Author: Chris Cox

Pay and Wealth Disparity Webinar

Pay and Wealth Disparity Webinar

Chris Cox

Good corporate governance, the “G” in ESG, allows for companies to better lean into the challenges and opportunities. Well-governed companies drive change rather than being subjected to it.

Warren Buffett, Chairman and CEO of Berkshire Hathaway, famously described executive compensation as the acid test of corporate governance. For my part, I think the Oracle of Omaha may only be half right. Yes, executive compensation is critical, but it is only half of the picture. The other half of the picture is looking at the wages of the lowest paid, most vulnerable within a company or within its supply chain. It’s a matter of looking not only from the top down, but also the bottom up.

On November 19th, we continued efforts to educate ourselves on issues related to pay and wealth disparity and about some actions we can take to address them. We are grateful that Brandon Rees of the AFL-CIO and Rosanna Landis Weaver of As You Sow joined us to enrich our conversation.

A couple of weeks ago, Tesla CEO Elon Musk made headlines as the first person in history with a net worth exceeding $300 billion. The other part of that story is that, by comparison, the median U.S. worker would need more than 4 million years to make that much.

SGI has a long history in this space. From our founding in 1973, Fr. Mike Crosby has advocated for a living wage. SGI consistently advocates for increasing the federal minimum wage.

In 2013, President Obama said, “Rising income inequality is the defining challenge of our time.” Pope Francis, in the same year, noted, “How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” As a consequence, one of Fr. Mike’s final efforts was a campaign for pay equity in 2014 by filing shareholder resolutions with 12 retailers. SEC allowed companies to omit the resolution based on “micro management.” SGI members continues to challenge retailers and restaurants to pay living wages, for their own workers and for those in their supply chain.

In hopes of building an economy that works for the many, not one that concentrates more and more wealth in the hands of a privileged few, we keep coming back to this issue to see if there are new ways that we can address income and wealth disparity. The Franciscan Sisters of Perpetual Adoration proposal on racial equity & starting pay at the Walmart AGM obtained strong shareholder support for a first-time resolution. SGI members have joined this year’s ICCR campaign to ask restaurants to raise their sub-minimum wage for tipped workers.

Increasingly, economists have come to see that wealth and income disparity harm the economy. Rising concern for pay and wealth disparity in proxy voting and changes at the SEC lead us to think the tide may be shifting, and so we come to today’s conversation to get better informed and to renew our commitment to act.

Again, we are very grateful for the presence of Brandon and Rosanna in this webinar, for their commitment to this work, and their generosity in sharing their wisdom and experience with us. As always, we welcome your feedback via a confidential evaluation found here. Slides are available here.

Pay and Wealth Disparity Resources:

Be a catalyst for change in Native American Heritage Month

Be a catalyst for change in Native American Heritage Month

Chris Cox

Since 1990, the United States has formally recognized November as Native American Heritage Month, a time when we can celebrate the culture, traditions and ways of this country’s Indigenous peoples, while also taking time to better understand our part in their often-painful history. We must also recognize that our country has a history of mistreatment and even genocide against indigenous people.

We can reflect on this collectively through our role as institutional investors. There are reports that should trouble us and spur us to action, like the Business & Human Rights Resource Centre’s Renewable Energy and Human Rights Benchmark 2021. Transition minerals, including nickel, lithium, cobalt, and platinum, are critical to the development of a green, low-carbon economy. Increased mining for these resources threatens indigenous rights and territories through the desecration of sacred places, pollution, and an increased risk of sexual violence and homicide. While international agreements provide for Free Prior and Informed Consent (FPIC), the benchmark finds that barely one-quarter of companies had policies recognizing and respecting the rights of indigenous peoples.

We can recall that SGI has been a part of efforts to respect the rights of indigenous peoples. Investors played a significant role in retiring the offensive name of the Washington Football Team. Mercy Investment Services helped organize the letter that spurred the action. As the Washington Post noted: “The company’s request comes less than a week after a group of more than 85 investment firms and shareholders representing $620 billion in assets called on FedEx, Nike and PepsiCo to sever ties with the team unless Snyder changes its name.”

Moving forward, we can also collaborate with and participate in groups like the Investors & Indigenous Peoples Working Group (IIWPG). Launched in 2006 as a task force by US SIF, it became a stand alone organization in 2016. The IIWPG recently wrote an important Letter to the SEC concerning Indigenous Rights in ESG and Climate Disclosures. A recent news report described the group’s work here. In fact, ICCR’s fall conference had a great session outlining the work of the IIWPG entitled “Championing Indigenous Peoples Rights through Shareholder Advocacy.”

