Partners in Advocacy: Boston Common Asset Management
By Holly Testa, Director, Shareowner Engagement
First Affirmative’s shareowner advocacy program does not stand alone. Many of the asset managers we use in client accounts are also our partners in advocacy—and they have powerful stories to share. In this installment, we talk with Lauren Compere, Director, Shareowner Engagement, Boston Common Asset Management.
Boston Common Asset Management manages substantial international holdings on behalf of its clients, and the firm’s shareowner engagements strongly reflect this international diversification. The Boston Common advocacy team travels the globe to meet face-to-face with company personnel, and the differences they encounter in culture and business practices strongly influence their approach to shareowner advocacy.
A Blended, Nuanced Approach to Engagement
Lauren Compere describes the Boston Common approach as a blended Euro American approach: “We combine the European model of constructive engagement with the open and transparent approach used here in the states. This is part of our secret sauce. Our approach results in quiet, behind-the-scenes dialogue that builds trust over time. We are really known for long-term dialogues, some spanning over a decade. This approach sends the signal to companies that we are truly long-term investors, and we have a legitimate voice at the table; more so than activist investors whose primary goal is short-term financial gain. This does not mean that we won’t escalate if we don’t see progress in our dialogues, and will use more public means such as press releases, and even shareholder proposals, if needed, to prompt company action.”
Invest Globally, Act Globally
“Get on a plane!” That’s the Boston Common key advocacy mantra. “We meet with companies at their headquarters and where they are operating,” Compere says. “We’ve been to the Amazon rain forest seeing the impact of oil development by Chevron. We’ve been to fracking fields. We’ve been to the Newmont mine in Nevada.” In other words, the Boston Common advocacy team is not afraid to get their feet dirty.
Compere believes that all of this travel makes their advocacy efforts all the more effective: “Because we engage globally, it helps us to be more enriched and informed, and we have global examples to bring to the table that allows us to address issues ahead of the curve.”
Compere reflects on cultural differences that require different approaches and expectations: “Companies in Asia, for example, are not as open and frank as U.S. companies.
Another major difference is the number of women in leadership positions. Being a woman in senior management myself, and from a different country, I find that I actually have more freedom to bring up these difficult issues than perhaps a local investor or a man could. They anticipate that I’m going to bring up this issue. In my latest trip to India in January, in all seven company meetings, we asked how the company was getting ready to implement the new sexual harassment law and what sort of training/awareness were they conducting for their workers? This is not something a domestic Indian investor would probably even think to raise, but non-discrimination and workplace environment are central ESG themes for global investors, including Boston Common.”
One often has to frame the discussion differently. “In Japan, for example, talking about companies needing to add women to their board would not gain much traction, Compere said. “Instead, we talk about what the company can do to provide a career path for women, how they are supporting working mothers and how they can develop a supportive corporate culture. It’s also important to know what countries are doing in the area you are targeting, like knowing that the Tokyo stock exchange provides rewards for diversity. In Japan, they need more workers; increasing diversity in the workforce is one way to get there. It will be one of their main drivers for growth, and management needs to be aware of this.”
To get a full picture of the situation on the ground, the conversation should be inclusive. This can be difficult as companies seek to manage the information flow. Compere says that “In Bangladesh, we saw three factories—the best suppliers for H&M, Marks & Spencer, and Debenhams… But you don’t know what is happening when you are not there, as a lot of the tours are staged. The most frank exposure we get is when we are able to talk to workers, labor unions, and local nongovernmental organizations. That’s when we get the real stories.”
Leave Your Assumptions at Home
Compere points out that the change that is needed might not be what a Westerner would expect: “On my trip to Bangladesh, a surprising aspect of learning about the supply chain is that what workers want is not necessarily what we might think. Of course they want higher wages, but what many of the women I talked to really wanted was for the managers to stop yelling at them! They simply don’t want that to be a normal part of their day. They talked more about the work environment than anything else.”
Compere was also surprised to realize that in Bangladesh the workers want dormitories. “We hear horror stories about dormitories, but in Bangladesh dormitories mean something far different than in China. They are family-based and provide access to clean water and canteens, while avoiding a long and dangerous commute on unreliable public transport. This type of insight can translate into requests made to companies. In this case, providing dormitories for workers could be a win-win for everyone.”
Taking on a Global Challenge
Nothing is more pervasive than climate change, and Boston Common is challenging an entire industry with a bold initiative at banks on financing climate change. “We were looking for a different way of impacting the climate change debate,” she said. “Sectors with obvious climate impact have received the most attention. Banking operations are not seen as having a significant environmental footprint, and so the climate impact of banks has mostly escaped scrutiny. Yet climate change is fundamentally altering the landscape in which banks operate. A bank’s greenhouse gas footprint is significantly larger than that of their operational activities alone. A full picture has to include a bank’s lending, underwriting, and ownership.”
Boston Common has rallied a broad group of investors, including First Affirmative, to take on this challenge. The investor group is calling on banks worldwide to assess and disclose the climate risk embedded in their lending and investment activities and urging them to take an active role in using their assets to smooth the transition to a low carbon economy. This approach is already showing signs of good progress. Compere shares a progress report:
“The most fruitful discussion we’ve had so far is PNC Bank. We met with the CEO and senior managers to lay out our expectations. The dialogue went from confrontation to collaboration. The result of our efforts is that PNC quickly moved from not addressing the issue at all to making substantial progress on a number of fronts including embedding climate in the credit risk function to adopting board level oversight. I believe that it can actually be more effective to move an average bank to leadership than to have the leaders raise the bar even further.”
To learn more about Boston Common’s advocacy work, please click here.
At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?
Mention of specific companies or securities should not be considered an endorsement or a recommendation to buy or sell that security. Past performance is no guarantee of future results.
Posted: April 29, 2015