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Seeking to understand investing trend, State Dept enlists help from Pitt

Students and faculty at Pitt are helping the US Department of State understand one of the biggest trends in finance: socially responsible investing.

Socially responsible investing (SRI) is investment which reflects goals that go beyond purely financial returns. This can mean investing in companies or funds that draw high marks on issues like human rights, environmental impact, and consumer welfare. SRI has become increasingly important to investors in the US – especially millennials – and has now caught the interest of the US State Department.

As the federal branch responsible for foreign policy, the State Dept. tracks human rights issues in other nations, and uses that information to make suggestions for multinational US businesses.

This past summer, Pitt Economics Professor Carey Treado joined the State Dept. as a Franklin Fellow, where she researched investor strategies associated with human rights. Treado (Pitt PhD, 2002) has connected her work with the State Department to the Pitt community through a Diplomacy Lab project. 

From State to Pitt

Pitt is one of 35 universities designated by the State Dept. as a “Diplomacy Lab.” Diplomacy Labs are schools that the State Dept. reaches out to when it needs help studying a topic. Treado’s fellowship was extended to a Diplomacy Lab project, allowing Pitt faculty to supervise student research on SRI and the role it should play at the State Dept.

In the Fall, Treado worked with faculty and graduate students from across Pitt to build on her fellowship work. The Spring semester has seen the Diplomacy Lab project further expanded, to include Pitt undergraduates, for many of whom this is their first foray into independent research.

[To learn more about Treado’s work at the State Department, click here to see a University Times feature.]

Econ 0905 gets involved

James Maloy teaches Econ 0905: Financial Markets and Institutions, an undergraduate course focused on financial market analysis. While all students in the course are required to submit a project that analyzes a firm’s stock performance, students in the class were given the opportunity to extend their projects to incorporate the Diplomacy Lab project.

The extension requires students to analyze a firm’s stock performance alongside measures of its human rights record. Students select a company that is listed on Corporate Human Rights Benchmark’s website. Corporate Human Rights Benchmark (CHRB) is a non-profit watchdog groupthat ranks companies on their human rights policies. CHRB’s data is publicly available, allowing anyone to see how their favorite brands – and the world’s largest companies – compare with respect to human rights.   

After choosing a company and investigating its human rights record, students assess that record alongside its stock performance and make a judgement about whether and how the two measures might be connected.  Because human rights issues are only recently being considered as part of investor strategies, there is not much data or analysis on the stock performance of companies that respect human rights in comparison to those that do not.  

Those reports will then be passed along to Treado and members of the State Dept. In return for the extra work, students are given an additional course credit from the University.    

“The project is a terrific opportunity for students,” says Maloy. “They get the opportunity for course credit, exposure to research, and to say they participated in State Dept. research project” Currently, 24 of Maloy’s 29 students have elected to complete the Diplomacy Lab extension.

One of those students is Chris Spengler, a sophomore economics major from Pittsburgh. Spengler chose to research the PA-based Hershey Company. Despite a lackluster rating regarding human rights, Hershey’s financial performance over the past few years has been stellar.

“It’s my first time doing any research like this,” said Spengler. “The chance to use what we learn in class and put it toward an issue that people at the State Department care about excited me.”

In a two weeks, Spengler his classmates will submit their reports, which will be passed along to the State Dept. Treado said they are hoping to coordinate a Skype or Zoom call between students and members of the State Dept. to discuss their findings.