The IIWPG has also developed and gathered valuable resources for investors to use: 

If you are not a member of the Investors & Indigenous Peoples Working Group and would like to be, you can join the mailing list. The IIPWG invites investors to join its monthly calls. As well, the Group serves as a clearinghouse for education, news, and joint action to bridge and bring together Native and Non-Native communities on issues related to sustainable and responsible investing.

Perhaps the best way to honor Native American Heritage Month is to be a catalyst for change.

Merck signs agreement with Medicines Patent Pool

Merck signs agreement with Medicines Patent Pool

Chris Cox

Yesterday, Merck announced an agreement with the Medicines Patent Pool (MPP) for the COVID-19 therapeutic molnupiravir, reported to cut COVID-19 hospitalizations and death in high-risk patients in half, that makes the pill available for generic manufacture in 105 countries, dramatically increasing access and affordability in low- and middle-income countries.

SGI believes this is an important event for two reasons. First, the agreement makes molnupiravir the first COVID product to allow for the sale of lower-cost generic versions of medicines in over a hundred developing countries. Second, the agreement is transparent. You can read the agreement, without any redactions, here. At the same time, we remain concerned about the enduring price for health systems in high income countries and how the company will ensure access in the countries not covered by the MPP license. While not perfect, the agreement is vastly better than what the other companies have done.

The pharmaceutical industry deserves praise for producing safe and effective COVID-19 vaccines so quickly. Developing a vaccine takes an average of 10 years — if it works at all. Despite years of well-funded research, there are still no vaccines for HIV or malaria.

These vaccines are the product of innovative research, spurred by unprecedented public investment. Operation Warp Speed provided more than $10 Billion in support of vaccine makers for the development and expansion of manufacturing capacity. Another $825 million has been given in support of monoclonal antibody therapies. As of March, U.S. commitment to the CT-Accelerator stood at $6 billion. In April, President Biden pledged another $2 billion to the international COVAX effort.

Amid such vast public investment, most pharma companies have been pursuing monopolistic deals rather than getting those vaccines and therapeutics to everyone, everywhere, at the lowest cost possible, as quickly as possible. Merck’s agreement with the MPP goes a long way toward advancing access globally.

ICCR’s 2021 filings with Johnson & Johnson, Pfizer, Merck, and Eli Lilly, asked the board of directors to report on how public investment in vaccines and therapeutics is or will be accounted for in such things as settings prices. This is important because drugs can’t work if people can’t afford them. An increasing number of signs — the rise of coronavirus variants and our collective failure to mask up and maintain social distance — suggest that Covid-19 will become an endemic condition, much like the flu. Billions of us will likely need the vaccine each year. This is not an issue that only depends on governments. Corporations have an important role to play in ensuring equitable access to affordable, quality care. These resolutions asked pharma companies to account for their role in our collective fight against the Coronavirus. Many shareholders agreed with our concerns; 33% of Merck shareholders voted in favor of the proposal filed by the Capuchin Province of St. Joseph, 31.8% at Johnson & Johnson, and 29.9% at Pfizer (while the SEC allowed Eli Lilly to omit the resolution).

The MPP agreement has transparency that is lacking in the bilateral agreements signed before this one. Pfizer’s practice has been especially egregious. Only 6% of the text of contracts between vaccine-makers and countries remains after redactions. The non-redacted material suggests particularly harsh terms for Latin American countries including Brazil, Colombia, the Dominican Republic, and Peru. The Guardian reports that Pfizer has held Brazil “to ransom,” including putting up sovereign assets as collateral to guarantee indemnity. Public Citizen outlines some of Pfizer’s draconian terms here.

We do believe that Merck’s decision to make the agreement with MPP is consistent with our proposal request. We now hope that Johnson & Johnson, Pfizer, Moderna, and so many other pharmaceutical companies follow Merck’s lead and make these lifesaving medications available broadly through mechanisms like the MPP and to do so in terms that are transparent.

Connecting faith and finance for 50 years, ICCR had a hand in the early years of the Medicines Patent Pool. The MPP, established in July 2010, in response to the global HIV/AIDS epidemic, had difficulty acquiring commitments from pharmaceutical companies. In February of 2011, ICCR hosted a multi-stakeholder roundtable including representatives from the MPP, leading pharmaceutical companies, NGOs such as Doctors without Borders and Oxfam, as well as intergovernmental organizations like the World Health Organization, to explore and work through some of the barriers to entering the patent pool. In response to investor encouragement, Gilead Sciences became the first company to join the MPP in 2011, sharing licenses with generics manufacturers for its vital HIV and Hepatitis B drugs. (To learn more, read this report.)

