Category: Shareholder actions

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

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

Chris Cox

By Frank Sherman

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

Pope Francis, October 2021

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

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

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

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

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

Walmart Hits a Double on Responsible Climate Lobbying Disclosure

Walmart Hits a Double on Responsible Climate Lobbying Disclosure

Chris Cox

By Frank Sherman

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

Walmart, 2021 ESG Summary

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

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

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

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

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

The Necessity to Perform Investor Human Rights Due Diligence

The Necessity to Perform Investor Human Rights Due Diligence

Chris Cox

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

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

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

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

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

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

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

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

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

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

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

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

Time for a Say-on-Pay

Time for a Say-on-Pay

Chris Cox

The proxy statements for 2022 are arriving, and we debate anew: “How much is too much?”

Mandated under the Dodd-Frank Act, say-on-pay is a nonbinding, advisory shareholder vote on the compensation policies for the company’s executive officers. In their proxy statement, companies must disclose how their compensation strategy has considered the results of their most recent say-on-pay vote, but the law does not require the company to make any changes based on the vote. Nonetheless, the say-on pay vote is a barometer for shareholder perception of the company’s executive compensation practices.

For instance, Apple proposes a $99 million pay package for CEO Tim Cook this year, but shareholder advisory firm ISS has recommended a “no” vote. I understand the basis for ISS’ recommendation is because it is triple the package of peer median pay and serves no purpose for retaining Cook, as he will earn shares in retirement. On the contrary, Glass Lewis, the other large proxy advisor, recommended supporting the package.

It is almost certain that the Apple say-on-pay resolution will have a majority of support as most shareholders routinely vote in favor of these packages. This will have a cascading effect on executive compensation in 2023 as peer companies will try to keep up. Cook’s proposed salary may simply be keeping up with the Joneses as Alphabet’s CEO Sundar Pichai was awarded more than $280 million in 2019.

Last year, however, bore seeds of hopeful news. Failure rates on compensation packages in 2021 were considerably higher than 2020 and 2019 levels as numerous companies experienced a “failed” vote for the first time, including AT&T, Marathon, Starbucks, and Walgreens. A more complete list of failed say-on-pay votes can be found here.

There are, of course, better ways to ask the question than “How much is too much?” We hosted a webinar last year on Pay and Wealth Disparity. One of the participants, Rosanna Landis Weaver, will host her annual webinar on Thursday: “100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel?” (You can register here.) As well, one can turn to the AFL-CIO’s Executive Paywatch.

SGI has a long history in this space. From our founding in 1973, Fr. Mike Crosby, O.F.M., Cap. 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, filing shareholder resolutions with 12 retailers. The SEC allowed companies to omit the resolution based on ‘micro management.’ SGI members continue 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 in 2021 on racial equity & starting pay at the Walmart AGM obtained strong shareholder support for a first-time resolution (12.5% of total shares or 27% of independent shares voted). SGI members have joined this year’s ICCR campaign asking 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 call upon shareholders to act.

Bill Bars Forced Arbitration in Sexual-Assault, Harassment Claims

Chris Cox

Congress has passed legislation to ban mandatory arbitration clauses for cases involving allegations of sexual harassment or assault. With the Senate having passed it yesterday, the bill, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA), will now go to President Biden, who is expected to sign it into law.

EFASASHA will invalidate most contractual provisions requiring the arbitration of claims alleging sexual harassment or sexual assault. Once in effect, EFASASHA will apply to all pre-dispute arbitration clauses, including those in contracts executed before the law’s enactment.

The new law may have an outsized impact in the asset management industry, given firms’ reliance on arbitration to resolve all manner of disputes. Companies will need to re-examine their approach to dispute resolution and to their anti-harassment initiatives more broadly.

SGI is pleased to have been a part of earlier efforts to ask companies to remove these unjust clauses from employment contracts. Cindy Bohlen of River Water Partners led engagements with a number of companies in her firm’s portfolio, and she wrote about it here in SGI’s blog.

Of the bill, Cindy Bohlen said, “Corporations will be required to have strong policy regarding remedy following allegations of sexual misconduct, including the right to legal action. This change will ensure that employees feel comfortable coming forward in such cases, which will promote inclusive and healthy corporate culture, benefitting employees and corporations alike.”

In these partisan days, we believe that investor outreach contributed to the passage of this bill in both chambers by wide margins.

Facebook has Meta problems, needs metanoia

Facebook has Meta problems, needs metanoia

Chris Cox

The company formerly known as Facebook, now Meta, aims to shift into a new organization focused on virtual connectivity. Rebranding is not new for this firm; some may recall that it was originally TheFacebook.com. Mark Zuckerberg explained the name change in a founder’s letter for the new company at the end of October.

