A hearty welcome to Riverwater Partners

As you likely know, last year, SGI added 5 new members, and we are grateful for the efforts of our members, in particular Mark Peters (an SGI board member, chair of our development committee, and director of Justice, Peace and Reconciliation for the Priests of the Sacred Heart), to encourage more organizations to join SGI and to make us genuinely an interfaith organization. We’d like to introduce our newest member, Riverwater Partners, to the broader SGI family.

Our members may have learned a bit about Riverwater Partners from a recent article from the Milwaukee Journal-Sentinel:
Wisconsin’s B Corporations want to be a force for good, not just profit.

Additionally, they describe their work in the following way:

Riverwater Partners, an employee-owned registered investment advisor, believes it is in the best interest of our clients, our firm, our communities, and our world to consider the Environmental, Social, and Governance (ESG) policies and practices of the firms in which we invest our clients’ assets, as we do at Riverwater Partners. Therefore, we evaluate potential investment candidates on the basis of their ESG efforts, alongside their more traditional investment characteristics of Superior Business, Exceptional Management, and Reasonable Valuation.

Riverwater Partners uses a Three Pillar Approach to evaluate the ESG efforts of companies being considered for inclusion in client portfolios:

Research

Riverwater Partners analysts and portfolio managers research the ESG efforts of companies, gathering information provided in sustainability reports, financial statements, corporate disclosures, and press releases. In addition, we inquire about ESG efforts when we speak with management directly.

Engagement

Riverwater Partners engages company Executives and Boards regarding their ESG efforts, or lack thereof, in order to assist them in understanding the benefits of, and in initiating and/or improving their ESG efforts. It is our goal to promote greater impact over time with respect to improved corporate governance, fair treatment of all stakeholders, enhanced environmental impact, and ultimately, superior financial outcomes and real economy benefits.

Collaboration

Riverwater Partners collaborates with organizations that promote ESG efforts to inform our practice. Riverwater is a member of US SIF, CDP Worldwide, Seventh Generation Interfaith Coalition for Responsible Investment, and is a signatory of United Nations PRI. In addition, Riverwater is a Certified B Corp. Membership in these organizations provides us with thought leadership on best practices, current trends, impact, etc., which enables us to focus our ESG lens effectively.

Many believe one must sacrifice financial gain to achieve real economy gain; however, history has shown that companies that incorporate ESG policies and practices into running their business have generally outperformed companies that do not. The fact is that these practices often result in meaningful financial gain in the form of increased revenue (as customers want to support the efforts) and/or decreased expenses (as a result of lower energy consumption, for example) or potential liability. Our commitment to investing in companies that consider impact on all stakeholders will likely generate superior investment returns for our clients and will surely lead to a better world.

Again, we offer a hearty welcome to Riverwater Partners and look forward to their collaboration with us in the work of building a more just and sustainable world.

“Change is inevitable, growth is optional”

By Frank Sherman

December is a time of hope……a time to reflect on the past and dream of the future.

As I look back on 2018, I think of Nobel Peace Prize winners Nadia Murad, 25, who became the voice and face of women who survived sexual violence by the Islamic State, and Dr. Denis Mukwege, 63, the Congolese gynecological surgeon has treated thousands of women in a country once called the rape capital of the world. I think of Time magazine Persons of the Year, “The Guardians” – a group of journalists who have been targeted for their work. I think of CNN’s Hero of the Year, Dr. Ricardo Pun-Chong, a physician who provides rooms for poor families who bring their children from the countryside for life saving surgery in Lima, Peru. These are ordinary people doing extraordinary things. 

What about our members of Seventh Generation Interfaith? Are they making a difference?

This year SGI members worked with Midwestern electric utility companies to develop long term climate change scenarios and set ambitious greenhouse gas emission reduction targets. We promoted transparency in corporate political spending and lobbying. We challenged pharmaceutical companies to base their executive remuneration policies on innovation and patient outcomes rather than predatory pricing. We helped companies eliminate deforestation and reduce water pollution in their supply chain. We asked food brands and restaurants to improve their nutritional profile and follow marketing-to-children guidelines to fight obesity. We advocated for human rights policies and ethical recruitment to support workers and communities impacted by global corporate supply chains. 

Our message is growing. Over the past year, SGI added 5 new members and are developing many more prospects to diversify our faith traditions. Our quarterly webinars, semimonthly blog articles and weekly newsletters kept our members informed on our issues and trained on our tactics.

So what do we have to look forward to in 2019? Our Corporate Engagement Plan is bigger than ever including 53 companies in active dialogue with over half of our members. SGI members have filed or cofiled 28 resolutions to amplify our voice to the broader shareholder base. SGI staff and members are active in ICCR leadership and program workgroups. 