For more information about the Merck-MPP agreement, please, read the ICCR press release here.

SGI launches new four-year strategy

SGI launches new four-year strategy

Chris Cox

At the Oct. 12th member meeting, SGI members approved the adoption of the strategic plan for 2022-2025. Building upon the 2018 strategic plan, this one continues in the framework of the three pillars from the previous plan: Making a Difference, Empowering Members, and Building Capacity. The new plan comes at a confluence of significant events: the COVID-19 pandemic, rising concern for the climate crisis, and a renewed awareness of the call for racial justice and equity, as well as a growing interest in sustainable investing.

SGI Board President Cindy Bohlen said, “I am so very thankful for the contributions of members and staff to the development of this strategic plan. It gives direction and invites collaboration toward fulfilling 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.’ This work is imperative to build a resilient society for all.”

To read the plan in full, please visit here.

Time to Reckon with Insider Trading

Time to Reckon with Insider Trading

Chris Cox

News outlets have unleashed an avalanche of allegations of insider trading:

These articles heighten a sense to ordinary people that the system is rigged; they call for significant action, but major problems remain unattended.

Insider trading consists of buying or selling a security, being in possession of material, nonpublic information (MNPI) about the security, in breach of a fiduciary duty or other relationship of trust and confidence. The action is damaging whether one is the person who shared or “tipped” the information or the person who traded the securities based on the information. The trading can occur in the anticipation of “bad” news for a company, selling before the stock crashes, or it may coincide with the announcement of favorable news and a stock rising to new heights.

As executives and board members regularly are exposed to MNPI, the window of opportunity to trade their own shares without violating insider trading rules is narrow. So, the SEC adopted Rule 10b5-1 in 2000, which allows insiders of publicly-traded corporations to set up a trading plan – whereby the executive sells a predetermined number of shares at predetermined intervals –  to facilitate effective selling of personal shares of company stock.

Professor Daniel Taylor of the Wharton School at the University of Pennsylvania has done a deep dive into Rule 10b5-1, and his research has exposed some “cracks” in this system that are ripe for abuse. He and his colleagues reported on some “red flags” in January of 2021:

  1.  An archaic paper-filing system for sales from Rule 10b5-1 plans. A simple remedy is to make them digital and put on the SEC website through the EDGAR portal.
  2. Rule 10b5-1 requires no interval between the creation of a plan and its execution. A recent study found that more than one-third of the plans adopted in a given quarter saw an insider execute a trade before that quarter’s earnings announcement, avoiding considerable losses. A remedy to restore confidence would be to require a cooling off period of four to six months.
  3. Some insiders create Rule 10b5-1 plans to effect a single trade. Prohibiting this option makes for a reasonable remedy.
  4. Some insiders create multiple Rule 10b5-1 plans to run concurrently and cancel all but the most advantageous plans. Prohibiting a single person or entity to have more than one Rule 10b5-1 plan at a time would advance the credibility of the system.
  5. Currently, the Form 4 disclosures of insider trades lack relevant information. The date of plan adoption or modification provides greater transparency.
  6. Boards and/or compensation committees may not be giving sufficient oversight to the issue. The board or compensation committee should monitor executive stock sales.

(If you prefer a podcast, Taylor describes the issue here.)

In June, Chairman Gary Gensler acknowledged that “these plans have led to real cracks in our insider trading regime” and asked the SEC staff for recommendations on how to “freshen up” Rule 10b5-1. As well, the Investor-as-Owner Subcommittee of the SEC Investor Advisory Committee has released draft recommendations and discussed the topic at its September meeting.

Even if the studies by Professor Taylor and his peers cannot determine with absolute certainty whether any insiders that avoided losses or otherwise achieved “market-beating returns” actually traded on the basis of MNPI misses the point; insider trades must not only be legal, they must also appear ethical. The current system allows for far too much ethical ambiguity and erodes basic trust in the common good.

“Effective governance is a pillar of sustainable companies,” according to Cindy Bohlen of Riverwater Partners. “Executive alignment with company success is a governance factor considered important by many investors, including Riverwater. It is imperative that insider trading rules allow executives to share in the success of the businesses they run, while at the same time ensuring they are not afforded preferential outcomes given their insider status.”

