Author: Chris Cox

Frank Sherman to receive SGI’s 2022 Fr. Mike Crosby Award

Frank Sherman to receive SGI’s 2022 Fr. Mike Crosby Award

Chris Cox

The Board of Seventh Generation Interfaith coalition is pleased to announce that Frank Sherman, the executive director of SGI, has been selected to receive the 2022 Fr. Mike Crosby Award. The award will be presented in a reception at the SGI conference on October 11. The Fr. Mike Crosby Award recognizes a person who has promoted a more just and sustainable world and exemplifies the passion and commitment of our founder, Michael Crosby, O.F.M., Cap.

“We are so happy to honor Frank Sherman,” said SGI Board Chair Cindy Bohlen. “Several board members came forward to nominate Frank to receive this year’s award; once Dan Tretow’s final nomination was shared, Frank’s selection was unanimous. All who have had the privilege of working with Frank understand that he has been the person who has shepherded SGI toward fulfilling Fr. Mike Crosby’s vision. The award is the perfect way to cap off Frank’s role as the Executive Director.”

“I have had the privilege of working with Frank on multiple corporate engagements over the years, said Dan Tretow. “Everyone knows they are working with a wise, educated, pragmatic and sincere individual. And he does not work alone. In each engagement, he partners with experts from partner coalitions, ICCR program directors, Ceres and NGO’s that add credibility and strength to the conversation. He challenges the companies to do better, not for his own sake or for our coalition, but for all of society and the world.”

Frank’s background is unlike many others in our ministry; he sat on the other side of the table for 35 years. Before retiring from the corporate world at the end of 2012, Frank worked in the chemical industry, rising to serve as President of the American affiliate of AkzoNobel, a multinational paint and performance coating company. As part of his duties at AkzoNobel, he acted as a board member and, later, chair of a trade association.

While others in retirement might have hesitated, Frank made a wholehearted commitment to Fr. Mike when he was asked to help with some engagements focused on the risk of transport by rail and engagements concerning deforestation. Frank’s agreement to help resulted in his leadership in the process of creating a board of directors, re-naming SGI, and incorporating the organization. When Fr. Mike was diagnosed with cancer, Frank led the strategic planning process to envision how SGI might move from a founder-led organization to a member-led organization and was named executive director in July 2017. From the beginning, Frank has given his time freely to SGI, seeking no remuneration for his work.

Amid questions about the future of SGI following Fr. Mike’s untimely death, in his actions, Frank guaranteed growth from seeds that Fr. Mike planted.

During his tenure as the Executive Director of SGI, Frank has worked to fulfill SGI’s mission to build a more just and sustainable world for those most vulnerable by integrating social and environmental values into corporate and investor actions. Father Mike Crosby’s vision to use the shareholder voice toward a more just and sustainable world for those most vulnerable has been realized and continues to grow thanks in large part to the dedication of Frank Sherman.

Please join us in congratulating Frank.

SGI’s 2022 Conference: Corporate Human Rights Due Diligence in Conflict-Affected and High-Risk Areas

SGI’s 2022 Conference: Corporate Human Rights Due Diligence in Conflict-Affected and High-Risk Areas

Chris Cox

Good stewardship requires posing and answering difficult questions, especially concerning business activities in conflict-affected and high-risk areas where the risks are highest to people, the planet, and portfolios. The World Bank estimates that two-thirds of the world’s poor will live in such areas by 2030. Russia’s invasion of Ukraine, the military coup in Myanmar, and forced labor in XUAR, China make this an urgent and compelling topic now. It is up to investors and companies to respond to these risks with systemic solutions, putting conflict-sensitive policies and practices into place.

SGI’s 2022 Conference: Corporate Human Rights Due Diligence in Conflict-Affected and High-Risk Areas will take place on October 11th at 4:30PM CT. We are delighted to announce that our keynoter will be Bennett Freeman, Associate Fellow in the International Law at Chatham House.

