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Power of the Proxy
By Steve Schueth

What gets measured gets managed.  When investors vote their proxies in support of greater transparency around environmental, social, and governance (ESG) risks and opportunities, we can send a strong message about what we would like to see companies measure and manage.

Proxy voting is a frequently overlooked aspect of owning company stock.  Voting proxies can be empowering for clients, and offering assistance in proxy research can provide a competitive advantage for some investment advisors.

With the 2010 proxy season substantially behind us, green investors are celebrating victories on many fronts.  There have been dozens of successful dialogues and engagements, ESG related resolutions have fared well as vote counts have been tabulated, and we have seen the federal government come out in support of greater corporate disclosure on ESG issues.

More and more investors are waking up to the idea that sustainable and responsible investment criteria are critical indicators of reputational and financial risk.  Whether investors seek information regarding a company’s environmental impacts, climate change risk mitigation strategies, executive compensation policies, or any other number of issues—greater transparency is the common theme.

While most independent financial advisors have limited capacity to develop advocacy programs of their own, we can stay on top of the trends and become an information source and educator for our clients.  While roughly 30% of shares are held by retail investors, fewer than half of those shares are voted.

First Affirmative offers proxy voting for all clients based on a set of criteria that reflects the social and environmental priorities of most of our clients.  For investors wishing to vote their own proxies in line with ESG criteria, there are some new services available:  Moxy Vote offers free proxy research and allows registered users to actually vote their proxies and submit their votes online; Proxy Democracy also offers free research and will show you how various mutual funds are voting the shares held in their funds.

Collectively and individually, shareowners are finding ways to engage companies on the issues that are important to them.  Advisors who serve social investors have an important duty to either climb the proxy voting learning curve or refer their clients to appropriate outside resources.  One of the best ways to begin learning is to begin voting!

For the full length version of this article please visit:  http://www.fa-mag.com/component/content/article/5890.html?magazineID=2&issue=149&Itemid=125

NOTE: Mention of specific companies or securities should not be considered a recommendation to either buy or sell that security.  For information regarding the suitability of any security for your investment portfolio please contact your financial advisor.

Steve Schueth
President
steveschueth@firstaffirmative.com

Posted: August 5, 2010