Donna Meyer to receive SGI’s 2021 Fr. Mike Crosby Award

Donna Meyer to receive SGI’s 2021 Fr. Mike Crosby Award

Chris Cox

The Board of Seventh Generation Interfaith Coalition for Responsible Investment is pleased to announce that Donna Meyer, recently retired from Mercy Investment Services, has been selected to receive the 2021 Fr. Mike Crosby Award. The award will be presented at the SGI member meeting and conference on October 12. 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’re so happy to recognize Donna with the Fr. Mike Crosby Award. In addition to working closely with Father Mike in tobacco engagements, she has been a leader in ICCR and beyond by promoting health equity for the most vulnerable in our society,” said Frank Sherman, SGI executive director. He added, “Companies and investors alike recognize Donna for her knowledge and compassion. Mike is smiling today!”

Donna Meyer

“Through her quiet but steadfast dedication, and gracious leadership, Donna has promoted health equity and helped improve the health of local and global communities,” said Katie McCloskey, vice president of social responsibility at Mercy Investment Services.

Donna Meyer, PhD, was Director of Shareholder Advocacy for Mercy, where she specialized in Public Health and Health Services. She actively participated with the Interfaith Center on Corporate Responsibility (ICCR), serving alongside Fr. Mike on its board from 2007 to 2013 and using her expertise in health care and public health to provide leadership for domestic and global health issues. Recently, she helped lead the focus on increasing access to COVID vaccines and treatments.

Throughout more than two decades of shareholder advocacy, Donna was a regular collaborator with Fr. Mike. Fr. Mike collaborated with Donna in the design of the SRI program for CHRISTUS Health, and he guided her into an engagement about the sale and advertisement of tobacco products that was her first “win.”

Donna also served as co-chair of the Investors for Opioid and Pharmaceutical Accountability (IOPA). The IOPA is a coalition of 61 investors with $4.2trn in combined assets under management. In four years, this coalition has engaged major opioid manufacturers, distributors, and retail pharmacies on gaps in governance and oversight, leading to companies pulling back pay from executives, producing public reports on their board oversight of opioid-related risks, and instituting oversight committees.

Donna’s career in healthcare administration includes serving on the Board of Directors of a number of health-related organizations. She currently serves on the Board of the Texas Health Institute and as a member of the Catholic Health Initiatives (Common Spirit) Mission and Ministry Board Committee. She is a Fellow of the American College of Health Care Executives; she earned her BS and MS from the University of Minnesota and her Doctorate from the University of Texas School of Public Health.

Please join us in congratulating Donna!

John Ruggie, human rights icon, dies at 76

John Ruggie, human rights icon, dies at 76

Chris Cox

Some SGI members may not recognize his name, but much of our work in human rights over the last 20 years has been built upon John Ruggie’s vision, imagination, determination, and political skill.

John G. Ruggie, a Harvard professor who developed the U.N. Global Compact and its Guiding Principles on Business and Human Rights (UNGPs), died on Thursday, September 16, at age 76.

SGI joins with so many who mourn the passing of this icon in human rights. May we, who believe in the work that he advanced, continue the efforts that he initiated.

Ruggie was a professor at Harvard’s Kennedy School of Government. From 1997-2001, he served as United Nations Assistant Secretary-General for Strategic Planning, a post created specifically for him by then Secretary-General Kofi Annan. His areas of responsibility included assisting the Secretary-General in establishing and overseeing the UN Global Compact, now the world’s largest corporate citizenship initiative; proposing and gaining General Assembly approval for the Millennium Development Goals; and broadly contributing to the effort at institutional reform and renewal for which Annan and the United Nations as a whole were awarded the Nobel Peace Prize in 2001. In 2005, Annan appointed Ruggie as the UN Secretary-General’s Special Representative for Business and Human Rights, tasked with proposing measures to strengthen the human rights performance of the global business sector. In June 2011 the UN Human Rights Council, in an unprecedented step, unanimously endorsed the UNGPs that Professor Ruggie developed through extensive consultations, pilot projects and research. The UNGPs, dubbed the “Ruggie Principles,” celebrated their 10th anniversary this year.

I’d recommend reading these tributes to his work:

What’s all the Fuss about Exxon Mobil and Investors lately?

What’s all the Fuss about Exxon Mobil and Investors lately?

Chris Cox

By Sr. Barbara Jennings, CSJ

On May 26, 2021, a little known investment company called Engine No. 1 challenged and won a proxy battle with one of the world’s largest public oil and gas companies, Exxon Mobil.  Three of Engine No. 1’s four proposed Board Members who have qualified energy industry experience were elected to the board. They will challenge company management to transform their business model for a low carbon economy, which will benefit all stakeholders including workers and shareholders alike. 