Following our keynote, our associate director, Chris Cox, will moderate a panel with leading experts:

In the conference, we hope to explore these questions:

  • Do socially responsible investors need to respond to human rights issues in their portfolio? Can they just write a screen?
  • What human rights issues should a responsible investor respond to and how?
  • How would a responsible investor ask one of their money managers to do this?
  • What is heightened human rights due diligence for investors and companies? How does an investor or a company go about doing it?
  • How do investors and companies assess human rights and geopolitical risks of emerging markets, informed by the UN Guiding Principles on Business and Human Rights (UNGPs)?
  • How can investors and companies respond to state-sponsored actions that undermine the rules-based order necessary to safeguard the international community and the global economy?
  • With 500 companies withdrawing operations from Russia, has a new standard been set for corporate responsibility and a stakeholder economy?

Conducting heightened due diligence helps companies and investors to identify and mitigate human rights risks, while simultaneously addressing the potential material risks – legal, operational, and financial – associated with areas impacted by conflict. Join us for a conversation on the difficult questions investors must ask of their portfolio companies and themselves when seeking to be rights-respecting stewards in an increasingly conflicted world.

Individual tickets for in-person attendance are $75 per person, and individual tickets for virtual participations are available at $50 per person. You can purchase individual tickets for the Conference here. The conference will be hosted at Fox Point Lutheran Church, located at 7510 N Santa Monica Blvd. in Fox Point, WI, 53217.

More information about the Conference can be found here.

SEC Finalizes Pay Versus Performance Disclosure Rules

SEC Finalizes Pay Versus Performance Disclosure Rules

Chris Cox

Last Friday (August 25), the Securities and Exchange Commission (SEC) adopted final rules implementing the “pay versus performance” disclosure requirement, completing a 12-year journey to fulfill a provision of the 2010 Dodd-Frank Act.

Under the rule, U.S. public companies must provide a new table in their annual proxy filings that contains executive compensation and financial performance measures covering a period of up to five years. While this new rule does not mandate any action that will narrow the pay disparity between executives and workers or reduce wealth inequality in the U.S., the rule requires companies to provide data comparing executive pay to financial performance. This table and the new figures will provide investors some clearer information for the mandatory (advisory) “Say on Pay” votes in every company’s proxy.

As a result, I hope that this makes Rosanna Landis Weaver’s work for As You Sow a little easier as she annually prepares a report on “The 100 Most Overpaid CEOs.” Previously, she had to dig through the not-so-transparent data in the “Compensation Discussion and Analysis” (CD&A), a required part of a company’s annual proxy statement, to generate her figures. Theoretically, the new rule will allow for a more straightforward means of comparison. (Worth noting: Year after year, the report uncovers overpaid CEOs who underperform on “Total Shareholder Return.”)

As You Sow, The 100 Most Overpaid CEOs, 2022

Some will take issue with the new disclosure rule as it is all about financial performance. Rightfully, socially responsible investors may be concerned because these new required charts do not include non-financial disclosure (i.e., human rights performance or emissions reduction). However, the rule does not preclude a company from including that information.

The new rule may draw companies to better tell their story, rather than bury shareholders in legalese. At the end of the day, the rule is not just about filling out the table, but that companies devote time to develop a narrative that helps investors understand how pay and performance align.

Even after this rulemaking, the SEC has yet to finish the implementation of Dodd-Frank. Perhaps we may see the SEC finalize the long-delayed provision for a clawback rule for accounting missteps mandated by Dodd-Frank. And we may be light years from reducing pay disparity and acting on wealth inequality, but better disclosure is a small step in the right direction.

Both Chair and CEO? Formula for Disaster

Both Chair and CEO? Formula for Disaster

Chris Cox

The Guardian recently revealed new problems from Travis Kalanick’s tenure as WeWorks CEO and chair of the board. Combining the two roles often leads to disaster. It is actually an old storyline:

Boards and investors want CEOs who hunger for improving the company. Boards want to hire winners. But the chair serves a different role, representing the shareholders and other stakeholders. Only an exceptional leader could fill both the role of CEO and chair. Surprisingly, a combined CEO and chair position led over  40% of S&P 500 companies in 2021. Too many boards, like the residents of Lake Wobegon, seem to think their CEOs “are all above average.”

