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Shareowner Action on Climate: What Is the Impact?
By Holly Testa, Director, Shareowner Engagement

clouds-20909_1920The escalating investor concern about climate change risk is reflected in the level of shareowner activity over the last 15 years. Shareholder resolutions related to climate change numbered less than 10 in 2001, but this number has skyrocketed to 167 in 2015. This does not include the many dialogues and other communications not related to resolution filing.

We report on our activities and can cite success stories at individual companies across numerous climate related issues that demonstrate the positive impact investors have on company climate policies and practices. However, many of these success stories are the result of slow, painstaking progress made by many investors over the course of years. That kind of progress is extremely difficult to measure!

So how do we know we are really “moving the needle” on climate?

Collecting the Successes to See the Big Picture

The Investor Network on Climate Risk (INCR) released a report that takes a deep dive into the successes that will help us better assess the collective impact of investor efforts. First Affirmative is one of 110 institutional investor members of this coalition that represents more than $13 trillion in investment assets. Members work together to engage companies on addressing the risks and capitalizing on the opportunities resulting from climate change impacts.

The report focuses specifically on the substantive climate related commitments that have been made by companies to coalition members as a result of dialogue and resolutions for 2014 and 2015. More importantly, the report tracks the progress towards implementation of those commitments.

INCR members reported 101 corporate commitments during this period on a number of climate related issues, including sustainability reporting, greenhouse gas reduction, sustainable agriculture, deforestation, water management, and political involvement in climate issues. Of those commitments:

  • 73% of companies fully “met” their stated commitment,
  • 13% “mostly met” the commitment, and
  • 11% either “only partially” or “did not” meet their commitment.

Going forward, we believe that tracking such information will help investors “communicate the impact of shareholder engagement to a broader audience, provide an accountability framework to help investors track how companies are following through on commitments they make and collect meaningful data that can inform future engagements.”

In other words, measuring our progress—and our setbacks—can help us to collectively “move the needle” on climate.

Leveraging Portfolios for Change

Several case studies in the report put a spotlight on institutional investors who act as change agents. First Affirmative clients take note: One or more of these featured investment firms manage allocations in your investment portfolio.

In fact, First Affirmative and/or the institutions we engage to manage client assets were involved in over 65 of the shareowner actions featured in the report!

Partners in Advocacy 1Green Century Capital Management Inc. was featured for their work with agribusiness firm Archers Daniels Midland that eventually led to a policy to end deforestation across their supply chain. This was just one agreement in a remarkable campaign to transform an industry.

Many supply companies and consumer facing companies have adopted no-deforestation sourcing policies for palm oil and other land intensive products. First Affirmative participated by co-filing resolutions at Yum and McDonald’s. We successfully negotiated a substantial agreement with Yum and the resolution at McDonald’s went to a vote.

Partners in Advocacy Boston Common1.pngBoston Common Asset Management shared how the firm worked with PNC Financial Services Group to address carbon risk. The company committed to board level oversight, enhanced high-risk sector policies, client due diligence, and improved disclosure. Read our leadership blog for more information.

First Affirmative is a lead investor, taking an active role in this ongoing industry initiative aimed at banks identified as having substantial carbon risk in their lending portfolios.

Partners in Advocacy Trillium 1Trillium Asset Management discussed their agreement with 3M that led to a new renewable energy commitment to source 25% of its electricity needs from renewable sources by 2025. This translates to nearly 800,000 megawatt hours of renewable energy globally. We featured Trillium’s advocacy program in a recent leadership blog.

WaldenWalden Asset Management has been focusing on public policy lobbying by companies (and by trade associations to which they belong) on issues impacting climate. Of particular concern are companies whose policies and practices indicate that sustainability and mitigating climate impact are a high priority while at the same time their lobbying spending threatens to undermine those priorities.

Walden’s work with Microsoft exemplifies the drive towards ensuring a company’s values and long-term interests align with their climate lobbying activities. Dialogue with Microsoft eventually led the company to join the over 100 companies that have left the American Legislative Exchange Council, a membership organization that has been trying to roll back state-wide renewable energy policies by influencing state legislatures.

First Affirmative understands 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?

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: December 7, 2015