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Fund manager makes pitch for conservative investing

A new investment group feels that corporate America is not conservative
enough–and it has begun a campaign to use the tactics of “socially
responsible investing” to achieve conservative goals.

Tom Borelli, co-managing partner of Action Fund Management, made the pitch
for politically-conservative investment at the Republican State Convention
in San Jose last Saturday. Speaking at a session held by the conservative
Club for Growth, he said that something must be done to combat decades of
liberal groups’ pressuring of corporate boards.

“The Right, we write money out of our own checkbooks,” Borelli said. “The
Left uses other people’s money. And corporations are the biggest supply of
other people’s money.”

Indeed, Borelli is seeking to tap into long-standing conservative anger over
the “socially responsible investing,” or SRI, movement. Such funds use
resolutions and other types of shareholder pressure to get corporations to
take–or abandon–certain policies.

“For very little investment, they have had a massive effect on corporate
boardrooms because the rest of us are too busy making money,” said Shawn
Steel, former California Republican Party chairman, during his introduction
for Borelli. “We will be fighting with capitalism to save capitalism.”

His partner, Steven Milloy, said they are seeking new investors for the
year-old Free Enterprise Action Fund, which currently has $5.3 million under
management. Milloy told the Capitol Weekly that they see California as
particularly ripe ground.

“The Orange County crowd ought to be pretty interested in what we’re doing,”
Milloy said. “And there’s an enclave of free market libertarians in San
Francisco.”

In his presentation, Borelli told a kind of David and Goliath story, with
their tiny fund lined up against 200 SRI funds on the Left. These firms
control $35 billion in assets, Borelli said, dominated by Domini Social
Investments, with over $1.8 billion.

Milloy and Borelli have long tried to be thorns in the side of the SRI
movement, said Toben Dilworth, a spokesman for the San Francisco
environmental group Rainforest Action Network. Borelli is the former manager
of corporate scientific affairs for Philip Morris. He began working on the
concept of the Fund three years ago with Milloy, who is best known as an
author who fights against what he sees as junk science around issues such as
global warming.

Dilworth also noted that Milloy is a regular FoxNews commentator and has
affiliations with several think tanks, such as the Cato Institute and
Competitive Enterprise Institute. These organizations get funding from Exxon
Mobil, he said, meaning that it should surprise no one when Milloy claims
global warming does not exist.

While left-leaning funds are usually labeled as being part of the SRI or
“corporate social responsibility” (CSR) movement, Borelli referred to it as
the “anti-business movement.” However, Adam Kanzer, director of shareholder
advocacy at Domini, said that his fund’s success has come from keeping
long-term business goals in mind, especially around the issue of global
warming.

“If you’ve got a problem that both banks and insurance companies are worried
about, I think it’s pretty safe to say that it’s a real problem,” Kanzer
said.

If the Action Fund grows or spawns competitors, it could potentially throw
another factor into the increasingly politicized investment climate in
California.

Last year, a coalition of groups floated the idea of a “shareholder
protection” initiative that would force corporations to get permission from
a majority of shareholders before giving money to California political
campaigns. While sponsors appear to have dropped the initiative idea, state
Sen. Joe Dunn, D-Santa Ana, his proposed shareholder protection legislation.

Another target of the fledgling conservative investment movement is public
employee pension funds. California’s treasurer–and likely Democratic
gubernatorial nominee–Phil Angelides has been particularly active in pushing
for these funds to divest of countries like Sudan. Meanwhile, groups on the
Right have repeated charged him with allowing investments in companies they
say do business with state sponsors of terrorism, a charge the Angelides has
vehemently denied.

The SRI movement dates from efforts in the 1980s to get companies to divest
of South Africa’s Apartheid regime. However, Borelli said, such practices
have had much more recent, less publicized effects. For instance, he claimed
a coalition of groups recently pressured several financial services firms
not to fund a trade association that would have pushed for social security
privatization. Other examples include General Electric being pressured to
fight global warming and Coca-Cola giving money to the Mexican American
Legal Defense and Education Fund.

“The Left is making public policy through corporations,” Borelli said.
Borelli says this two-decade head start has given liberals a major
advantage. He cited a recent Wall Street Journal article which defined
shareholder activism as “transforming companies into liberal lobbyists.”

Meanwhile, he added, the Free Enterprise Fund is the “first” on the Right.

The company follows a “conservative” investment strategy. It is designed to
mirror the S&P 500, with investments in 400 of these firms. The Fund, which
celebrating it’s one year anniversary on March 1, delivered a 4.4 percent
return last year.

But this conservative return is offset by the ability to propose changes in
corporate policy. Borelli and Milloy have already filed numerous shareholder
resolutions. One calls for GE to explain why it is advocating global warming
policies that go against its economic interests; another urges Charles
Schwab to push for the flat tax. The group also plans to advocate for
litigation reform and against the Kyoto Protocol.

For the time being, however, those in the SRI movement seem to view the
Action Fund as little more than a distraction.

“What other $5 million investment fund is getting press?” Domini’s Kanzer
said. “They don’t even have a ticker symbol.”


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