One person holding both titles brings about conflicts of interest. The board guides, evaluates, and compensates the CEO. Legal & General’s Clare Payn describes it this way: “the CEO role is a full-time strategic role; the chair role is to manage the board.” She continues, “It’s like marking your own homework if you hold both roles.”

In our view, the best practice is that the chair should be an independent director. Most well-governed entities have checks and balances in place to ensure accountability and not vest excessive authority in one person or office. Throughout history, we have seen what happens when one person or institution is delegated too much power.

The practice of a combined chair and CEO is uncommon in Europe. In fact, UK Corporate Governance Code recommends that a CEO should not become chair of the same company. Without the formal guidance, investors must make the push in the U.S. Separate chair and CEO resolutions were the second-most voted proposal type in the 2021 proxy season (with 44 voted proposals in the January 1-June 30 period).

For the 2022 proxy season, SGI members co-filed this resolution at Exxon Mobil, Meta (Facebook), and Bristol-Myers Squibb. And the Conference Board suggests that it is making a difference outside of the S&P 500: “The trend toward CEO-board chair separation, previously more pronounced among smaller businesses in the Russell 3000, is extending to the S&P MidCap 400.”

To learn more about SGI’s work in corporate governance, please, visit here.

Photo credit: Mark Zuckerberg F8 2018 Keynote | Anthony Quintano | FLICKR (CC BY 2.0)

Making the Investment Policy Statement Your Own

Making the Investment Policy Statement Your Own

Chris Cox

Building on our webinar about the revised USCCB Socially Responsible Investing Guidelines, SGI’s subsequent member webinar invites us to evaluate our investment practices and policies as expressed in an Investment Policy Statement (IPS). For some this may seem a dry document about asset allocation and expected returns. In fact, the Investment Policy Statement sets forth a set of goals for your institution. It can and should speak to what your institution stands for.

We were joined by:

We want to thank all of our members and guests for attending our webinar. We would greatly appreciate if you would take a quick minute to fill out our questionnaire, here, regarding your experience.

Slides are available here.

Laudato Si’ Week 2022: How SGI Members Contribute to Structural Change

Laudato Si’ Week 2022: How SGI Members Contribute to Structural Change

Chris Cox

By Frank Sherman

“Each of us – whoever and wherever we may be – can play our own part in changing our collective response to the unprecedented threat of climate change and the degradation of our common home.”

Pope Francis, October 2021

The global Catholic Church celebrates Laudato Si’ Week 2022 over May 22-29 to mark the seventh anniversary of Pope Francis’ landmark encyclical on care for creation. It is meant to be a celebration, showing the world how much the Church has changed in these seven years by inspiring millions of Catholics to bring the whole human family together to protect our common home.

There are several resources available to participate in the week-long celebration including the Laudato Si’ Week website and the 7 Laudato Si’ Goals with online and offline activities as well as resources for prayer, study and action. The events will focus on biodiversity, responding to the cry of the poor, divestment, education, and eco-spirituality. The Catholic Climate Covenant is hosting an online discussion on Tuesday, May 24th at 12 p.m. CT to spotlight U.S. diocesan efforts to uplift Laudato Si’ (register here).

Also coming next week are annual shareholder meetings for some of America’s biggest corporate greenhouse gas (GHG) emitters including ExxonMobil, Chevron and Amazon. Amazon received a record 20 shareholder resolutions, 4 of which were filed by SGI members. ExxonMobil received 8 proposals, half of which were filed by our members while SGI members filed 2 of the 7 proposals at Chevron.  

