Investors Petition CFTC for Stronger Regulation of Commodities Trades
World Food Day Action Meant To Draw Attention To Connection Between Over-Speculation In Commodities Markets And Rising Food Prices.
New York, NY///October, 14, 2011///Members of the Interfaith Center on Corporate Responsibility (ICCR), a shareholder coalition representing assets of over $100 billion has initiated a letter-writing campaign in advance of World Food Day (WFD) on October 16th to encourage the five commissioners of the Commodities Futures Trading Commission (CFTC) to issue position limits on commodities trades.
Aligning this years’ WFD theme, Food Prices: From Crisis to Stability, the letter cites the potential for a global food crisis due to large institutional investors whose financial speculation in commodity markets could be driving up food prices. According to the World Bank, during 2010-2011 rising food costs pushed nearly 70 million people into extreme poverty. The commissioners are being asked to support position limits to curb excessive speculation in commodities markets by financial speculators. This will help to weed out trades that are purely speculative from those by market participants using futures markets to insure themselves against the risk of price changes.
Said Cathy Rowan of the Maryknoll Sisters, “As faith based and socially responsible investors, we are well aware of the potential impacts that over-speculation can have on vulnerable communities. We were working with the banks around ‘over the counter’ derivatives years before the bubble burst in 2008. Whether it’s mortgages or food futures, Washington must do its part to provide appropriate oversight and controls over these markets to guard against dangerous boom and bust cycles.”
According to the letter, one in six children in the U.S. is food insecure, and globally estimates are topping nearly one billion people or one in seven who suffer from hunger. The Wall Street Reform and Consumer Protection Act enacted as a result of the financial crisis of 2008 mandates stronger regulation around all financial instruments. Putting restrictions on commodities hedging is seen by economists as a straightforward, yet critical safeguard against potential famine.
“Dangerous spikes in food prices have sent tens of millions of people around the world into poverty this year alone,” said Suzy Glucksman of Oxfam America. Referencing a 10/11 letter sent to G20 finance ministers she continued, “Hundreds of economists recently urged the CFTC to introduce position limits into commodities markets pointing out the significant economic benefits that will come from increased market stability. With billions of dollars at stake, and millions of lives on the line, we cannot expect investors to regulate themselves.”
“We are encouraged by investors such as CalSTRS that have taken a more prudent approach to these investments acknowledging the influence large institutional investors can have on markets,” said Kate Walsh of the Tri-State Coalition for Responsible investment. “When traders bet on the price of food rising, the actual cost of food does increase. This impacts farmers, food companies and, ultimately consumers – particularly the poor. When over-speculation forces people to spend 80% of their income on food, it becomes a clear human rights issue.”
Better Markets, a nonpartisan, nonprofit organization released a new report today showing speculative commodity trading pushed by Wall Street is causing market disruptions that have increased prices for food and fuel.
There have been some early and encouraging responses from the Commission but the investors are hoping to push the group to unanimously endorse strong/effective position limits. Says Nadira Narine of ICCR, “Our members are serious fiduciaries who understand the importance of showing a healthy return on their investments. But they feel a moral obligation to ensure that those investments are producing a healthy social return as well. We are hopeful the CFTC commissioners feel the same moral obligation.”
About the Interfaith Center on Corporate Responsibility (ICCR):
Currently celebrating its 40th year, ICCR is the pioneer coalition of active shareholders who view the management of their investments as a catalyst for change. Its 300 member organizations with over $100 billion in AUM have an enduring record of corporate engagement that has demonstrated influence on policies promoting justice and sustainability in the world. Follow us on Facebook and on Twitter @ICCRonline
Director of Communications, ICCR