Opioid Epidemic: What can investors do?

Opioid addiction has become a disease that has destroyed the lives and families of millions of everyday working Americans. The epidemic is not abating.  With increasing frequency, new headlines emerge as the problem grows in scale and the consequences become ever more devastating. New data from the National Institute on Drug Abuse shows there were over 72,000 estimated overdose deaths last year, a 10% increase on the prior year. These estimates mean the problem is more deadly than gun violence, car crashes and AIDS.

In addition to the human cost, the massive economic cost grows daily. For example, the U.S. Center for Disease Control reports that opioids have cost the American workforce the largest portion of labor since the Spanish flu epidemic in 1918. A recent report from Ohio State University also documents that the crisis is costing Ohio more than the state’s annual budget for k-12 education.

Over the last year, SGI has been working with Investors for Opioid Accountability, an initiative that joins ICCR members with other investors to engage corporations who have profited from this epidemic. We engage pharmaceuticals producers, distributors, and retailers. We believe that companies that have acted negligently should be held to account. However, we do not believe that opioid producers and distributors should be the only stakeholders considered when tackling this issue. Opioids are effective pain killers that are commonly prescribed for acute and chronic pain. To fully address the issue, we believe that regulators, pharmacists, insurers, point-of-care providers and users all have a role to play.

In 2018, IOA members filed 35 resolutions at the following 11 companies: Alkermes; Amerisource Bergen (ABC); Cardinal Health (CAH); Depomed; Endo; Insys Therapeutics; Johnson & Johnson (JNJ); Mallinkrodt; McKesson; Pfizer; Walgreens.

Below are outcomes for the resolutions that went to a vote:

  • ABC – 62% of indep. votes for board risk report
  • ABC – 52% of indep. votes for clawback
  • ABC – 49% of indep. votes for indep. chair
  • Pfizer – 25% for indep. chair
  • Pfizer – 33% corporate lobbying disclosure
  • JNJ –17.8% for stop exclusion of legal costs in executive compensation
  • Depomed – 62.5% for board risk report
  • McKesson – 39% corp. lobbying, 34% accelerated vesting, 1% GAAP, 12% withhold Audit chair
  • Rite Aid – 56.7% for board risk report

An additional 13 resolutions were settled:

  • CAH: Cardinal separates chair and CEO ahead of meeting 
  • JNJ: Indep. chair annual review of combined roles
  • ALK: Board agreed to expand corporate lobbying expenditure disclosure
  • CAH: Board published risk report, misconduct clawback and separated chair & CEO
  • DEPO: Board agreed to misconduct clawback
  • ENDO: Board agreed to risk report, misconduct clawback and expand political spending reporting
  • MCK: Board agreed to continued reporting on anti-diversion efforts
  • MNK: Board agreed to misconduct clawback and expand political spending reporting, Board elected to sell opioid business
  • Insys: Board agreed to misconduct clawback

Next year, we will have even more filings regarding this important issue. It is our hope that more SGI members can become involved in this work so critical to many communities across the U.S.

Faith-based Investors and the Oil and Gas Sector

By Frank Sherman

The Intergovernmental Panel on Climate Change (IPCC) recently issued a special report on the impacts of global warming of 1.5 °C above pre-industrial levels and related global greenhouse gas (GHG) emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty (see FAQ). This was done in anticipation of the UN Climate Change Conference in Katowice, Poland (COP24) in December.

Under the 2015 Paris Agreement, countries agreed to cut GHG emissions with a view to ‘holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels’. Human-induced warming has already reached about 1°C above pre-industrial levels and the impacts have already been felt. If the current warming rate continues, the world would reach human-induced global warming of 1.5°C around 2040.

Limiting warming to 1.5°C rather than 2°C can help reduce the risks of severe climate disruption. While some cities, regions, countries, businesses and communities are transitioning towards lower GHG emissions, few are consistent with limiting warming to 1.5°C. Meeting this challenge would require a rapid escalation in the current scale and pace of change. This report brings a new urgency and increased demands in our corporate engagements.