Facebook also announced at the beginning of November that it would end its facial recognition program. In the fine print of accepted terms, Facebook users permitted the company to develop facial ID templates. Consequently, Facebook now will delete more than a billion facial recognition templates.

Facebook’s new name changes absolutely nothing about the company’s problems – an avalanche of misinformation, hate, and other issues within the platform. To paraphrase the Bard, “That which we call Facebook / By Any Other Name would smell” (the phrase can stop there, omitting the subsequent words of Juliet). Frances Haugen, the Facebook whistleblower, has brought to light, with internal company documents, a series of substantial concerns.

It comes to this: If we cannot trust Facebook in the real world, why would we be willing to trust them in the “metaverse?” If we occasionally experience Zoom fatigue, do we really want to live even more of our lives on the internet? Facebook needs not so much a change of name but a change of heart.

As Facebook faces critical coverage pushing the company to reform itself, it also confronts the virtually impossible: Transforming a company with a market capitalization just south of a trillion dollars—and yet that change, that conversion (what the Gospel calls metanoia) is what Facebook desperately needs.

The media outlet Vox interviewed 12 experts on how to fix Facebook. Some of the ideas track well with this year’s crop of shareholder resolutions. Last Friday was the filing deadline, and, in all, ICCR members and members of the Investor Alliance for Human Rights filed eight resolutions with the company. SGI members co-filed two of the resolutions: one calls for a separation between board chair and CEO, both currently occupied by Mark Zuckerberg, and the other calls for a report on Child Sexually Explicit Materials (CSAM) distributed on the platform. This year’s filings even caught the eye of the Wall Street Journal that reported on these efforts today.

While these efforts are important, will they change things at Facebook? Not yet. Zuckerberg, through Facebook’s dual class share structure and his “super-shares,” controls about 58% of the vote. Even if our efforts do not change the company at the 2022 shareholder meeting, we must remain persistent and call for genuine metanoia from this company, not just a glossy rebranding.

Does Sustainable Investing Help Wall Street More Than the Planet?

Does Sustainable Investing Help Wall Street More Than the Planet?

Chris Cox

By Frank Sherman

Two experts recently debated the impact of the ESG investment strategies that has reached mainstream (Does Sustainable Investing Really Help the Environment?, WSJ 11-7-2021). Tariq Fancy, formerly the sustainable-investing chief at BlackRock, argues that the investment sector is doing more good for Wall Street than it is for the planet! He left the financial services industry and has become a critic of relying on the market economy to solve societal problems. “Funds that focus on ESG issues are profitable for Wall Street—but amount to a dangerous placebo that doesn’t cure the planet’s problems.” He calls the ‘win-win’ SRI philosophy of being good for business AND good for people & the planet a fantasy. “The ESG industry today consists of products that have higher fees but little or no impact and narratives that mislead the public and delay the government reforms we need.“

Alex Edmans, a professor at London Business School, says that Fancy’s criticism goes too far. While government intervention is essential, he believes engaging with companies on ESG issues has indeed made a difference. Companies that treat their employees well outperform their peers in total shareholder returns. And where some ESG issues can’t be regulated, such as corporate culture, investors can play a role to hold companies to account. He also argues that focus on ESG issues has shifted the Overton window, broadening the range of policy proposals that are acceptable in the political mainstream.

SGI member Duane Roberts, Dana Investment Advisors, agrees with the Professor in thinking Mr. Fancy is too pessimistic. “There are valid reasons for some of his cynicism. Our industry has identified ESG as the new investing fad that can make a lot of money. Thoughtful investors and consultants are trying to distinguish between greenwashing and true ESG investing. But the placebo effect is a real possibility.”

Roberts views sustainable investing vs. public policy as a false choice. “ESG investors and managers see their portfolios, and finance more broadly, as a tool to be applied to the problems society faces. But it should not be considered the only tool.” He agrees with Edmans’ assertion that sustainable investing has influenced public policy. “Business can support necessary policy changes, or work against those changes in their own selfish interest. Investors can nudge companies toward the former.”

I believe we can learn something from Mr. Fancy’s challenge of SGI’s theory of change. Our effort to make the business case to create a win-win can hold faith-based investors back from asking companies to simply do the right thing for their stakeholders. Does there always have to be a return on investment for companies to pay their workers a living wage or to take steps to reverse systemic racism?

SGI Board member Ed Fitzpatrick sums it up this way: “There may be risk of greenwashing; but net-net, investment managers incorporating ESG strategies will ultimately help society.”

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.

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. 

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.”