Supreme Court rules on Nestlé USA, Cargill child labor case

Today, in an 8-1 ruling, the Supreme Court issued a decision in favor of two corporations accused of links to child slavery in the Ivory Coast. The case, Nestlé v. Doe, was a lawsuit brought by six Mali citizens against the companies Nestlé USA and Cargill. The lawsuit claimed that the chocolate makers aided and abetted child slavery on African cocoa farms, reversing a ruling that allowed the claims to proceed under the Alien Tort Statute (ATS). Writing for the majority, Justice Clarence Thomas said the companies’ activities in the United States were not sufficiently related to the alleged abuses to be subject to suit under the ATS. The decision, the latest in a series of rulings, sets increasingly strict limitations on federal lawsuits based on foreign human rights abuses. Justice Samuel Alito wrote the lone dissent.

I wrote about the December 2020 oral arguments here. The decision feels like a setback, especially as we observed World Day Against Child Labor just last week (June 12th), and, yesterday, the U.S. State Department heralded the 10th anniversary of the UN Guiding Principles on Business and Human Rights (UNGPs):

These principles recognize a three-pronged approach to protecting human rights in the context of business activity: States have the duty to protect human rights; businesses have a responsibility to respect human rights; and victims affected by business-related human rights issues should have access to remedy. We commemorate the achievements made over the last decade in these areas, and take heed of the substantive work that still needs to be done toward realization of these principles.

Antony JBlinken, Secretary of State, Press Statement

While the Supreme Court ruled in favor of Nestlé USA and Cargill, hope is not lost. The majority of justices rejected a notion of corporate immunity under the statute. The ruling continues to hold that corporations can be sued under international law for actions within their supply chain. The case will be remanded to a lower court where the six trafficked children will seek to amend their case in such a way as to satisfy today’s ruling. I join in the hopes that they have their day in court and that justice is done.

Taking “heed of the substantive work that still needs to be done,” SGI urges Nestlé and Cargill to take action to action to eliminate the grave crime of child slavery from their supply chain, and we will continue to call upon all companies with whom we engage to see and act on their responsibility for protecting and respecting human rights and providing remediation for those instances were human rights have been violated.

Human Rights Remain a Focus

SGI members have been engaging mac & cheese and ketchup producer, Kraft Heinz, on issues including nutrition, deforestation, and human rights for several years. In 2019, Kraft Heinz published a Human Rights Policy after withdrawal of a shareholder resolution filed by The Capuchin Province of St. Joseph. Subsequently, after an ESG materiality assessment, Kraft Heinz ranked human rights as among the issues with the greatest impact on the company and of most importance to its stakeholders. 

The Capuchins and other SGI and ICCR members continued to engage the company on the implementation of their new policy. However, their lack of transparency and slow progress on implementing a due diligence process resulted in a low score of 21 out of 100, ranking 27 out of 43 companies on the most recent Know the Chain Benchmark, which has also identified tomatoes, cattle, and coffee being sourced by Kraft Heinz as having a high risk of human rights abuses. This was further confirmed by the Corporate Human Rights Benchmark who scored Kraft Heinz 7.5 out of 26, including 0 points on Human Rights Due Diligence. 

Given this lack of progress, SGI members filed a second proposal asking the company to complete a Human Rights Impact Assessment to “mitigate against significant operational, financial, and reputational risks associated with negative human rights impacts throughout its supply chain.” Although the company undertook a global human rights risk assessment last year, they did not publish plans to complete a due diligence process. However, they have committed to undertake third-party due diligence audits prioritizing the most problematic countries and commodities identified in its risk assessment. Kraft Heinz further acknowledged that social audits are not designed to capture sensitive labor and human rights violations such as forced labor and harassment, and their due diligence audits will engage workers in a meaningful way to determine root causes and address remediation and capacity building. Based on this commitment, shareholders withdrew the proposal.

