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Socially Responsible Investing and the Quest to End Child Slavery

Written By Jeff Siegel

Posted January 15, 2016

chocslNestle (OTCBB: NSRGY), the company that brought you the Baby Ruth bar, Hot Pockets, and Coffemate is on the hot seat, and may soon be given a necessary thrashing in federal court.

As reported by Reuters, a U.S. Supreme Court’s refusal to dismiss a lawsuit seeking to hold Nestle accountable for using child slaves to harvest cocoa in Africa looks set to be a landmark battle over labor used overseas.

The ruling sends the case back to federal court in California and brings closer the possibility of a trial, said Terrence Collingsworth, executive director at International Rights Advocates who is involved in the lawsuit.

The lawsuit was filed against Nestle, Archer Daniels Midland Co and Cargill Inc. by former child slavery victims originally from Mali in West Africa. The case dates back to 2005.

Their lawsuit claims that, aware of the child slavery problem, the companies offered financial and technical assistance to local farmers in a bid to guarantee the cheapest source of cocoa.

Of course, no one should find this particularly surprising.

The chocolate industry has long been guilty of utilizing child slave labor in an effort to meet the ever-rising demand for cheap cocoa. Certainly companies like Nestle and Hershey (NYSE: HSY) have benefited from this, as have consumers that aren’t particularly concerned about where their food comes from.

I don’t say this to criticize these folks, by the way. This is merely an observation of the fact that, by and large, most consumers don’t particularly care or at least don’t really think about these types of things. Quite frankly, they’re just looking for the best bargain. And given so much economic uncertainty today, this is understandable.

That being said, as socially-responsible investors, we seek investment opportunities that can help alleviate the scourge of something so horrible as child slave labor.

Now unfortunately, there is nothing in the public markets that allow retail investors to accomplish such a thing in the chocolate industry. However, for accredited investors that are occasionally opportunities to take part in various capital raises for chocolate companies that operate in a responsible and compassionate manner – while still maintaining profitability.

Also, now that equity crowdfunding is finally available for retail investors, we hope to see this mechanism utilized by socially responsible investors in the near future. Certainly we’ll continue to stay on top of any new developments on the equity crowdfunding front.


Although it’s not possible to invest in a publicly-traded chocolate company that is not guilty of utilizing child labor, you can divest from companies that are guilty of such a despicable practice.

The divestment movement, as it pertains to fossil fuels has been quite successful. In fact, according to the latest data released to Bloomberg, portfolio managers have pledged to transition $2.5 trillion in investments away from fossil fuels.

I’m not saying portfolio managers are going to rush to do the same with cocoa. After all, much of the transition away from fossil fuels can be directly connected to the increased economic risk associated with fossil fuel production.

Still, as one who seeks to only invest in companies that do right by humanity, right by mother nature, and right by shareholders, to own shares of Nestle or Hershey, simply wouldn’t align with my values as an ethical investor.

Of course, these companies have been promising to make the necessary adjustments to their supply chains in an effort to stomp out child slave labor. These are promises, however, that have been made for more than a decade now. And it’s still happening. Meanwhile, smaller chocolate companies that embrace social responsibility have been able to source their cocoa from plantations that don’t utilize slave labor. And many are quite profitable.

If companies like Green & Black’s, Equal Exchange, and Madecasse can do it, certainly a behemoth like Nestle can do it, too. It just seems as if management has chosen not to.

While I’m sure some folks will read this and think it’s nothing more than a bunch of tree-hugging nonsense, I find nothing nonsensical about doing my part to help eradicate child slave labor in the cocoa industry.

To read more about socially responsible investing and where we see the lion’s share of opportunities in this space, click here to check out our free report: An Investor’s Guide to Green Market Profits.