Faith-Based Organizations Issue a Holiday Investment Advisory: Inflated Commodities May Contribute to World Hunger

Citing price volatility as a potential catalyst for another "food bubble," ICCR urges CalSTRS and other large institutional investors to reconsider commodities markets.

NEW YORK, Nov. 11, 2010 /PRNewswire-USNewswire/ -- Last spring, members of the Interfaith Center on Corporate Responsibility (ICCR), a coalition of nearly 300 faith-based institutional investors got the attention of top U.S. banking institutions with some frank shareholder feedback: risky practices such as complex derivative trading, may indirectly contribute to global poverty. Understanding too well the consequences of unstable financial markets on the world's most vulnerable communities, for 40 years ICCR members, many with on-the-ground missions in developing nations, have been raising their voices in corporate boardrooms on behalf of the world's poor. At issue now is the excessive speculation in U.S. food commodities markets that cause the spikes in global food prices that in turn can lead to famine.

"For years ICCR members have been concerned about the social purpose of financial activity and have advocated for an open, transparent and well-regulated financial system," said Cathy Rowan of the Maryknoll Sisters. "During the month of July the price of wheat increased by 60%.  When excessive speculation causes price volatility, we are in danger of forgetting that staples such as wheat and rice are not just commodities but necessities."

In June, the California State Teachers Retirement System (CalSTRS) announced their intention to invest $2.5 billion in commodities markets. In response, a coalition of 37 organizations representing faith-based institutional investors, agricultural and energy groups and other NGOs wrote a letter to the fund outlining their concerns and encouraged them to rethink their investment strategy. "We were very concerned that if a large fund like CalSTRS shifted part of their portfolio into commodity markets, other institutional investors might follow suit," said David Kane of Maryknoll's Office of Global Concerns. "The food and energy bubbles of 2008 that drove 130 million people into hunger can be traced back to commodities speculation."

According to a report from the UN Special Rapporteur on the Right to Food, "The 2008 food price crisis was unique in that…it was characterized by massive amounts of novel forms of speculation in commodity derivative markets."

At the CalSTRS board meeting last week where members of the coalition spoke out, it was decided to substantially reduce the investment to a pilot program of $150 million over the next 18 months, during which time CalSTRS will monitor returns as well as press and research on the societal impacts of commodity speculation.

"We are very heartened by the CalSTRS decision," said David Frenk of Better Markets Inc. who represented the coalition at the board meeting, "and while not every board member agreed fully with every argument we made, there was sufficient concern among the board as a whole to drastically alter their original strategy. We praise CalSTRS for their responsiveness and leadership on this vital issue."

Kate Walsh of the Tri-State Coalition for Responsible Investment said, "As faith-based and responsible investors who work directly with marginalized communities around the world, we take our participation in the global economy very seriously. We are encouraged that CalSTRS understood their responsibility, and are hopeful other investors will follow their example and think twice about commodity investments."

About ICCR (www.iccr.org)The Interfaith Center on Corporate Responsibility is a membership organization of institutional investors who work in coalition to promote ethical business practices across a wide variety of social justice issues.

SOURCE Interfaith Center on Corporate Responsibility