Despite the movement that we are seeing from the company, Kraft Heinz remains one of 106 companies whom ICCR members and allies are engaging on their weak human rights policy implementation. ICCR’s Investor Alliance for Human Rights reached out to those 106 companies, including others engaged by SGI members: Kohl’s, Macy’s, Phillips 66, TJX, and Yum! Brands, about scoring 0 across the human rights due diligence indicators in the Corporate Human Rights Benchmark (CHRB) 2020 Report. 

The statement sent to each company explains that “Companies need to know and show their respect for human rights under the UN Guiding Principles for Human Rights, through public disclosure of the implementation and ongoing results of human rights due diligence processes.” Similar to corporate greenwashing, companies often rely on policies, codes of conduct, and traditional audits which have been shown to be insufficient in addressing and remediating human rights impacts.

While it is important for a company to understand their material financial risks, a holistic human rights policy requires understanding of their salient risks. These salient risks focus on the risks to people rather than the financial performance of the company. Implementing a human rights policy and doing the proper due diligence is required for a social license to operate and should not create an internal dilemma. This is about fair and just treatment of people. It is not a question of if this needs to be done; it is a question of why it has not already been done. 

Fast Food – Slow (but steady) Momentum

As some of the most recognizable, cultural icons that dot the American (and global) landscape, it’s hard to go without seeing a growing drive-through line or an ad for a new product at a local chain restaurant. SGI members have engaged fast food and other consumer based companies on a variety of issues for years.  

In the fast food sector, oftentimes we are urging companies to make improvements that some of their competitors have already made and are now expected. After a resolution is filed, a withdrawal generally means progress. Or at least, movement. 

SGI members have been involved in a campaign led by Ceres and FAIRR, targeting fast food companies to improve their meat sourcing. These chosen companies are vulnerable to impacts of climate change, water scarcity, and other threats due to protein production. A FAIRR report states, “agricultural emissions, including those from meat and dairy, are on track to contribute approximately 70% of total allowable GHG emissions by 2050, creating an 11 gigaton mitigation gap required to stay under the 2°C threshold.” Of the six companies engaged in this campaign, SGI members lead on three: Wendy’s, Restaurant Brands International (RBI), and Yum! Brands. 

After slow movement from Wendy’s, investors filed a resolution asking for a report on whether and how the Company plans to measure and reduce its total contribution to climate change, including emissions from its supply chain, and align its operations with the Paris Agreement’s goal of maintaining global temperature increases well below 2°C. This increased disclosure and target setting would not only be beneficial in reducing the company’s climate impacts but benefit consumers and shareholders. 

The proposal was withdrawn as Wendy’s has committed to pursue Science Based Targets (SBT) for Scope 1, 2, and 3 emissions. Yum! Brands has been committed to the SBT process since a shareholder proposal in 2019 and has approved 2030 targets, including reducing GHG emissions by 46%, required to keep global warming to 1.5°C. RBI has also recently committed to the SBT process.

This is just a first step for these companies. As investors increasingly look for climate disclosure and transparency on environmental issues, setting SBT has become a trusted benchmark in addressing the climate crisis. Investors are encouraged by the move towards stronger climate targets and will use this momentum to continue this campaign working with these companies on water impact and water use. 

Pay and Wealth Disparity: Still our greatest social challenge

By Frank Sherman

Sister Sue Ernster’s (Franciscan Sisters of Perpetual Adoration) proposal on racial equity & starting pay at the Walmart AGM earlier this week obtained strong shareholder support for a first-time resolution (12.5% of total shares or 27% of independent shares voted). Congratulations to Sue and the many ICCR co-filers.

I’m reminded of Father Mike Crosby’s 2015 campaign on income disparity. At that time, President Obama called the growing pay & wealth gap in our country “the greatest social challenge of our time“…. and it hasn’t gotten better since then. We didn’t get very far back then after the SEC’s sided with the companies, permitting them to omit our proposal from the proxy based on the “ordinary business” exclusion.

Starting in 2011, the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 required companies to include disclosure of the total compensation of the top 5 paid executives in their annual proxy statements. Shareholders are allowed to cast a non-binding advisory vote for or against these pay packages (“say-on-pay”). Very few companies “failed” their say-on-pay vote in recent years. A failure occurs if the company does not obtain majority support from shareholders for the executive compensation proposal.