Many of these proposals asked for more climate disclosure, GHG reduction targets or transition plans. One such proposal filed with both Exxon and Chevron asks for an audited report assessing how applying the International Energy Agency’s “Net Zero by 2050” pathway would affect company financial statements, including carbon prices, retirement obligations and capital expenditures. Companies must adequately reflect the impacts of the climate crisis and the clean energy transition in their financial reporting if shareholders are to have confidence that their capital is being effectively allocated and assets do not become stranded. This is especially crucial for companies like Exxon and Chevron, whose business strategy appears to be built on continuing growth in demand for hydrocarbons for the next several decades.

The latest Intergovernmental Panel on Climate Change (IPCC) report delivered a sobering message: we’re already experiencing the devastating impacts of climate change and continuing the current trajectory equals catastrophe. Governments, businesses and civil society must do more before it’s too late. So as your communities and organizations celebrate the progress made in the past 7 years, SGI members are doing their part to impact the structure drivers of climate change through corporate engagements.

SGI joins Major U.S. Companies and Investors To Urge Congress to LEAD on Climate

SGI joins Major U.S. Companies and Investors To Urge Congress to LEAD on Climate

Chris Cox

SGI participated in a delegation of more than 100 large companies and investors to meet with key lawmakers of both parties this week to ask them to LEAD on Climate 2022. It was a united call for Congress to pass an ambitious package of federal clean energy, transportation, infrastructure, and advanced manufacturing investments.

Best Buy, bp America, Gap, General Mills, HPand Microsoft were among the major U.S. employers, innovators, and manufacturers spanning all sectors of the economy participating in this advocacy event. Representatives from the participating organizations met with lawmakers and Congressional staff on Wednesday, May 11, and Thursday, May 12, in virtual forums. 90 meetings were scheduled over this two-day period.

View the full list of LEAD on Climate 2022 participants here.

This fourth annual business advocacy event gives leading companies and investors the opportunity to make the strong economic case for federal climate action, elevating their calls for clean energy and environmental justice investments that will bolster the nation’s competitiveness, lower energy costs, strengthen domestic supply chains, and confront the threat of the climate crisis. U.S. Sen. Sheldon Whitehouse, Siemens Corporation’s Barbara Humpton, PSEG’s Ralph Izzo, and Hannon Armstrong’s Susan Nickey participated in a virtual roundtable and media briefing as part of LEAD on Climate 2022 on May 11th.

Representing SGI in the meetings, associate director Chris Cox said, “Fr. Mike Crosby began making the moral and business case for addressing climate change decades ago. It’s an honor to continue this work in pressing for environmental justice, as the harms of climate fall most heavily on the poor, those on the periphery.”

Organized by the sustainability nonprofit Ceres, LEAD on Climate 2022 features companies and investors that collectively count more than $1.6 trillion in annual revenue and $4.6 trillion in assets under management, and that employ more than 3 million people in all 50 states. The event comes at a critical time when Congress considers major investments in clean energy, transportation, and infrastructure, as well as the advanced manufacturing and supply chain capabilities to support it, either through a budget reconciliation deal or a bipartisan energy package.

Specifically, companies and investors are calling for Congress to:

  • Meet the urgency and scale of the climate crisis with ambitious federal investments to accelerate the transition to affordable, secure, domestic clean energy.
  • Seize the economic opportunities to lead the world in clean energy manufacturing and deployment to create jobs, spur innovation, strengthen supply chains, and reduce costs and price volatility for businesses and consumers. 
  • Tackle inequity by targeting climate and clean energy investments in disadvantaged, rural, and frontline energy communities.

This is the second year that SGI has supported Ceres’ LEAD on Climate. With the midterm elections quickly approaching, the window is closing for the last, best chance of getting significant federal climate and clean energy investments passed in time to meet our climate, energy, and economic security goals.

Click here to watch the full recording of the roundtable and media briefing.

Walmart Hits a Double on Responsible Climate Lobbying Disclosure

Walmart Hits a Double on Responsible Climate Lobbying Disclosure

Chris Cox

By Frank Sherman

“Climate change is one of the greatest challenges of our time, profoundly affecting all regions of the world and all sectors of society. . . . Companies need to be part of the solution to manage physical and transition risk, maintain societal license to operate and create value for business and society through mitigation and adaptation initiatives that draw on unique business capabilities.”

