In December 2013, Portfolio 21 analyzed the auto manufacturing industry group seeking to identify global and regional leaders that manage their businesses with respect to the critical environmental, social and governance issues specific to their industry. Toyota Motor Corporation was identified as one such leader given the company’s commitment to improving fuel economy, its market share of hybrid vehicles, and its research and development on alternative vehicles. Unfortunately, on March 20, 2014, the U.S. Department of Justice announced a criminal wire fraud charge against Toyota and deferred prosecution agreement with a record $1.2 billion financial penalty. The charge is that Toyota defrauded consumers in the fall of 2009 and early 2010 by issuing misleading statements about safety in Toyota and Lexus vehicles. According to U.S. Attorney Preet Bharara, “Toyota stands charged with a criminal offense because it cared more about savings than safety and more about its brand and bottom line than the truth.”
The auto manufacturer industry is highly exposed to product safety recalls, litigation costs, and warranty payments; nonetheless Portfolio 21 expects that all of our companies meet our Principles for Investment. Specifically that all companies “be honorable corporate citizens.” Toyota’s actions to conceal safety information which then resulted in criminal charges strongly challenges this principle and for this reason, Portfolio 21 has chosen to divest from Toyota.