Fr. Dan Crosby said it best in his keynote speech at our 45th anniversary when he spoke of his bother Fr. Mike’s conviction to live the Gospel. He reminding us that “change is inevitable, growth is optional”. He ended saying that “…four virtues are essential to SGI’s work: collaboration, solidarity, courage, …….and hope”.

A very blessed holiday season to you and your family, and a hopeful New Year!

Proposed Rollback of Methane Regulations Threatens Long-term Viability of Oil and Gas Sector

SGI joined a group of investors in a letter sent to oil and gas companies to warn against the Environmental Protection Agency’s (EPA) proposed rollback of the New Source Performance Standards (NSPS), a regulation the investors say is critical to the long-term viability of the oil and gas sector in the energy transition already underway.

Sent to 30 companies on behalf of 61 investor signatories representing US$1.9 trillion in assets under management, the letter calls upon the companies to offer public support for continued EPA regulation of methane emissions and to oppose the elimination of direct regulation of methane emissions.

More than 610 different companies accounted for 50% of U.S. oil and gas production in 2017. While most of the companies receiving the letter have responded positively to investor engagement on methane management, there are hundreds of companies that are not managing methane emissions carefully, which threatens the reputation of natural gas as a ‘cleaner’ fossil fuel.  A study earlier this year in the journal Science estimated that in the U.S., methane equivalent to 2.3 percent of all the natural gas produced in the nation leaks into the atmosphere during the production, processing and transportation of oil and gas every year.

Strong and fair methane regulations, which require companies to conduct regular inspections for leaks and report on their methane management efforts, create a more stable environment by leveling the playing field among U.S. oil and gas companies. As the U.S. is a net exporter of natural gas, and as an increasing number of countries adopt legislation and other policies to address climate change, sound methane regulation preserves the industry’s global competitiveness. According to the recent IPCC report, countries won’t be able to limit global warming to 1.5 degrees Celsius above pre-industrial levels, considered by some scientists and policymakers to be the “safe” limit of climate change, without immediate and rapid reductions in a wide range of greenhouse gases, including methane.

In 2015, ICCR launched a concerted methane campaign with the goal of engaging primarily U.S. companies across the natural gas value chain on improving disclosure, reducing emissions and reporting critical information on methane management efforts, such as leak detection and repair (LDAR). If the EPA is successful in rolling back the NSPS, LDAR, currently one of the most cost-effective ways to curb dangerous methane emissions, will be significantly weakened which, investors say, benefits no one. 

Apart from publicly declaring their support for the NSPS Rule, we ask companies to submit comments to the EPA regarding the benefits of industry-wide methane regulation by December 17th. 

“The companies receiving the letter are large producers representing 35% of U.S. oil and gas production,” said Rob Fohr of the Presbyterian Church, USA.  “Our hope is to convince these more influential companies to use their voices in support of sensible and cost-effective methane regulation to bring along the entire industry and mitigate the risk of an unregulated market.”

A link to the investor letter and signatories as well as a list of the companies receiving the letter can be found at this link. The complete ICCR press release can be found here. Bloomberg covered the letter in an article here.

What Story Do We Tell?

For an author and former tech company executive, Seth Godin has a no frills blog that offers pithy insight. In a podcast some years back, he observed the following:

“Once you have enough for beans and rice and taking care of your family and a few other things, money is a story. You can tell yourself any story you want about money, and it’s better to tell yourself a story about money that you can happily live with.”

SGI is an organization for those who want to tell a different kind of story about their money than a simple report on the bottom line. Our members are those who want their investments to tell a story consistent with the values and passions of their lives. Our members have served those on the margins in far-flung missions or just on the other side of town. Our members have run schools to provide a quality education, inspired by faith, to those who might not otherwise be able to obtain it. Our members have built health institutions that have served the ill and injured regardless of their capacity to pay. Our members have worked tirelessly to care for and to protect creation. Would it not make sense that the savings destined for their healthcare and retirement, and those funds entrusted to them by generous donors, be used in ways that reflect what our members believe to be important?

Once upon a time, I used to urge folks to look through the last ten checks they wrote—now, I’d suggest that younger readers look through the credit card statement—what do those expenditures say about our priorities and values? The work of SGI is to tell a story with our funds. It is a story that values the poor so often invisible within the economy, especially vulnerable children and women. It is a story where the Earth, its soil and seas and air, is more valuable than the gold and oil buried underground.

A story that focuses solely on the economic return is a story too thin to heal. Indeed, we need a story rich enough to live by. Our story will not interpret the world to everyone’s satisfaction. But, finally, in our judgement, their stories can’t stand up to our stories.

Update: NYT reports on investors’ letter to Disney

In February, we posted news of SGI and its members joining other investors in a letter to Disney to restrict smoking in products from newly acquired Fox film and television assets. Yesterday, The New York Times carried news of our letter in an article entitled “There’s No Smoking in Disney Films. What About When It Owns Fox?

