(November 24 – 10:40 ET) – Ethical Funds Inc. has joined forces with the Presbyterian Church (USA) and several other socially responsible investment institutions in the United States., in filing a shareholder resolution concerning lending practices at Citigroup Inc.

Ethical Funds describes predatory lending in the U.S. as the dark side of sub-prime lending. Sub-prime lending becomes predatory lending when it involves abusive practices, excessive fees and interest rates, hidden costs, unnecessary insurance, and deceptive use of balloon payments. The Coalition for Responsible Lenders says these practices are stripping the equity from the homes of people in low-income communities. Comprised of some 80 organizations with over three million members, the Coalition was established in 1999 to promote and safeguard the principles of fair lending.

The shareholder resolution will be addressed at Citigroup’s annual general meeting next spring. Citigroup Inc. is the fifth largest sub-prime lender in the U.S. and it is in the midst of acquiring the second-largest player in Associates First Capital. Ethical Funds and others are worried that Associates has engaged in predatory lending.

Ethical Funds says the resolution comes after the extensive dialogue between the Presbyterian Church and Citigroup, and calls for the company to develop policies to ensure that no employee or broker engages in predatory lending practices. “By participating in this initiative, Ethical Funds becomes the first mutual fund company in Canada to file a shareholder resolution that addresses the link between socially responsible business practices and company reputation,” said Robert Walker, vice president, SRI Policy and Research. “To our knowledge this is the first time a mutual fund company has filed a resolution of any kind.”

“Ethical Funds regards socially responsible investment as more than the application of social and environmental screens for the purpose of constructing investment portfolios,” said Walker. “Our investors have told us they want us to use our voice as a shareholder to encourage companies to adopt socially responsible business practices.”

The Presbyterian Church is the lead filer on the case. “Church groups have led institutional shareholders for more than 20 years in making use of the ‘voice’ strategy,” said Walker. “Church shareholders have long recognized that you cannot change a company you do not own and that shareholder action is often the more effective strategy for advancing social change.”

“We’re proud to be the first mutual fund company in Canada to partner with socially responsible investors in the U.S. and make use of the shareholder resolution process,” said Margaret Yee, vice president at Ethical Funds. “And we look forward to seeing how Citigroup responds to shareholder concerns on this important issue.”
-IE Staff