The tide may be shifting. Twice as many say-on-pay proposals failed this year as in previous years, including some companies that had never had a failure in these resolutions. As You Sow’s Rosanna Landis Weaver does great work digging through the fine print of the “Compensation Discussion and Analysis” section of each company’s proxy statement with an annual report on the 100 Most Overpaid CEOs. A recent NEI article on CEO compensation (A Promising Start To The Challenge Of Excessive CEO Pay) notes that support for pay packages among S&P 500 firms fell to an average of 87%, down 3 percentage points from 2020 and 2019, and down 4 points from 2016 to 2018. It references a report from the Institute for Policy Studies (Pandemic Pay Plunder: Low-Wage Workers Lost Hours, Jobs, and Lives. Their Employers Bent the Rules – to Pump up CEO Paychecks) which found that 51 of the S&P 500 firms with the lowest median worker wage revised their pay rules in 2020, so that median worker pay fell 2%, while CEO pay rose—by 29%.

Investors pushed corporations to tie their pay packages to stock performance (…to better align management pay with investor returns) in the early ’90s. Little did they know that this would be used by companies to successively ratchet up CEO, and as a result, the rest of management’s, comp packages every year to a level that makes U.S. CEOs stand out on the global stage.

The Dodd–Frank Act also required companies to disclose the ratio of CEO compensation to the median compensation of their employees. The rule has only been in effect since 2017, but the SEC allows companies “substantial flexibility” in the calculation of the ratio, making it difficult for investors and society to make meaningful comparisons.

Of course, CEO’s know that their pay relative to the median pay of their workers is out of control. But even if they wanted to change this (and I’m not sure many “want” to do so), they are reluctant to be a first mover on restructuring pay because it would “negatively impact retention and make them less competitive”.

As we complete the next draft of SGI’s strategic plan and think about our engagement focus for the 2022 season (which starts this summer), I believe pay disparity has to be high on our list. I hope you concur.

FSPA begins compensation project as it joins the Fight for $15

By Sister Sue Ernster, Vice President & Treasurer/CFO, FSPA


In appreciation of our valued partners in mission and in support of the actions of ICCR, SGI and Raise the Wage Act of 2021, FSPA has partnered with Wipfli consultants to begin a compensation project that will ultimately raise our organization’s minimum wage to $15 in 2021. 

According to the Franciscan Sisters of Perpetual Adoration (FSPA) Leadership Team, “This isn’t just about economic justice. We recognize our partners in mission serving on staff are gold. We’re advocating for livable wages and we want it to start at home. We’re investing in our partners as they help us carry forward our mission.” The FSPA Merged HR Team note that all wages are evaluated annually, which will continue after the new minimum wage is in place.

FSPA stands with ICCR calling on the federal government to “implement a mandatory minimum wage of at least $15 per hour as a floor, with an eye towards establishing a living wage standard.” ICCR’s 300-plus faith and values-based institutional investors view the management of their investments as a catalyst for social change. In addition, the Leadership Conference of Women Religious Region 9, of which FSPA is a part of, is also advocating for living wages. This is in line with Pope Francis’ Easter message of solidarity with movements that support workers’ dignity through changing economic structures, including consideration of a universal basic wage.  

As our compensation project and advocacy for a living wage intersects with our commitment to unveil our white privilege. Throughout 2021, guided by our Dismantling FSPA Racism Team, we will work to raise awareness of our participation in systemic racism, analyze our congregation’s anti-racist vision and act authentically for racial equity.

FSPA recently took the lead in advocating for racial and economic justice by filing a shareholder resolution (see our exempt solicitation) with Walmart, calling for a higher starting wage — intersecting our compensation project and advocacy with our 2018 commitment to unveil white privilege. Walmart’s low starting wages are not aligned with the its professed values of respect for the individual and promoting healthy communities or its commitment to sustainability. Boosting wages for the lowest paid employees, which are disproportionately people of color, would advance Walmart’s stated commitment to racial justice. Remedying systemic racism provides everyone with tangible benefits. Wages are the most important element of employee compensation, according to Walmart Associates, and the negative effects of lower wages undermine their ability to serve the customer.

