Social Index Fund Dumps Wal-Mart Shares
The largest “socially responsible” mutual fund sold its shares of Wal-Mart Stores Inc. (WMT), citing “sweatshop conditions” at overseas factories run by vendors to the world’s biggest retailer.
KLD & Co. removed the Bentonville, Ark., retailer from its Domini 400 Social Index on Feb. 1. The $1.4-billion Domini Social Equity Fund, which tracks the index, sold the shares, the Boston firm said.
Wal-Mart hasn’t done enough to ensure that vendors meet “adequate labor and human rights standards,” KLD said in a statement.
KLD provides research for institutional investors on how companies treat employees and the environment.
“Based on our discussions with investment advisors and investors, this was a company that they were not buying” because of concern about factory conditions, said Peter Kinder, president of KLD. “We’re not trying to lead the market. We’re trying to reflect what social investors are buying.”
A Wal-Mart spokesman said the company tries to do business only with factories that are run legally and ethically.
“It is very important to us to be seen as socially responsible to our customers and our investors,” said Wal-Mart spokesman Rob Phillips. “We would take issue with those that would say we are not.”
Domini Social Investments, which runs the mutual fund, was founded by Amy Domini, who also was a founder of KLD. She sold her stake in KLD about a year ago and now is a client of the firm.
KLD said it based its decision on several factors, including a report in July that Wal-Mart Canada purchased products made in Myanmar, a military-controlled country that has been accused of committing human rights abuses.
KLD also cited a Business Week article in October about Wal-Mart’s involvement with a so-called sweatshop in China and said it was disappointed with the company’s decision to not start independent monitoring of its vendors’ factories in Central America.
Although KLD removed Wal-Mart from the index in February, the firm waited to make the decision public until it had completed a report on its action, said KLD spokeswoman Anjali Gupta. The firm released the 41-page report Thursday.
As of Jan. 31, Wal-Mart was the third-largest company in the Domini 400, accounting for 3.9% of the index’s weight.
The Domini fund is down 16% in the last 12 months and 3.9% for the year. The Standard & Poor’s 500 index, a gauge of the broader market, is down 11% in the last 12 months and 2.4% in 2001.
The Domini index and fund include companies such as Coca-Cola Co. (KO), Cisco Systems Inc. (CSCO) and Reebok International Ltd. (RBK). Wal-Mart had been a part of the index since the benchmark was established in 1990.
“There’s no financial criteria involved” in picking stocks for the index, said Sigward Moser, president and managing principal at Domini Social Investments in New York.