Shareholder elected Greg Goff, former CEO of Andeavor and EVP of Marathon Petroleum who thinks that mitigating climate change is part of corporate responsibility; Kaisa Hietala, a former VP of Finnish renewable energy company, Neste Oyi; and Alexander Karsner, a strategist at Alphabet, Inc.  These three candidates beat out three of Exxon Mobil’s current, reelected board members. 

Shareholders proposals co-filed by members of the Seventh Generation Interfaith also received majority votes at the Exxon Mobil AGM. Dana Investments, the Capuchins, and the School Sisters of Notre Dame, Central Province co-filed a proposal asking for a report on climate lobbying (64% vote). The Sisters of St. Agnes co-filed the proposal asking for broader lobbying disclosure (55% vote). The Dubuque Franciscan’s co-filed the separate chair proposal (22% vote). Members of SGI and ICCR also co-filed successful climate proposals at Chevron, ConocoPhillips and Phillips66. 

Members of ICCR have dialogued and filed shareholder resolutions at Exxon Mobil since the early 1990’s. The company always responded with platitudes about their amoeba studies for alternative fuels, but refused to set targets or goals.  What has changed?

Here are my educated guesses:

  1. The Time has come! Finally, extreme weather events and consistent calls from scientists have increased public awareness of climate change, although a decreasing percentage remain climate deniers. Climate Activists like Greta Thunberg are finally getting through to all of us, especially to young people.
  2. It is irrefutable that drilling, and burning petroleum produces is a major cause of climate change as well as of human rights abuses. The latest IPCC report removed any uncertainty: “It is unequivocal that human influence has warmed the atmosphere, ocean and land.” 
  3. There is growing popularity of ESG strategies. It has become easier to invest sustainably through many asset managers. Bloomberg projects ESG assets may hit $53 trillion by 2025, a third of global AUM.
  4. The International Energy Agency (IEA) Net Zero by 2050: a Roadmap for the Global Energy Sector report published shortly before the Exxon Mobil AGM called on governments and companies to stop investment in new fossil fuel supply projects or coal plants; no sales of new internal combustion engine passenger cars after 2035; and net-zero emissions in the global electricity sector by 2040.
  5. Pope Francis continues to remind us to care for our common home. The Vatican released 14 recommended actions in June 2020, including ‘ethical responsible and integral criteria for investment decision making.” The Vatican Dicastery for Promoting Integral Human Development urges that Church divestment from fossil fuels and reinvestment in renewables is a moral imperative.
  6. The U. S. Catholic Bishops are reviewing their Socially Responsible Investment Guidelines for the first time in 20 years. Bishop Gregory Parkes, USCCB Treasurer, who worked in the banking industry before entering the priesthood, is seeing the “financial writing on the wall” for fossil fuel companies who will not or cannot diversify. 
  7. A U. S. House subcommittee is “demanding that Exxon Mobil, Shell, Chevron testify before Congress about the industry’s decades-long effort to wage disinformation campaigns around climate change.” (St. Louis PostDispach, July 3, 2021 and New York Times, June 16, 2021) 

The majority votes at Exxon Mobile indicate a tipping point in pushing fossil fuel companies to transition to low-carbon business models. SGI and ICCR members have persisted and led the way with corporate engagements…and are continuing to see success. 

What’s a “Good Buy?”

What’s a “Good Buy?”

Chris Cox

According to the latest statistics released by the American Apparel & Footwear Association: In 2020, on average, every man, woman, and child in the United States spent $1,067.93 to buy 51.8 pieces of clothes and 5.8 pairs of shoes. Normally, those numbers are higher, but the COVID-19 pandemic reduced them.

In Laudato Si’, Pope Francis reminds us: “Purchasing is always a moral – and not simply economic – act” (#206).

We have five times more clothing today than 40 years ago. We prize bigger, walk-in closets to accommodate our clothes. Clothing purchased this year will have seven uses on average before being discarded by the purchaser.

That’s a lot of clothing with a hefty impact on carbon emissions and the climate crisis. That’s a lot of stuff sitting in people’s closets. That’s a lot of that ends up in landfills.

Our overflowing landfills aren’t the only obvious signs of a “throwaway culture.” The purchase of discardable clothing lends itself to thinking of the workers as disposable as well.

The old notion of a “good buy” is that it is cheap and makes you look thin. A renewed notion: a “good buy” has ethical content. How was it sourced? How does it care for creation? How were the workers treated in the making of this garment? Were they paid a living wage?