Our community is also growing our impact investing. Our 2020 Seeding a Legacy of Healing initiative will usher in a second round of seeding grants including the Apis & Heritage Capital Partners, whose mission  is to attack the racial wealth gap to restore dignity and status to the American Worker. A second investment in the Religious Communities Impact Fund will benefit the economically poor, especially women and children, concentrating on those who are unserved or poorly served through traditional financial sources.

As Pope Francis says in Evangelii Gaudium (The Joy of the Gospel), “The dignity of each human person and the pursuit of the common good are concerns which ought to shape all economic policies” (#203). The dignity of each person can be recognized through fair wages.

Webinar: Proxy Voting

On April 16th, SGI’s quarterly member webinar examined how the engagement season will be shaped by the pandemic and racial justice issues. We are grateful that Michael Passoff of Proxy Impact and Meredith Miller of the UAW Retiree Medical Benefits Trust joined us to enrich our conversation. We had some great interaction in the question and answer period, and, if a member missed it, please, email a staff member for a link to the recording.

Every year, billions of shares are voted at more than 3,000 shareholder meetings of public companies. “Proxy plumbing” is an informal name for the system by which proxy materials land in shareholders’ mailboxes each year. The name is apt. Today’s proxy plumbing is confusing, inefficient and expensive, much like some interconnected jumble of water pipes, joints and faucets. Michael and Meredith helped give us a clearer understanding of how shareholders can better navigate the maze.

Again, we are very grateful for the presence of Michael and Meredith 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.

SGI Joins Business Leaders In Calling For Aggressive Climate Targets

By Frank Sherman

President Biden will host 40 world leaders next week in a virtual Leaders Summit on Climate to galvanize support to tackle climate change. Having rejoined the Paris Climate Agreement on his first day in office, Biden wants to retake global leadership of this existential issue to underscore the urgency and economic benefits of stronger climate action.

Before the Leaders Summit, the Biden Administration will announce a new U.S. Nationally Determined Contribution (NDC), an emissions reduction target for 2030. Upon signing the Paris Agreement in 2015, each of the 190 participating countries submitted their initial NDC. President Obama pledged to cut U.S. emissions by 26-28% below 2005 levels by 2025. We are currently less than halfway to our original goal. Under Paris, countries are expected to submit updated commitments every five years.

Today, the We Mean Business Coalition announced that 310 businesses and investors, including Google, McDonalds, Walmart, CalSTRS……and Seventh Generation Interfaith, have signed an open letter to President Biden indicating our support for nearly doubling the emission reduction targets set by the Obama administration. This is consistent with the Intergovernmental Panel on Climate Change (IPCC) conclusion that, to have any chance of limiting temperature rise to 1.5˚C, global emissions must fall at least 50 percent by 2030. Corporate executives called the 50% reduction target “ambitious and attainable.”

For SGI, the decision to sign is fairly straight-forward. The COVID-19 pandemic and racial justice concerns may have overshadowed the climate crisis in the news much of last year, but the climate crisis will continue its march as the 21st century’s most dangerous and intractable threat. Hence, SGI members continue to engage companies to address the risks and opportunities of the warming planet.

Business leaders’ decision to break with Republicans in the post-Trump era follows similar moves on voting rights and racial justice. They risk further alienating Republicans by pressing Biden to aggressively combat climate change. But they also recognize the risks and the benefits posed by the climate crisis. In a counter argument to the fossil fuel narrative that climate action will cost jobs and raise energy costs, Patrick Flynn, vice president of sustainability for Salesforce, which signed on to the letter, said he hopes businesses will lobby Congress to support the Biden administration’s target. “We know it will create millions of jobs, we know it’s a good thing for the economy, and we know if we do it right we can do it in a way that leaves no one behind” (NYT, April 13, 2021).

