oil and natural-gas exploration company; Darden Restaurants Inc., which operates a chain with its own micro-brewed beer; and Jacobs Engineering Group Inc., a defense contractor."
We've complained in the past about some socially responsible fund portfolios being anything but, and while there are certainly higher crimes and misdemeanors in the world of investing, we're glad to see the marketing fluff produced by socially responsible funds finally come under under some scrutiny. Call us old fashioned, but when Pax world says their investment philosophy include so-called sustainable investing, "the full integration of environmental, social and governance (ESG) factors into investment analysis and decision making", we don't expect to see the number one holding on 6/30/08 of the Pax World Value Fund (PAXVX) to be Whiting Petroleum Corp (WLL), a company involved in "exploration, development, exploitation, and production of oil and gas primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast, and Michigan regions of the United States" that was busted by the EPA and had to pay a fine under the clean water act for spilling oil into an tributary of Whitetail Creek in North Dakota.
Socially Responsible Fund Family Fined For Buying Socially Irresponsible Stocks
Apparently the tree huggers at the Securities and Exchange Commission were a little annoyed when they noticed that holdings in certain Pax Word socially responsible funds didn't seem up to the touchy-feely earth-friendly marketing hoopla on Pax World's site, according to this Wall Street Journal article:
"Pax World Management Corp., one of the best-known 'socially responsible' investment firms, settled Securities and Exchange Commission charges that it violated its own rules against purchasing shares in companies involved in such businesses as defense, alcohol, tobacco and gambling.
The settlement -- in which Pax agreed to pay a $500,000 fine -- marks the first time the SEC has taken action against a purportedly socially responsible fund for failing to live up to its mission. The SEC said it uncovered the problems in a routine examination.
...The SEC alleged that, from 2001 through 2005, Pax World Growth Fund and Pax World High Yield Bond Fund failed to screen 41 stocks and bonds at all to see if they met socially responsible criteria.
Of those securities, 10 violated the funds' written restrictions. Regulators didn't reveal the securities' names, but Portsmouth, N.H.-based Pax said they included Anadarko Petroleum Corp., an oil and natural-gas exploration company; Darden Restaurants Inc., which operates a chain with its own micro-brewed beer; and Jacobs Engineering Group Inc., a defense contractor."
We've complained in the past about some socially responsible fund portfolios being anything but, and while there are certainly higher crimes and misdemeanors in the world of investing, we're glad to see the marketing fluff produced by socially responsible funds finally come under under some scrutiny. Call us old fashioned, but when Pax world says their investment philosophy include so-called sustainable investing, "the full integration of environmental, social and governance (ESG) factors into investment analysis and decision making", we don't expect to see the number one holding on 6/30/08 of the Pax World Value Fund (PAXVX) to be Whiting Petroleum Corp (WLL), a company involved in "exploration, development, exploitation, and production of oil and gas primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast, and Michigan regions of the United States" that was busted by the EPA and had to pay a fine under the clean water act for spilling oil into an tributary of Whitetail Creek in North Dakota.