Another report (2020: A Clear Vision For Paris Compliant Shareholder Engagement) was also issued by our partners at As You Sow. Given that the global oil and gas companies contribute 50% of GHG emissions, they must become part of the solution if we have any chance of effectively addressing climate change. After decades of engagement, none of the U.S. oil & gas companies has adopted a plan or a target to limit the GHG emissions associated with their products. This report, written before the IPCC 1.5 degree report was issued, concludes that ‘shareholder engagement must focus on one last, fit for purpose demand, seeking 2-degree assessments from companies in year one and 2-degree action plans by 2020….or investors must divest’.

Given the call for urgent action by the IPCC, we no longer have the luxury of time.

Externalities vs. Solidarity

By Brother Robert Wotypka, O.F.M. Cap., Corporate Responsibility agent for the Capuchin Province of St. Joseph

Writing from the twice-year meeting of the Interfaith Center for Corporate Responsibility in New York, I apologize to any of our readers who have MBAs. My MBA sisters and brothers likely could discuss this topic more thoroughly and competently, and of course your comments are welcome.

But a term and its meaning arose yesterday at a panel convened by ICCR, “When No One is Watching: Corporate Responsibility in an Age of Deregulation.” The term is “externalize.” A for-profit enterprise seeks to “externalize” to the fullest extent possible the costs of operating its business. For example, if a manufacturing or mining process produces an undesired aftereffect or element – airborne mercury from burning coal, or PCBs from industrial output – an enterprise, in the absence of regulation, will simply dump these residuals untreated into the air, into the water, into the ground. And this externality will become a matter of concern for residents local, national, global. And governments and elected officials will or will not respond to the harms caused by these externalities, these unregulated outputs, as history reveals.

Externalizing also occurs in a service economy. An enterprise can pay wages so low that its employees are eligible for SNAP (Supplemental Nutrition Assistance Program), which means the state in part pays for the care of feeding of the employees, and not the enterprise. Or an enterprise can so limit the hours its employees are allowed to work that they are not eligible for or cannot afford health care, which rules out preventative care, which means the employees end up using emergency rooms. And these costs have to be subsided by fundraising in the case of non-profit hospitals, or subsidies in the case of for-profit health care entities. Either way, the enterprise increases its profits by lowering its costs.

Externalizing costs is analogous to “othering,” the mindset that says that some of our brothers and sisters are unequal or lesser and can be discharged, can be discriminated against. Where is God in this? Today’s Gospel acclamation is taken from Philippians, “I consider all things so much rubbish that I may gain Christ and be found in him” (Phil 3: 8-9). Talk about externalities! But Paul is not wrong, rather, this understanding is redemptively inverted. Reverence for creation requires that all be gathered together, all be invited, all be saved. We take this from Paul, too, who teaches elsewhere, “When everything is subjected to him, then the Son himself will [also] be subjected to the one who subjected everything to him, so that God may be all in all” (1 Cor 15: 28). So, again – where is God in this? Only in all.

The Christian vision and the Franciscan movement aims toward no externalities: no one and nothing goes without notice, and compassionate care is brought to those locked in material suffering and disenfranchisement. And the suffering that comes to some of our brothers and sisters from externalities belongs to and is the responsibility of all. Faith-based shareholder activism brings this vision to the corporate world. Please join in this work wherever you can.

The Decade We Stopped Climate Change

By Aaron Ziulkowski, Walden Asset Management

A New York Times Magazine published in August included one single article: “Losing Earth: The Decade We Almost Stopped Climate Change.” The title contains the spoiler that we all already knew: We are not stopping climate change. But the focus of the article by Nathaniel Rich—a whopping 30,000 words—is a historical recounting of how close the U.S. and global community came to establishing a binding framework that would have set us on a path to limit warming to what scientists consider manageable. Several decades later, we have still not accomplished this feat.

While some readers likely found the article depressing, it gave me a bit of hope. Rich chronicled a time when the risks of climate change were appreciated and regulations to limit emissions were recognized as the prudent action to take. This knowledge was accepted and embraced by conservatives and liberals as well as leaders of business and advocacy groups. While this promising response eventually derailed, investors may be able to help return the U.S. to a 1980s context—poised to act to mitigate the worst impacts of climate change.

Here’s what we can do.      

Ask companies to set emissions reduction goals that align with climate science. While this may sound outlandish, it is not. Many companies recognize that climate change presents both risks and opportunities and are committed to doing something about it. Forty-eight percent of Fortune 500 companies have set public targets to reduce greenhouse gas emissions, improve energy efficiency, source more renewable energy, or some combination of the three. While some of these targets are not science-based (i.e., aggressive enough to reach carbon neutrality by the second half of the century), nearly five hundred companies from around the globe have publicly committed to set science-based targets, and over one hundred have already done so.