In April 2021, 200 ICCR members and affiliates signed the ICCR Investor Statement Calling for Renewal of Bangladesh Accord, a month before the agreement was set to expire. A brief extension of the Accord secured protections for worker rights and remedy solutions for 2 million workers at 600 factories through August 31st. We are delighted that the Accord has been renewed and expanded for two years as the International Accord for Health and Safety in the Textile and Garment Industry. This new Accord takes effect on September 1, one day after the current Bangladesh Accord is set to expire. Like its predecessor agreement, the new International Accord is a legally binding agreement between companies and trade unions that aims to make ready-made garments (RMG) and textile factories safe. True to its new title, the new Accord aims to expand these safety standards and worker to other countries and labor markets using the Bangladesh Accord model.

A list of signatories to the International Accord is available here. While it includes American labels like Fanatics and PVH (owner of Tommy Hilfiger, Calvin Klein, Warner’s, Olga and True & Co., and licenses brands such as Kenneth Cole New York and Michael Kors), we are disappointed that U.S. companies like Costco, the Gap, Kohl’s, Macy’s, Target, TJX (owner of TJ Maxx and Marshalls), and Walmart are not yet signatories. This roster of American non-signatories aligns with those who refused to join the Accord in 2013, opting to create the now defunct Alliance for Bangladesh Worker Safety instead. Given that a fire swept through a garment factory, killing 17 people in Pakistan on Friday (8/27), worker safety remains an urgent concern and requires multilateral action. To sit on the sidelines is irresponsible.

Connecting the first section of this post with the second, I’d suggest that, while we, as consumers, can “buy better,” the Accord, a legally binding, multi-stakeholder agreement, advances commitments to worker safety in ways that corporate “codes of conduct” and audits cannot. If a company hasn’t signed it, the onus is on them to demonstrate that they are doing something better.

Please see the New York Times and Reuters articles for more background on the new Accord.

Do You Know Where Your Asset Manager Is (on climate)?

Chris Cox

By Frank Sherman

This article augments an earlier blog by John Mueller of Dana Investment Advisors on Questions to Ask Your Money Manager.

There is a growing recognition within the financial sector of its responsibility, as well as its power, to transition the economy to a low carbon future.  The Glasgow Financial Alliance for Net Zero (GFANZ), representing $70tn in assets, is committed to achieving the objective of the Paris Agreement to limit global temperature increases to 1.5°C. Combined with Net Zero commitments from countries representing approximately 70% of global GDP, it sounds like the world has turned the corner on climate change. However, there is a gap between these long term ambitions and short term actions. The latest round of UN Nationally Determined Contributions (NDC) put the world on track for less than a 1% reduction in emissions by 2030 vs. 45% called for by the Intergovernmental Panel on Climate Change (see Responsible Investor, Aug 17, 2021).

As a small asset owner, what can an SGI member do to ensure they are part of the solution rather than contributing to the problem? One easy strategy is to ask your asset manager about their climate stewardship activities, including proxy voting. The UN-convened Net-Zero Asset Owner Alliance, part of the GFANZ composed of over 40 institutional investors (including some ICCR members), recently released a new resource designed to help asset owners set expectations for, evaluate, and engage with asset managers on their climate-related proxy voting activities. As well, the resource is useful to asset owners who retain the right to vote their shares or to those asset owners with internally managed portfolios by integrating the principles into their own proxy voting and asset manager selection, appointment, and monitoring processes. These foundational guidelines are centered on four themes: governance, interest alignment, merit-based evaluation, and transparency. They help asset owners construct their own expectations of their asset managers’ proxy voting approaches.

Many asset managers have already made the commitment to align their portfolios with net-zero as part of the Net-Zero Asset Manager Initiative (NZAMI), which is also part of the GFANZ. Among the 128 signatories with $43tn in assets under management have already signed on to this Initiative are some of the biggies like Blackrock, Vanguard, and State Street. If you find your asset managers are part of NZAMI, you have the opportunity as a client to ask about how they are actualizing this goal within their management of their portfolio. If your asset managers have not yet signed on to NZAMI, you should ask them “why not?” I suggest you share this resource with your Investment Committee with a recommendation to review your own proxy voting guidelines and your expectations set with your asset management service providers. At the same time, you may want to challenge your Investment Committee to consider signing on to the Net-Zero Asset Owner Alliance themselves. As Blackrock’s Larry Fink has made clear, “climate risk is investment risk.”