Many of the depressing reports on the health of the American economy reference that 60% of our economy is driven by consumer spending. After years of stagnant middle- and lower-income wages, ballooning consumer debt, dramatic home-equity borrowing, the sub-prime mortgage crisis, skyrocketing gas prices and the collapse of home values, one wonders just what consumer has money left to spend?

With $1.2 trillion in equity and housing value destroyed in the first quarter of 2008, consumer spending—for luxuries and, increasingly, necessities—is being carried by revolving credit usage, which increased four-fold in recent months over the growth rate of 2004-2006. At the same time, banks reeling from stunning losses in the sub-prime mortgage collapse are squeezing many of these same sub-prime borrowers through ever more restrictive credit card policies. While generating significant short-term returns for the credit card company, these practices push borrowers ever closer to financial collapse—further weakening the economy as a whole.

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Mark and I attended the fall meetings of the Interfaith Center on Corporate Responsibility (ICCR) last week in NYC, while the financial system meltdown dominated the news. During the week, several ICCR members crafted a response to the crisis, available here.

For a number of years, ICCR members have filed shareholder resolutions with financial firms questioning the business soundness and ethics of many practices relating to sub-prime and predatory lending, off balance sheet liabilities, and other practices which have now proven to be catastrophic to the health of financial firms and the financial system. During dialogs with ICCR representatives in the last several years, virtually all of the companies (including Lehman Brothers and Merrill Lynch) defended their practices and resisted calls for more transparency. If these companies had heeded ICCR’s calls and modified their policies, the current crisis could have been lessened, or even avoided.

On issues like these, ICCR is often ahead of the curve, anticipating problems before they rise to the surface. As a member of ICCR, MMA will continue to press for more responsible practices at the remaining financial institutions, as well as anticipate the next major issues - at this point we feel it may be credit card debt. It is our hope that through our efforts, we can encourage sound and just corporate practices, and avert the type of crisis we are now experiencing.

In partnership with five other institutions, MMA Community Development Investments recently helped launch The Isaiah Funds, an interfaith effort to rebuild communities following natural disasters. The funds will provide low-cost capital to disadvantaged communities who are especially hard hit, with an initial focus on hurricane recovery efforts along the Gulf Coast.

Economic redevelopment is a vital, and often overlooked, second stage to disaster recovery. MMA Community Development Investments (MMA CDI) plans to invest up to $500,000 in the funds by 2009. Approximately 85% (over $10 million) of MMA CDI assets come from the MMA Praxis Mutual Funds as part of the Fund’s commitment to community development investing.

Other partners in The Isaiah Funds include: American Baptist Home Mission Society, CHRISTUS Health, Highland Good Steward Management, Jesuits New Orleans Province, and Jewish Funds for Justice.

Though much of the Gulf Coast has regained the appearance of normalcy, some of the hardest rebuilding work lies ahead. The Isaiah Funds anticipate making more than $10 million in investments in New Orleans and the Gulf Coast Region by the end of 2009. Visit isaiahfunds.org to learn more.

As part of its sustainability agenda, Wal-Mart has made three announcements regarding certain products it sells and their social impact. These initiatives result in part from shareholder advocacy that has strongly encouraged Wal-Mart to adopt more sustainable business practices.

The gold and silver in the new Love, Earth jewelry line can be traced from where it was mined to the store shelf. This transparency and documentation is meant to assure the company and its customers that the jewelry line is sourced from mines and manufacturers that meet its environmental and human rights standards. In the future, Wal-Mart hopes to source 100 percent of its gold, silver and diamonds from places that meet its sustainability standards.

Wal-Mart has also joined the Global Forest and Trade Network, a program backed by the World Wildlife Fund that aims to eliminate illegal and unsustainable logging worldwide. Wal-Mart has pledged to eliminate the wood in its own furniture line that comes from illegal or unknown sources within five years. This pledge will be subject to independent auditing.

Additionally, Wal-Mart has revamped efforts by its individual stores to purchase and sell local produce. The company has purchased local produce for many years, but hopes to increase its partnerships with local farmers to cut shipping costs and provide fresher produce.