Walmart, 2021 ESG Summary

At first glance, this may be mistaken as an excerpt from an environmental NGO website rather than from the largest corporation in the world. But Walmart has long been recognized by many as a leader in climate action.  They were the first retailer to obtain SBTi certified greenhouse gas (GHG) targets and the first to make a zero emissions commitment that does not rely on carbon offsets for scope 1 & 2 emissions. Committed to 100% renewable electricity by 2035, they have also been recognized as the top retail partner by the U.S. EPA Green Power Partnership. EPA’s SmartWay Excellence Award for shipping performance recognized Walmart for the fifth year in a row. Their award winning Project Gigaton targets a reduction of at least 30% of estimated scope 3 emissions by 2030. No wonder they made CDP Climate’s ‘A List’ for several years.

But one area where Walmart, along with many other companies, has fallen short is in its engagement on climate public policy. That’s why SGI member, the School Sisters of Notre Dame, Central Pacific Province (SSND), filed a shareholder resolution with the Company, as part of a broader campaign coordinated by ICCR and Ceres. According to Influence Map, Transition Pathways Initiative and Ceres, Walmart’s direct lobbying is supportive of the Paris Agreement. The SSND proposal asked Walmart to evaluate whether their indirect lobbying activities through trade associations and social welfare and nonprofit organizations are aligned with the company’s support of the Paris Agreement goals. We also asked the company to be more public in their support of robust climate policies rather than engaging policy makers ‘in private.’ The proponents withdrew the proposal after the Company agreed to improve their disclosure.

Following the withdrawal, Walmart strengthened their Government Relations Policy and made extensive updates to their Engagement in public policy webpage, providing details on governance, policy positions, engagement process, and examples of positive advocacy. They published a list of trade associations to which Walmart contributed funds of $25,000 or more in 2021. They actively engage their trade associations to influence their public policy positions. They note that the Business Roundtable’s (BRT) position towards climate policy, although not as strong as we would like, improved as a result of Walmart’s CEO Doug McMillon’s influence when he chaired the BRT.

To be fair, the goalpost on what constitutes “responsible climate lobbying” has been moving due to a number of factors including increasing calls from scientists for urgent action, such as the recent IPCC report. This culminated in the recently released Global Standard on Corporate Climate Lobbying describing 14 indicators to assess a company’s direct and indirect lobbying alignment with the Paris goal of limiting global temperature rise  to 1.5 degrees.

To be sure, there are areas where Walmart’s disclosure and practices can be improved. The main shortfall vs. the new global standard is the lack of a detailed public assessment of each trade association’s climate policy positions and how well it aligns with the Paris goals and the Company’s position. An increasing number of multinational companies are doing this assessment of their indirect climate lobbying through trade associations and nonprofits they fund, evaluating the actions they are taking to support or undermine the Paris Agreement goal of 1.5 degrees. The Company states, “If a relationship—on balance—does not align with our priorities, we would end ties with the organization altogether,” which they did a few years ago when they exited the Chamber of Commerce. “I wouldn’t say they hit a homerun, but it’s safe to say they made it to second base,” said Tim Dewane, Director of Shalom – the Office of Justice, Peace, and Integrity of Creation for the School Sisters of Notre Dame, Central Pacific Province, the lead proponent of the resolution. “We have to continue to work to get them home.”

The Necessity to Perform Investor Human Rights Due Diligence

The Necessity to Perform Investor Human Rights Due Diligence

Chris Cox

In this difficult time, we continue to follow the crisis in Ukraine from afar. The war itself and its humanitarian and economic fallout pose some tough questions. Good stewardship may come down to posing and answering difficult questions.