More about the engagement with Disney on tobacco can be found here:

SGI joins investor statement on 5th Anniversary of Rana Plaza Disaster

At the fifth anniversary of the collapse of the Rana Plaza building in Bangladesh which resulted in the deaths of over 1,100 garment workers, SGI joins ICCR members in an investor statement assessing advancements made to improve worker health and safety in the Bangladesh apparel sector.

Within months of the disaster, the Bangladesh Accord on Fire and Building Safety was established as a model for collective action between brands and retailers sourcing in Bangladesh, as well as global and local trade unions, and NGOs, to inspect the country’s apparel factories and implement necessary reforms to safeguard workers.

Led by the Interfaith Center on Corporate Responsibility, the Bangladesh Investor initiative, an investor coalition comprising 250 institutional investors representing over $4.5 trillion in assets under management, was formed in May of 2013 to urge a strong corporate response to Rana Plaza including participation in the Accord. Further, in their engagements with companies the investors made four main recommendations:

  • Join the legally binding Accord on Fire and Building Safety (Accord) signed by trade unions, brands and retailers with NGOs as witness signatories;
  • Commit to strengthening local trade unions and ensuring a living wage for all workers including through their engagement with the Bangladesh government;
  • Publicly disclose all their suppliers including those from Bangladesh;
  • Ensure that appropriate grievance mechanisms and effective remedies, including compensation, are in place for affected workers and families.

The investors argue that supply chain transparency is critical to safeguarding worker safety and employer responsibility since visibility into extended supply chains, including sub-contractors, is a precondition to identifying risks, including safety, forced labor, harassment, discrimination and denial of freedom of association.

“Stakeholders, including investors, rely on transparency as a tool for evaluating corporate performance on a range of social, environmental and governance issues,” observed Lauren Compere, Managing Director of Boston Common Asset Management. “The Accord has been very transparent in requiring disclosure of each of the 1,600 factories it covers which helps investors track progress. This disclosure requirement is a ‘best practice’ that all companies need to implement, beginning with 1st tier suppliers, then throughout their extended supply chains.”

The Accord model has proven to be effective due to the binding nature of the agreement, and a governance structure that has equal representation of brands and trade unions with an independent chair from the International Labor Organization.

“We applaud the Accord for Fire and Building Safety for establishing safer factories through collective action at an unprecedented level, with 220 brands using their leverage to change supplier behavior in partnership with global and local trade unions,” said David Schilling, Senior Program Director, ICCR. “This transformative model should be applied and adapted to at-risk supply chains in other sectors and countries.”

Investors have been pressing companies and their boards to take the ‘high road’ when setting prices to enable factories to pay fair wages and comply with workplace human rights standards, including freedom of association and collective bargaining.

“Investors have the ability to influence company directors. This means that moral responsibilities accompany the rights we enjoy as shareholders,” said Steve Waygood, Chief Responsible Investment Officer, Aviva Investors. “The casual disregard for employee welfare demonstrated by the directors involved in the Rana Plaza catastrophe should be unacceptable to anyone. As institutional investors, we should challenge corruption and exploitation in all its forms wherever we find it. Ensuring we motivate the right kinds of corporate behavior is part of our own duty to our clients.”

While the investors are pleased with progress made by the Accord, they emphasize that the job of remediating all the issues is far from done and will continue to urge those companies that have not signed on to the 2018 Accord and its three-year extension to do so.

“It has been five years since the nightmare that took place at Rana Plaza, and while significant progress has been made by the Accord to address the root causes of the tragedy, we must not forget that these workplace risks persist in many sectors across the globe,” said Sr. Barbara Aires of the Sisters of Charity of St. Elizabeth, NJ. “The moral and business imperative for corporations to preempt these risks by implementing comprehensive safeguards throughout their supply chains is clear. As investors and stakeholders, we will continue to monitor progress on these concerns in the Bangladesh apparel sector and beyond.”

To see the full statement, please visit here. See more from ICCR here.

SGI Webinar Recording: Health

Hearing from both members and ICCR colleagues (Donna Meyer of Mercy Investment Servces and Meg Jones-Monteiro of the ICCR staff), this webinar provides tools for an understanding of our engagements in nutrition, insurance, pharmaceuticals, tobacco, and opioids as well as global health issues. This webinar also proposes time efficient ways of deepening our engagement with these issues.

The article, mentioned by Donna, about the relative expenses of research and development and marketing for pharmaceutical companies can be found here or in a PDF version here.

If you have any questions from the content of the webinar, please, feel free to direct them to us at SeventhGenerationInt@gmail.com.

As always, we welcome your feedback via a confidential evaluation found here.