By Thomas Croft
Author, Up From Wall Street: The Responsible Investment Alternative

Question: What do you mean by the responsible investment alternative?

Croft: I began working with [United Steelworkers President] Leo Gerard about 15 years ago developing a strategy to figure out where our pension money was going. We’re talking about $24 trillion in pension funds and institutional investments. What we found was that our assets were being invested in ways that helped destroy our jobs. Those pension funds were being invested in things like sweatshops overseas, where people were being exploited. The products were being shipped back here to this country resulting in layoffs—sometimes of the same beneficiaries whose pension funds were making those investments.

Over the past few years we talked to some “worker-friendly” investors and found that many of those investors were investing in ways that respect workers and support workers in collective bargaining. These worker friendly investors are increasingly investing in green jobs. Those include green construction, efficient transportation, windmills. Across the board, we found many examples of our money being invested in tremendously important, productive and profitable strategies.  

Question: Can responsible investing help rebuild our economy? 

Croft: There are some really great investors across North America who are out there investing in ways that save jobs and create new jobs. These are the kind of investment strategies the Obama administration should look toward as a partner when they’re pulling everyone around the table for this jobs summit.

We need to go beyond the fiction that if we simply increase our gross domestic product that we’ll create good jobs. We had some of those strategies during the Clinton years and we saw the effects of free trade and some of the other problems we had in the economy. What we’re trying to say in the book is that there are longer-term investment strategies and we list some of those strategies in the book. Our investment assets can be invested in ways that do bring good returns, but they also will help to do well and do good.

Question: What are some examples of good investments going on now?

Croft: One of the investments is at the tip of Roosevelt Island [in New York]. The pension fund partnered with a development company to purchase an abandoned hospital and built new housing units that were very environmentally sustainable. It was built union and they did everything right.

It’s time we begin to take our money back and invest in ways to rebuild our economy, to build up companies and not tear them down, to invest in real housing, real workplaces and not in ways that are risky. It’s time for a more responsible approach to the stewardship of our retirement assets and all the institutional assets we own.

Question: What needs to be done to encourage more responsible investing?

Croft: The first thing we need is financial reforms on Wall Street. Mega vulture investment funds are invading Europe and they’ve been buying companies in the United States. They’re not investing in companies for the long run. We still do not have financial reforms so the same conditions that existed in the marketplace last year, which led to so much systemic risk still exist. The fact is many of those investors are unregulated and there’s no transparency. There should be some stiffer monitoring of their actions. There shouldn’t be this shadow banking system and if we get rid of the shadow banking system, then we get rid of the shadow bank robbers.

Question: What role should pension fund trustees play?

Croft: Pension funds and other institutional funds have to really take actions that will ensure more responsible investments. My book tells trustees how to talk to back to experts and really develop a truth serum to determine how their money is being invested. The reality is that many of the pension funds did not understand what they were investing in and they ended up going with the herd. A lot of those investments were invested in very questionable strategies.

Thomas Croft is the executive director of the Steel Valley Authority, which assists companies in crisis on workplace retention, growth and buyout strategies. It also works regionally and nationally on innovative strategies to revitalize communities. AFL-CIO Now senior writer James Parks interviewed Croft about his new book, Up From Wall Street: The Responsible Investment Alternative.