These are historic times. When your grandchildren ask you someday in the future… “where were you when these decisions were being made?,” you’ll be able to tell them that you were on the right side of history.

Socially Responsible Investing requires effort

Tariq Fancy, BlackRock’s former chief investment officer for sustainable investing, made a startling confession in a recent USA Today editorial:

In essence, Wall Street is greenwashing the economic system and, in the process, creating a deadly distraction. I should know; I was at the heart of it.

Fancy went on: “In truth, sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community.”

It’s quite an indictment from a significant voice in the ESG sector, but, based on my personal experience working for Seventh Generation Interfaith for the past several years, I do not believe that it conveys the whole truth of the matter.

Yes, there are asset management firms that over-hype their ESG product. They slap an ESG label on a fund that screens out certain sectors and perhaps speak to a few companies about their climate actions and sell it at a higher price than non-ESG products. A recent Wall Street Journal article reported 43% higher fees for ESG products in one class of assets. Visit a grocery store, and a higher-priced item with a “Naturally Raised” or “Fresh” label may attract more consumers, even if neither quality is in any measurable sense true. The old Latin adage holds: Caveat Emptor! Buyer beware!

When we look under the hood, so to speak, at many ESG funds, there are reasons to be concerned.

Even as investors demand ESG investments, those funds labeled ESG may not always reflect investor preferences in their proxy voting. Last month, a study from Robeco Asset Management and the Erasmus University of Rotterdam School investigated a decade of proxy voting data, and concluded that large, passive asset managers vote the least in favor of ESG proposals. Further, PRI signatories in the U.S. did not even vote their proxies as well as other U.S. firms that did not describe themselves with an ESG label. Fiona Reynolds, CEO at PRI, recently responded to the report with a commitment to take action. Reynolds went on to give an unusual warning: “being a PRI signatory should not be the only due diligence test for investors.” 

Asset owners who rely on negative screens and “ESG” funds can be misled. Vincent Deluard of StoneX authored a recent report entitled “The ESG Bubble: Saving the Planet and Destroying Societies.” Deluard points to blind spots in customary ESG screens. He notes, “companies with a high ESG rating pay a much lower tax rate than their less virtuous peers.” As well, he observed that “ESG funds are biased against humans: the 15 most highly-rated companies employ just 1.9 million workers, versus 5.1 million for the 15 worst-rated ones.” He concludes: “By channeling more money towards these (already wealthy) companies, ESG funds are unconsciously worsening the social and political crisis associated with automation, inequality, and monopolistic concentration.”

While Deluard’s study can cause suspicion of all ESG products, there are hopeful signs on the horizon. Last week, acting SEC chair Allison Herren Lee spoke to the proxy voting issue, saying, “We know investors are demanding ESG investment strategies and opportunities, but funds may not always reflect those investor preferences in their voting” and suggested that the SEC may need to take action on proxy voting disclosure. Further, Gary Gensler, the nominee to lead the Security and Exchange Commission, has indicated that he favors greater ESG disclosures, and the SEC as a whole is making ESG a priority. Most importantly, there are firms that do the hard work. For an asset owner, asking good questions of an asset manager can help discern if the firm is committed to doing this work. [We will soon have a blog post that examines some good questions to ask.] 

The faith community, with ICCR leading the way, has pioneered socially responsible investing for fifty years. Many asset managers and advisors who are ICCR members are not doing the greenwashing that Mr. Fancy called out. And SGI members recognize their fiduciary responsibility and power of ownership to change the system for the better. SGI members create value by improving the conduct of portfolio companies and, at the same time, create real world impact for people and planet.

Investor Engagement by a Novice

By Judy Sinnwell, OSF Dubuque

A year after retiring to Mount St. Francis in July 2015, the president of our congregation asked if I would facilitate the formation of what came to be the Sisters of St. Francis-Dubuque SRI Working Group. My previous ministry experience was elementary education-administration, adult formation, licensed health practitioner and after-school tutoring in the rural south. Saying ‘yes’ acknowledged that the topic would be interesting and that the ‘working’ part of the label would have me personally engaged in a significantly new arena addressing life’s meaning and purpose.

