Investors may be indirectly holding shares of an outfit connected to the worst oil spill in U.S. history even if they purposely chose equity funds that specialize in companies friendly to the environment.
Until May 31, a major holding in the Dow Jones Sustainability Indexes was BP (BP), the owner of the well spewing 12,000 to 19,000 barrels of oil per day into the Gulf of Mexico. BP shares, which have fallen 38 percent since the oil rig exploded on Apr. 20, made up 1.95 percent of the market cap of the DJSI World index until it was removed.
Several mutual funds specializing in socially responsible investingâ??which almost always includes environmental factorsâ??also owned or continue to hold BP.
According to Bloomberg data as of Mar. 31, two Legg Mason (LM) Social Awareness funds owned a combined 112,412 shares of BP with a total value then of $6.4 million. The company did not respond to a request for comment. Wells Fargo (WFC) declined to discuss 2,449 BP shares held in its Social Sustainability Fund on Mar. 31.
Pax World, which calls itself a "sustainable investing" manager, sold 8,000 shares of BP stock on Apr. 29 in response to the spill. However, Pax World President and Chief Executive Officer Joe Keefe says the company had already been reviewing its BP holding after the Occupational Safety & Health Administration in October 2009 issued its largest fine ever, $87.4 million, for safety violations. OSHA's investigation followed an explosion in March 2005 that killed 15 workers at BP's refinery in Texas City, Tex.
"Our analysis was leading us to the conclusion that they had serious safety management problems," Keefe says.
Some other socially and environmentally conscious fund managers sold BP shares months before the disaster. A spokeswoman for Walden Asset Management says it sold its entire position in BP on Feb. 16, "due to concerns about a continuing pattern of health and safety violations."
Some socially responsible investors continue to hold the stock.
Mutual fund manager MMA Praxis is still permitting its portfolio managers to buy BP despite the spill. Like other socially responsible investors, MMA Praxis emphasizes BP's role as a leader in alternative energy and other initiatives.
"Over the years, [BP] committed itself to high standards," says MMA Praxis' Director of Stewardship Investing Mark Regier. For now, he's reserving judgment, while as a shareholder urging BP to respond appropriately to the spill. "We need to let the investigations run their course," he says.
The U.S. Justice Dept. said on June 1 it was investigating the causes of the oil spill. BP has argued with other companies over who is to blame for the spill. While BP owns the well, Transocean (RIG) owns the rig and Halliburton (HAL) was a contractor operating the rig.
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