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Dear Fellow
Shareholders:
The year ended
July 31, 2009, is one most investors would like to forget. For the twelve-month
period the Standard & Poor’s 500 was down 20%. This dismal performance
was matched in other parts of the world. In Japan the Nikkei was down 19.5%
and in Europe, the MSCI Europe index was down 25%. This would be troubling
enough, but added to this is the volatility factor. Each of these regions of
the world was actually much worse six months ago, and each has rallied in
excess of over 45% since their lows.
What is an
investor to do? The year proved that our global system of finance deeply
affects the day-to-day lives of individuals. The phrase “sophisticated
investment vehicles” gets bandied about by those on Wall Street who earn
their fortunes trading credit default swaps on rapid trading platforms, but
to the millions who lost their homes, lost their jobs, and lost hope for
their children, these vehicles were just irresponsible tricks to siphon money
out of the real economy and into the pockets of a few.
Last July 31 we
were in the midst of an election to select the 44th President of the United
States. On that date, Quinnipiac University published results from their most
recent poll. Their report indicated that most Americans were
concerned about energy prices, the war in Iraq, and the upcoming election.
They were not thinking about a global financial meltdown of cataclysmic
proportions.
The month of August saw markets holding fairly steady, but
then September hit. That month U.S. markets saw a decline of almost 9%,
contributing to a loss of almost 22% for the year ending September 30. The
cause had nothing to do with either fluctuations in the price of oil (which
we recently learned was caused by speculators and not supply and demand) or
the war in Iraq. The cause, we discovered, was that there was far too little
regulation of speculators on Wall Street and no regulation of “sophisticated
investment vehicles.”
By late March 2009 we began to see signs of hope. They
were fragile, mostly just indicators that the rate of decline was slowing,
and not much to cheer about generally. But with the markets so battered, it
was enough to bring some investors back to the stock market By April real
signs of improvement began. By April 15, 2009, Goldman Sachs issued a statement that it
believed it would be able to return bailout funds shortly. Wells Fargo,
another major recipient of TARP money, announced earnings that far exceeded
analysts' expectations due to strong increases in its lending business. The
market had been anxiously awaiting any sign that our banks were improving,
and this earnings report was taken as a broad sign that the frozen credit
markets may finally be thawing. The bull market had begun.
Responsible
investors were absolutely correct in calling on Congress and thought leaders
to address predatory lending. Had our calls been heeded it would have removed
the peg that failed, leading to this mess. But there is a more important lesson
to be learned. Disclosure and transparency are essential to maintaining a
competitive and functional economy. The events of the past year were largely
precipitated by practices not widely known and nowhere tracked. And the same
can be said for the climate crisis and continuing widespread human rights
abuses. This cannot be allowed to go on.
At Domini
Social Investments we have a long history of pushing for greater disclosure
and have seen tremendous effect. But more needs to be done. While social investors
have opened up many company practices, there is no systematic set of
regulations or even standard industry practice in the United States to allow
stakeholders to accurately measure what a company adds or detracts from
society.
We believe that
the Global Reporting Initiative is the best model in place and have been
asking companies to follow its guidelines, but voluntary reporting is not
sufficient. We would like to see government recognize that the events of the
past year were exacerbated by the secrecy financial institutions were allowed
to operate under. We hope that a broad set of new mandatory disclosure
requirements, including the social and environmental impact of corporate
practices, will be instituted, and after many years, we believe our voices
are now being heard.
Thank you for
your continued support of socially responsible investing and of Domini Social
Investments. We appreciate the opportunity to serve you.
Very truly yours,
Amy Domini
amy@domini.com
1046
09252
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