Ask companies to be more transparent about their political spending and lobbying, as well as lobbying done on their behalf by trade associations such as the U.S. Chamber of Commerce. The business community wields significant influence over public policy, for better and for worse. Transparency breeds accountability. As investors, we need to know how a company is lobbying, both because the reputational risk it might entail for the companies we invest in, as well as the risks that lobbying may create for the broader economy. According to AFSCME, more than 40 companies engaged by investors have strengthened their corporate lobbying policies, practices (e.g. a decision to end ties with a third party involved in controversial lobbying activities), and transparency.

Ask companies to proactively advocate for comprehensive climate legislation. While at the federal level it is unlikely there will be an opportunity in the near-term to pass comprehensive climate legislation, there is important groundwork that needs to be done to prepare for when the political moment is right. There are also numerous opportunities to influence state- and local-level policies related to climate change. We should ask companies, especially those that are setting their own goals and targets to reduce emissions, to support legislative and regulatory efforts that are consistent and indeed facilitate achieving their goals. For example, recently, in my home state of Massachusetts, the business community successfully mobilized to support strengthening climate legislation, including the sourcing of renewable energy. Groups like the Business for Innovative Climate and Energy Policy (BICEP), organized by Ceres, can help companies identify and participate in such efforts.

What we did not achieve in the past provides us our current goal and focus. The business community can be a supportive partner in fighting climate change, and investors have an important role in catalyzing that action.

How Well Are Your Financial Service Companies Incorporating ESG?

by Frank Sherman

Of US institutional investors, 43% incorporate ESG factors into their investment decision-making process, according to the sixth annual ESG survey by Callan. This percentage has almost doubled since the survey was first launched in 2013. Yet many financial service companies only pay lip service to these issues. How well do your financial advisors and money managers incorporate ESG best practices?

The Forum for Sustainable and Responsible Investment (US SIF) is committed to advancing sustainable, responsible and impact (SRI) investing across all asset classes. One of the core deliverables from their strategic plan is to identify and disseminate information about best practices within the field and provide tools for practitioners to undertake a rigorous and comprehensive approach to sustainable and impact investing. They published a Roadmap for financial advisors earlier this year on how to incorporate SRI investing into their practice. US SIF released a second Roadmap this month, this time focused on money managers. This Roadmap describes steps to establish board and senior level oversight; identify sources of ESG data, research and training; develop an ESG incorporation strategy; implement an investor engagement strategy; measure impact; and participate in building the field. Due to come out later this year, the third and final guide in the US SIF series will focus on asset owners.

I recommend that SGI members read and share these guides with their Investment Committees and question them on how well your financial advisors and asset managers have incorporated these best practices into their services.

Seventh Generation Interfaith will continue to support your corporate engagements and public advocacy on your community’s priority social and environmental issues. . . a key part of your SRI investment strategy.

Member statement at Kohl’s AGM

Yesterday, Frank Sherman, Chris Cox, and Tim Dewane attended the annual shareholder meeting at Kohl’s. For Kohl’s, the shareholder meeting was the closing of a significant chapter in the company’s history and the beginning of a new chapter. Having begun his career with the company in 1982, Kohl’s CEO Kevin Mansell retired, a post he has held since 2008. With the retirement, Michelle Gass is the company’s new CEO.

Tim Dewane

ICCR and SGI have a long history of engagement with Kohl’s. At the shareholder meeting, Tim Dewane, the JPIC director for the School Sisters of Notre Dame of the Central Pacific Province offered a statement:

Good morning Mr. Chairman and Kohl’s Board members. My name is Tim Dewane, I am the JPIC Director for the School Sisters of Notre Dame of the Central Pacific Province. The School Sisters of Notre Dame CPP are a long time shareholder of Kohl’s and a member of Seventh Generation Interfaith, an ICCR-affiliated coalition of faith-based institutional investors that has engaged in positive dialogue with Kohl’s for nearly 20 years. Our members first sat down with Kevin Mansell and Rick Schepp in 2000 to provide input into the language of Kohl’s Terms of Engagement, a set of standards on worker rights and working conditions for its suppliers throughout the world. Since 2000, faith-based shareholders have met with the company annually and have seen improvements its supplier’s performance on workplace human rights as well as significant improvement in its’ environmental sustainability of your operations through a variety of programs that are described in its 2017 CSR report.