For at least two decades, we ignored Russia’s globalized corruption and localized aggression. Ignored may be too soft– some even welcomed it. On March 4, 2018, Putin’s agents poisoned former Russian spy Sergei Skripal, then residing in the United Kingdom. Investors and global companies were willing to look the other way. Again, investors and global companies willfully ignored the attempted assassination of opposition leader Alexei Navalny in August of 2020. In fact, Germany, China, and the US topped the list of major investors in the Russian economy that year. On-going investments allowed Putin to entrench power, and, now, he is an unopposed dictator and global security threat.

The commencement of the Russian war in Ukraine has led to a corporate withdrawal from Russia that happened faster than anyone could have imagined. In less than four weeks, from American Express to YouTube, 380 global companies announced some kind of withdrawal from Russia, based on data compiled by the Yale School of Management. At the same time, Yale tracks 39 companies that will remain in Russia or have refused to disclose plans regarding their operations. [The Yale list does not include Koch Industries or its subsidiaries that, according to Judd Legum, also are continuing their operations in Russia.]

The motivations for abandoning business in Russia could be described in a handful of categories. Some companies have left on principle. Some have left as a consequence of sanctions. Others may have left for fear of boycotts and backlash. Still others didn’t want to be labeled as being on “the wrong side of history.” Some have only halted operations for now.

There was, obviously, another, earlier course of action: those who, based on human rights due diligence, found that investment in Russia was a risk that they would not undertake. Due to internal assessments of human rights and political governance risks, informed by the UN Guiding Principles on Business and Human Rights (UNGPs), those asset owners already had limited exposure to Russia. Since there has been an international armed conflict, internal armed conflict, and military occupation in Ukraine since 2014, enhanced human rights due diligence was required under the UNGPs. Change can be planned and gradual, or attempted in the heat of a crisis, but most would recommend the planned and gradual route.

Investors, like all business actors, are expected to respect human rights as outlined by UNGPs. Investor responsibility is increasingly embedded into legal frameworks (e.g. EU rules requiring investors to disclose steps taken to address the adverse impact of their investment decisions on people and the planet). ICCR’s Investor Alliance for Human Rights has developed a toolkit to help asset owners and managers address risks to people posed by their investments.

We should review the whole of our investments and use the IAHR toolkit and other resources to do so. Asset owners that expand investments in Saudi Arabia are willfully ignoring flashing warning lights about human rights risks. If Jamal Khashoggi’s brutal murder in 2018 did not persuade an asset owner or an asset manager, this weekend’s mass execution of 81 prisoners is not likely to be a deterrent either. Or consider Myanmar. Since the February 1, 2021 coup, gas revenues are the largest funding source for the Burmese armed forces. Foreign gas companies work hand-in-hand with Myanma Oil and Gas Enterprise (MOGE), which is under control of the Myanmar military. The same can be said for investments in the Xinjiang Uygur Autonomous Region (XUAR) of China and a host of other countries.

While the U.S. and international community have reacted with great speed and resolve to punish Russia’s most recent invasion of Ukraine, it is troubling that we have yet to levy a similar sanctions regime on the Chinese government for its genocide in Xinjiang.

The examples of Ukraine, Saudi Arabia, Myanmar, and XUAR China highlight the increasing severity and number of conflict-affected and high-risk areas across the globe. It is up to investors and companies to respond to these systemic risks with systemic solutions, putting conflict-sensitive policies and practices into place.

Our colleagues at Heartland Initiative developed the “Rights Respecting Investment in CAHRA methodology” as one resource to assist investors.

Rich Stazinski, executive director at Heartland put it this way: “Companies and investors have had nearly a decade since the Russian invasion of Crimea to grapple with the ongoing consequences of conflict and risk in Ukraine. While abiding by evolving rounds of economic sanctions and export controls is necessary to make companies and investors legally compliant, it is far from sufficient to fulfill their responsibilities under the UN Guiding Principles. In order to do so, they must adopt robust policy and practices that address the heightened risks of doing business in conflict-affected and high-risk areas, from Ukraine to Myanmar to Xinjiang.”

Asset owners need to ask difficult or controversial questions. The very issues facing our portfolios and, indeed, our planet are too important not to.