Partners in Advocacy: Everence Financial and the Praxis Mutual Funds
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 second installment, we talk with Chris Meyer, Stewardship Investing Specialist at Everence Financial, Advisor to Praxis Mutual Funds.
Everence is not owned by corporate interests, but instead serves as the stewardship agency of Mennonite Church USA. Investment decisions and advocacy efforts are driven not just by financial considerations, but also by the faith’s convictions. Six core values that embody these convictions guide the stewardship of assets and are integrated into all aspects of investment and advocacy efforts.
Persistence as a Strategy
Such inspirational core values make it clear that Everence is aiming high. No matter what the issue, they are in it for the long haul. Chris Meyer tells us that "Amicable dialogues are usually the most productive, in terms of enacting real, positive change. It’s important for both sides to trust the intentions of the other. However, getting to that point—and truly getting the company’s attention to begin with—may require the filing of shareholder resolutions and years of tough conversations. But, like investing itself, shareholder advocacy is not about the short-term; we want to change things for the better over the long-term. And that requires patience, diligence and focus.”
Core Values Reflected in Advocacy
Human slavery has been with us for millennia, and it is an issue that is an overwhelming affront to Everence’s core values. Perhaps this is why the company has taken a leadership role and focuses advocacy efforts on modern-day slavery in its many forms. Meyer tells us that “Tens of millions of people are victims of modern day slavery, forced to work by coercion or threat. By some counts, there are more slaves worldwide now than when Abraham Lincoln signed the Emancipation Proclamation 150 years ago. Everence has gained knowledge about human trafficking, and we have learned how to leverage our role in the financial industry to become a part of the solution to this terrible problem.”
Modern-day slavery comes in many guises, but perhaps the most disturbing of all is the widespread abuse of children for profit in industrial production. It is often hidden deep in the supply chain.
Child Labor in the Cocoa Industry
Most of our children enjoy chocolate as an afterschool treat, but in many countries the reality is not so sweet. Meyer shares the disturbing reality behind our chocolate addiction:
“About 70 percent of the world’s cocoa supply comes from West Africa where there are hundreds of thousands of cocoa farms. On these farms, it is estimated that tens of thousands of children are being used in the worst forms of child labor. They are often trafficked in from poorer neighboring countries. These children caught in the worst forms of child labor are unpaid, don’t attend school, can’t leave the farm, are physically punished, and perform dangerous work such as handling pesticides and herbicides without safety equipment.”
Cultivating Change in the Supply Chain
“To address this issue, Everence pursued dialogue with major chocolate companies. The chocolate companies don’t own the farms—there are several supply chain layers between them. But while they don’t own the farms, the chocolate companies are the most influential in the supply chain. Everence has worked with these companies to address the issue of child labor in the cocoa industry in many ways, including financial support for government anti-trafficking enforcement, and programs that helped set farmers up to become certified growers.”
Sometimes, success can be sweet. Meyer shared a major recent success, one that was accomplished through a long dialogue process. “We have led a dialogue with the Hershey company since 2009 on forced child labor in the cocoa industry. After increasingly productive conversations, Hershey committed to using certified cocoa with their Bliss product line in early 2012. Hershey also committed to sourcing 100% certified cocoa for all of their chocolate lines by 2020. This cocoa is certified and audited by third parties such as Fair Trade, Rainforest Alliance to ensure that sustainable practices are used, and that forced child labor is not present on the farms.”
“Certified cocoa currently accounts for less than 10 percent of the world’s cocoa supply. A commitment to source certified cocoa from a company like Hershey will lead to increased global capacity for certified cocoa.”
What’s in Your Cell Phone?
More child labor. Our indispensable electronic devices may be sleek and high tech, but dig deep into the supply chain and you will find conflict minerals. Meyer tells us the story by looking at a single indispensable component-tin.
“This conflict mineral story begins in the Democratic Republic of Congo. Militant groups control many mines. In these mines, many children are forced to work as slaves at gunpoint. The tin ore mined by children is transported and sold by the militant groups to trading houses, which in turn sell the ore to export companies. From there, they are sent to a transit country, then off to a refiner on another continent. The ore is smelted into useful tin. The tin is alloyed with other metals to make solder, which is then used on circuit boards found in cell phones.
“At Everence, we approached the conflict mineral issue by engaging the four largest mobile providers in the United States. While these companies don’t manufacture their phones themselves, they provide the design specifications and ultimately tell the manufacturer what to do, so they have the most power in the supply chain and, therefore, the most power to effect change.
“We asked the mobile providers to determine if they have exposure to conflict minerals, by deeply analyzing their supply chain. They found this information to be untraceable. Then, we requested their support for the establishment of certified conflict-free mines and smelters. In this way, artisanal miners in the Democratic Republic of Congo can benefit from the minerals trade, but not armed groups.”
The Last Word
“At Everence, we use our shareholder rights to bear witness to our core values. We believe we have a responsibility as investors of companies to speak on behalf of the disadvantaged while promoting sound corporate policy and practices.”
To find out more about Everence advocacy efforts, click here.
NOTE: 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: February 25, 2015