You can read the full stories in the document below:

Wal-Mart Stories

A new report from the UN’s Principles for Responsible Investment (PRI) initiative, supported by MMA, highlights significant progress in gaining global commitments to integrate social and environmental values with investment decisions.

The initiative, a collaboration of the United Nations Environment Programme Finance Initiative, the UN Global Compact and institutional investors, recognizes that long-term business success is linked to society’s interests and needs. Released last week, the report showed that the number of investors which have committed to the principles has doubled to over 380 in the past year, representing more than $14 trillion.

MMA has signed the principles and contributed data that was used to develop the report. MMA is one of a few faith-based investor signatories in the U.S. As a shareholder in many corporations, MMA is committed to communicating its concerns with the corporations’ management about financial and social issues.

Solar and wind energy have long been clean energy alternatives in the production of electricity. However, their usefulness has been limited by the inability to store their power for later use, when the sun isn’t shining and the wind doesn’t blow. Unlike coal-fired, nuclear and hydroelectric plants, solar and wind energy are intermittent and can’t be relied on to continuously generate large amounts of power.

Some energy scientists are now touting what could be a major breakthrough in solar energy storage. Researchers at the Massachusetts Institute of Technology have developed an unprecedented process that uses solar energy to split water into hydrogen and oxygen gases. The oxygen and hydrogen are later recombined inside a fuel cell to generate electricity. Such fuel cells could power a house or car. The scientists hope these fuel cells will be widely available within 10 years.

If this is indeed a viable and effective way to store power, it’s a a major win for the environment and our energy needs. In company engagements, utilities and financiers often argue in favor of continued fossil fuel use - rather than renewable energy - to generate the “base load” electricity needed around the clock. If this new process can transform the way solar energy is stored, companies will have more reason to invest in the sun and less reason to use fossil fuels.

MMA Praxis Mutual Funds joined Boston Common Asset Management and other concerned investors in filing a shareholder resolution with ConocoPhillips seeking a report on the Company’s policies, procedures and practices for obtaining consent of Indigenous Peoples affected by exploration and development activities. The majority of untapped oil reserves lie in ecologically sensitive and politically unstable parts of the world. It is increasingly important that companies develop sophisticated processes for engaging Indigenous Peoples whose lives are dramatically transformed and disrupted by massive natural resource extraction projects. Failure to do so generates anger, disenfranchisement and active—even violent—resistance. This has cost energy companies billions of dollars, damage to property and loss of human life in countries like Nigeria, Indonesia, Ecuador, Columbia and elsewhere.

Shareholders raised these concerns related to ConocoPhillips plans to explore and develop resources within the remote Northern Peruvian Amazon—a region where a number of indigenous peoples are seeking to live in Voluntary Isolation from the modern world, preserving their ancient ways of life. Efforts by ConocoPhillips and its partner Repsol, pose very real threats to the economic, spiritual, cultural and physical health of these isolated peoples.

The resolution appeared on the Company’s ballot at its May 14, 2008, annual meeting and earned a 9% positive vote, down slightly but sufficient for refiling a third year. The number not voting with management (“yes” + abstentions) actually rose to 24%.

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Toyota has responded to allegations brought by the National Labor Committee in a report on the treatment of its employees and the workers in its supply chain (see post below). Their response can be viewed here.

Toyota’s response seems fairly typical in that it denies the allegations, while touting its guiding principles and auditing system. But it doesn’t refute any of the specific claims with evidence. Part of the problem is the enormous and scattered global supply chain that can obscure abuses. No multi-national company whose supply chain includes sourcing from Third World countries can claim 100% compliance with human rights standards. The challenge for Toyota and other companies is to improve their direct operations to a higher ethical standard, and to work harder to improve the working conditions in the companies and factories in their supply chain.

MMA has signed a letter with other investors that was sent to Toyota several weeks ago. My hope is that it will spur good dialog on working conditions and sourcing.