We welcome Michelle Gass as Kohl’s new Chief Executive Officer, the first woman to occupy this important position at the company. We look forward to working with you and your staff. As you build on the legacy of Kevin Mansell we encourage you to expand and deepen the integration of Kohl’s commitment to corporate social responsibility throughout the company’s business strategy and messaging to customers, investors and to society. In the current environment, stakeholders and rating agencies, who have incorporated social and environmental criteria into their valuation of companies, are expecting more transparency of Kohl’s and other companies. Kohl’s has a good story to tell, one that we are working on to improve with every meeting we have with you.

We encourage you to apply ‘human rights due diligence,’ based on the UN Guiding Principles on Business and Human Rights, the new global norm, to identify potential risks to people and communities, especially where your business partners operate in high risk countries where rule of law is weak. In addition, we encourage Kohl’s to join a number of companies in aligning its CSR strategies to the realization of the UN Sustainable Development Goals adopted in 2015 to eradicate poverty, gender inequity, child and forced labor, adverse impacts of climate change, among others, by 2030.

Larry Fink, Chair and CEO of Blackrock, stated in his Letter to CEOs entitled, A Sense of Purpose, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” Pope Francis has echoed the understanding of many our own Kohl’s customers when he said that purchasing is not simply an economic act, but also a moral one. We are called to love and care for our neighbors as our selves and in today’s world our neighbor includes not only the folks in this room, or those here in Menominee Falls, but all those whose lives touch ours – including the garment workers in Bangladesh and elsewhere.

We look forward to working with you to build on Kohl’s solid commitment to quality and community – with profits we can all live with. Thank you!

A PDF version of Tim’s statement can be found here.

Shareholders work for racial justice

Four SGI members participated in ICCR‘s Spring Conference: Sr. Ruth Battaglia, C.S.A., Chris Cox, Frank Sherman, and Friar Robert Wotypka, O.F.M., Cap. We will report back what we heard and learned in a variety of ways in the coming weeks.

Today’s tweet from Pope Francis reminds us that preventing evil is not enough; we must take positive action together. Since its inception, SGI has endeavored to make the voices and concerns of those who suffer injustice the center of our reflection and action. I see it reflected as well in the work of the new Racial Justice Investing group within ICCR.

National events in 2017 intensified focus on racial, ethnic, and gender equality. The #MeToo movement, protests concerning the Confederate Flag and Confederate statues, the Women’s March, and the Black Lives Matter movement all contributed to this shift in focus. While personal conversion is vital to change, it is not enough. Addressing systemic injustice requires changes in structures at the level of policy, economics, and worldviews.

A session at the recent ICCR conference included a session from the newly formed Racial Justice Investing group. Pat Tomaino of Zevin Asset Management chaired the session. We also heard from Lisa Hayles of Boston Common Asset Management, Susan Baker of Trillium Asset Management, and Mari Schwartzer of NorthStar Asset Management. Hayles spoke of The 30% Coalition (that corporate boardrooms reflect the gender, racial and ethnic diversity of the United States workforce). Susan Baker discussed workforce diversity and the case for pressing companies to make the composition of the workforce transparent. Schwartzer voiced concerns about prison labor (NPR reported on some of the issues). Finally,  Tomaino addressed diversity and inclusion, especially within the tech workforce.

Pat Tomaino

The Racial Justice Investing group has monthly/semi-monthly calls and has a webpage within ICCR’s member area where SGI members can sign up to participate and to receive regular updates. Previously, the group drafted a Mission Statement:

Racial Justice Investing is a group of socially responsible investors and others in the business community who are taking action for racial justice within our own organizations, as well as in our engagements with portfolio companies.

This important work will contribute to our corporate engagements. We heard about success from Johns Hopkins in hiring of ex-offenders. We talked about resolutions asking tech companies to tie portion of executive compensation to diversity and inclusion goals among other sustainability goals. We also heard about work from the American Friends Service Committee investigating corporate investments in the prison industry. Much remains to be done, but it is exciting to see our partners deeply engaging this issue.