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Social Investing and the Law of Trusts, 79 Mich. L. Rev. 72 (1980)


In October 1979 the United Auto Workers negotiated a three year labor contract with the Chrysler Corporation containing a provision that up to ten percent of new pension contributions would be invested in "socially desirable projects." The agreement defines these investments to include residential mortgages in areas where UAW members live, as well as investments in nursing homes, nursery schools, health maintenance organizations, and "other socially desirable projects." The union also obtained the right "to recommend that pension trustees not invest in up to five companies that conduct business in South Africa."' In Wisconsin and elsewhere there has been growing pressure to restrict large portions of the pension funds- of state employees to investments in enterprises and mortgages in the state.

These developments illustrate the increasing pressure on pension plan sponsors and fiduciaries to engage in what is called "social investing." For the last year or two there has been hardly a month in which the industry journal, Pensions and Investments, has failed to carry some story about the demand on the part of a labor union or other group for social investing. As the Chrysler agreement indicates, these efforts have begun to get results. Similar pressures have been directed for an even longer time at the trustees of university endowment funds; some universities have yielded to those pressures and have begun to utilize noneconomic criteria in the design of their portfolios, particularly with regard to the securities of companies doing business in South Africa.

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