MOST second-graders spent the last school year struggling with multiplication tables and spelling tests. One special group from Connecticut, however, apparently conducted an analysis of corporate lending practices in developing countries. For on December 16, , they took a field trip to Manhattan, where they picketed the offices of J. P. Morgan Chase & Co. for loan policies that supposedly contribute to rainforest destruction and global warming. The sponsor of their expedition, the Rainforest Action Network, was no doubt happy to see these young minds engaged in so much hands-on learning.

This effort to enlist little kids as shock troops in the anti-globalization movement appears to have paid a handsome dividend. Instead of creating an alternative lesson plan on how the availability of capital increases economic prosperity in poor countries, J. P. Morgan adopted a new ten-page environmental policy that will have borrowers reporting carbon-dioxide emissions, ensuring that their wood products don't come from endangered forests, and promising not to hurt "indigenous peoples."

J. P. Morgan is by no means the first company to succumb to pressure from left-wing interest groups. Nor is it the first financial-services company to do so--both Bank of America and Citigroup have implemented similar plans. Yet its capitulation is the most far-reaching, because J. P. Morgan not only decided to alter its lending practices, it also promised to create and lead a coalition of banks that will lobby the federal government for a national policy on global warming, including limits on greenhouse-gas emissions. This group certainly will have its work cut out for it. In 1997, the Senate rejected the Kyoto treaty by a vote of 95 to zip, and prospects for passage have not brightened during the Bush years.

It is this failure to advance an agenda in Washington that has compelled environmental groups to bombard individual companies with everything from seven-year-old protesters to resolutions at corporate conferences. They're pushing an agenda in some of the unlikeliest places imaginable, but they've enjoyed a surprising measure of success. A few years ago, anti-globalization activists were scruffy street hooligans who gathered at World Trade Organization confabs. Today, they're increasingly at home in boardrooms and at shareholder meetings.

Their efforts generally fall under a broad rubric known as "Corporate Social Responsibility"--and please make sure to use those capital letters. Years ago, Milton Friedman famously commented that "the social responsibility of business is to increase its profits." Companies that flourish, after all, boost the wealth of their shareholders, create jobs and opportunities, and provide goods and services that customers want. Those are indeed some pretty big obligations. But activists tend to take the benefits that come from them for granted. When they speak of CSR, they mean something else entirely--the notion that businesses must be Good Citizens who don't do Bad Things, such as make cigarettes, distill alcohol, or spew anything from smokestacks.

Encouraging companies to behave in "socially responsible" ways is one of the investment world's hottest trends. In , assets worth more than $2.2 trillion--or about 11 percent of all those managed by professionals--were tied up in accounts that contained criteria separate from the standard categories of risk and return, according to the Social Investment Forum, a clearinghouse for CSR information. Between 1995 and , overall investments into CSR funds outpaced investment into conventional funds by 40 percent. "The variety, depth, and diversity of things people object to is incredible," says one former state-pension fund manager. For example, the Pax World Funds, founded in 1971 and generally considered the first CSR mutual fund, refuses to invest in defense contractors on the grounds that defense contractors inflict the scourge of war upon humanity.

To the extent that this merely reflects the preferences of individual investors, there's really no problem: Some people don't want to have their money tied up in building missile systems. That's their choice. Yet this type of nitpicking can lead to some odd arrangements. Christian Brothers Investment Services, for example, says it will sink its cash only into enterprises that are consistent with "our collective understanding of what social justice requires." That means no money for companies that make handguns, landmines, or contribute to "the spread of offensive global militarism." The standards for smut are looser: It refuses to invest in "companies deriving at least 50 percent of their revenues" from pornography and strip clubs, according to a statement recently on the group's website. Businesses that earn only 49 percent of their revenues from the skin trade are evidently acceptable.

But Christian Brothers does more than simply boycott selected companies--it also specifically targets certain ones, such as J. P. Morgan, which it views as vulnerable to shareholder pressure. After Christian Brothers introduced a global-warming resolution at a J. P. Morgan shareholders meeting last year, the company agreed to examine the issue. Combined with the Rainforest Action Network's protest, that decision ultimately led to the bank's adopting its new loan policy in April. The dilemma for J. P. Morgan wasn't that shareholders were on the verge of a grassroots revolt against the board: These resolutions tend to attract scant support. Businesses still feel a strong urge to make embarrassing resolutions disappear, as if they were junk lawsuits more cheaply settled out of court than through litigation. So they wind up negotiating with the likes of Christian Brothers and its ilk. The Rainforest Action Network is now polling its supporters about which bank it should target next: Credit Suisse First Boston, Goldman Sachs, Merrill Lynch, Morgan Stanley, Wachovia, or Wells Fargo. Look for Christian Brothers to take a keen interest in the winner. (Or would that be the loser?)

Sometimes the nexus between investors and activists can be, well, a bit shy of socially responsible. In December, Zac Goldsmith and Max Keiser, seasoned left-wing financial experts, announced that they were creating a hedge fund that would profit from declines in Coca-Cola's stock price. Betting against a company is of course nothing new: Investors often short-sell stocks when they think they're overvalued and a correction is coming. Goldsmith and Keiser, however, are actively trying to sabotage Coca-Cola. (Goldsmith, the son of the late British corporate raider James Goldsmith, is worth hundreds of millions of dollars; Keiser is a longtime stockbroker.)

By various means, they're promoting the activities of one Amit Srivastava, an anti-globalization activist who is causing so many headaches for Coke's expansion plans in India that he warranted a front-page news article in the Wall Street Journal on June 7. Writing in the March issue of The Ecologist, a magazine underwritten by Goldsmith's fortune, Keiser described his plan to encourage a worldwide boycott of Coke, watch its stock price drop, make money through the hedge fund, and then use the proceeds to compensate "the victims of the company's greed." The "victims" who will receive this money, he writes, are actually left-wing groups agitating for their own political and social causes.

"Like everything else, investing is now politicized," says Steven Milloy of the Free Enterprise Action Fund, a mutual fund that he and his colleague Tom Borelli launched in March. They plan to become activist shareholders who will protest global-warming resolutions and anything else that undermines corporate profitability. At J. P. Morgan's annual meeting on May 25, Borelli personally challenged CEO William B. Harrison over the company's new environmental policy. "Perhaps litigation reform would be a nice area for your lobbyists to be focused on," he said, since frivolous lawsuits cost the company hundreds of millions of dollars. His statement didn't accomplish anything substantive, but it did make a point--and the Free Enterprise Action Fund promises to be back. "Over time, we're going to provide not just a financial return, but an ideological one as well," says Milloy.

The advocates of Corporate Social Responsibility lately have taken to arguing that their policies are good for the bottom line--that green is green, so to speak. "They don't just serve social interests, but also corporate interests," says Tim Smith, chairman of the Social Investment Forum. "Companies see green policies as part of their long-term business strategies."

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