Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 8012 In this environment, real change requires ad- dressing (i) fundamental governance structures, (ii) central bank policies, (iii) government credit, spending, regulation and enforcement as well as (iv) actual policies related to transparency of tax payer resources, respect for individual privacy and fairness in the application of the law. One of the reasons I welcome the opportunity to develop a Solari Screen, is that I can use the Solari Report to bring transparency to the deeper issues. Consequently, the two efforts reinforce each other. Real transparency is essential to the successful ap- plication of ESG criteria. As Robert Axelrod has described in The Evolution of Cooperation, indi- viduals and markets will shun criminal players if they can see them clearly. In other words, when we create the conditions of real transparency, then investors will be more likely to shun indi- viduals and companies that behave immorally, unethically, or illegally. Hamilton Securities & US Pension Funds When I started Hamilton Securities Group in 1991, I was persuaded that new technology would have a dramatic impact on the circula- tion of equity capital. We could then finance places and neighborhoods with private equity rather than government investment. Part of the challenge was to determine how digital and information technology could benefit the daily economics of a family, a business, or a munic- ipality. To do so, we started to build databases of government credit and investment as well as software tools, to help us analyze public and pri- vate investment at a county and community level and to simulate opportunities to improve perfor- mance on both taxpayer and private investment returns. During this period, we entered into a joint ven- ture with the U.S. Department of Labor to build a database of pension investments that integrated ESG criteria, including economically targeted in- vestments (ETIs). The joint venture included an advisory board of top state, corporate, and union pension leaders. One of our goals was to help the pension leadership make recommendations to the US Department of Labor regarding policies related to ETIs. As we listened to more of their strategic concerns, another goal was to under- stand what could ensure that the US pension funds achieved the returns necessary to provide for baby boomer retirements, particularly in light of the globalization underway. One of our conclusions was that government policies needed to change if communities were to be successful – indeed there was an extraordinary opportunity if they did, including for the pen- sion funds. Without such changes, ETIs would simply make matters worse. If government pol- icies were designed to ensure that communities failed, asking the pension funds to lose money in those places was only going to make matters worse. If we intend to destroy a local economy, there is no point destroying additional retirement savings along with it. I later described this in an article published in 2002: One response to negative government investment returns is to pressure private investors and lend- ers to step into the breach in communities with economically targeted investments. We need to be careful about asking private in- vestors to dispense with performance standards to subsidize low or negative returns on govern- ment investment where that avoids dealing with the real problem and even compounds the real problem. Often the real problem is not that some investors are optimizing too much. Rather, it is either that government is optimizing too little, or some private investors are manipulating government investment and central banking policy to lower total economic returns in order to help them- selves inflate their private investor returns in questionable or criminal ways, frequently at the expense of other private investors. Total economic returns are low or negative. The solution may not be to invest more capital at the situation or to take reduced returns. The solu- “ One of the reasons I welcome the op- portunity to develop a Solari Screen, is that I can use the Solari Report to bring transparency to the deeper issues. Consequently, the two efforts reinforce each other. ” I. Investment Screening: Can We Filter for Productive Comapnies?