And so it has! Especially in recent years, as active ownership has effectively increased its voice and influence in the investment arena. Belonging to a faith- and values-based investor coalition, Seventh Generation Interfaith based in Milwaukee, provided education, professional resources, and mentoring in this important work, which for the Dubuque Franciscans, is a way of keeping our congregational mission alive.

One thing I became aware of in those first years was the annual general meeting, the AGM, which a company has for shareholders to weigh in on important company matters. Being a co-owner enabled me to file a shareholder resolution, challenging the company to make improvements in its governance, environmental and social practices. It seemed to be the right thing to do when we had the chance; but at times, it felt a bit intimidating. Recently, that was my experience as a co-filer on a resolution presented at the Tyson Food Inc. annual meeting.

The resolution asked for human rights due diligence in Tyson’s meat packing sites across the country. Iowa has several Tyson sites; one is in Waterloo, where Rath Packing Co. once had a positive reputation and provided a level of economic mobility for Blacks who migrated from the South until it was shut down in 1985. Learning about workers’ conditions during the COVID pandemic in Tyson’s Waterloo plant, where our congregation provided staff at two elementary and a central high school, became a concern and made this an obvious focus of our shareholder action.

When the resolution was made public and the AGM date was nearing, Investor Advocacy for Social Justice (a sister coalition to SGI) began to build awareness among the press and all shareholders who would have a proxy vote on the proposal during the meeting. Reporters from the Des Moines Register and Reuters contacted me for comment, specifically interested in the fact that ‘nuns’ were engaged with a national company; and the Iowa connection because of the negative news that had been previously reported about the Iowa Tyson site and COVID. Their news coverage educated readers about the broad impact of shareholder action. Each request also made me very aware that this experience was not something I anticipated when I agreed to facilitate a group investment effort five years previous!

Was it worth it? Definitely! Yes! Taking the chance to be the voice for marginalized sisters and brothers had to be done. It’s who we are as Dubuque Franciscans. And it stretched me. The support of faith-based and value-based organizations like SGI and IASJ made this possible as an investor. It’s what the world needs right now as one way to reclaim the commitment to the common good and the dignity of the individual person in the economic arena.

Essential Workers: COVID-19 and Racial Equity

On February 19th, SGI’s quarterly member webinar examined how the engagement season will be shaped by the pandemic and racial justice issues. We are grateful that Corey Klemmer of Domini Impact Investments and Hanna Lucal of Open MIC joined us to enrich our conversation. We had some great interaction in the question and answer period, and we added some resources that were shared in the webinar’s chat feature to a final slide in the slide deck.

At the start of the COVID-19 pandemic, many Americans were shocked at the sight of empty shelves in stores as global supply chains sputtered to keep up with the demand for a variety of products. The fragility of these supply chains has suddenly become evident to a lot of Americans who expect them to always operate seamlessly. Global supply chains connect people worldwide, from garment workers in Bangladesh to consumers in the United States. They are built to be ruthlessly efficient, manufacturing and delivering goods exactly when and where they are needed. The ability to move quickly and seamlessly across the globe also helps companies find cheaper labor or other opportunities to make products more cheaply. While this system may be good for corporate owners and supply chain managers, it takes a toll on workers. In the face of COVID-19, poultry workers literally put their life on the line every time they punch in to work. The opportunity of 2021 is to place worker dignity at the center of supply chain transformation plans.

The Black Lives Matter movement has also created an unprecedented urgency for a more genuinely diverse and inclusive workforce. The COVID-19 pandemic has inflicted devastating effects on the U.S. economy, with job losses, especially concentrated among women, minorities, and low-wage workers. It illustrates the systemic racism that lives in our financial institutions. Corporations are making statements in support of Black Lives Matter, but statements are easy. Ensuring that People of Color are hired, paid, promoted, and retained equitably is less so. We cannot allow the corporate response to be merely words. Together, we can compel action.

Again, we are very grateful for the presence of Corey and Hannah 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.