Each year I attend the SRI Conference to learn about new developments in the area of Sustainable Investing- from shareholder engagements to ethical impact investing and any other new initiatives and methods from a community of socially conscious investors and shareholder advocates.
It should be clear by now that the earth and all of humanity is confronting a global shortage of clean water as well as the catastrophic and systemic effects from global warming. As investors we have the power through capital movements to steer our money to organizations that align with impeding problems that are vital to our survival and problems that align with our ethical and moral principles. The SRI conference channels the movement of using the power of capital to address social, environmental, and cultural challenges while generating financial return. The first session I attended was an interview with Seth Goldman, the founder of Honest Teas and CEO of Beyond Meat.
Mr. Goldman having sold Honest Teas, an organic free trade sourced tea drink to Coca Cola, views Beyond Meat as an opportunity by shifting from animal to plant-based meat, to address four growing global issues: human health, climate change, constraints on natural resources, and animal welfare.
Much like Elon Musk and his vision of transforming the way we use energy, Seth Goldman appears to have a vision where one day we will wonder why we ever ate meat as a source of protein. And judging by this past quarter’s performance when McDonald’s, KFC, and Subway all began trials using Beyond Meat plant based protein; Seth Goldman’s vision is solidly on the way to being realized. That kind of systemic change is rarely seen.
In an earlier breakout session “Power to the Shareowner”, the important role of the shareowner was discussed by an expert panel, including Sara Blackwell from the Investor Alliance for Human Rights (an initiative of ICCR) and Lauren Compere from Boston Common. The conversations focused on the heavy lifting done to protect human rights and environmental protections in today’s climate of government cutbacks, regulatory rollbacks, and disregard for climate and humanitarian risks.
The expert panel focused on some of the issues they face and where they have made an impact through the use of shareholder proposals, proxies, and engagement with management and Board directors. For example, through the work of these and other shareholder advocates the SEC now requires corporations to disclose climate risk.
However, despite the progressive efforts on climate change disclosure policies the SEC is currently looking to change the rules of shareowner proposals by increasing the minimum shares held on those who may make proposals. This would take away the voice of many small investors.
We as shareholders need to contact our Congress people to stop this. As share owners we need to send comments to the SEC asking them to explain why they are making changes when the current rules are not broken as well as what meaningful analysis they are using to determine the necessity for change.
The following US SIF link will allow you to learn about what the proposed SEC shareholder rights rules changes mean to investors and how you can take action:
It was emphatically noted that the Federal Reserve and Banks have done nothing to mitigate some of the risks we face today. Jeff Eckel [in attendance], the CEO of Hannin Armstrong (a Sustainable Infrastructure Fund) states “we don’t do anything about climate change without big banks on board”.
Even in the pursuit of climate change remediation two thirds of FEMA flood insurance payments have gone to owners of beach houses and the rich, abandoning those most desperate. The banking system could also be used to prevent purchases of multiple guns in short time frames or prevent human trafficking, all much the same way they monitor money laundering. But these and many other issues only get attention when shareholders of these banks speak out.
Shareowner engagement was also a main theme in the session I attended about the Chemical Footprint Project. The Chemical Footprint Project’s mission is to provide a measurable framework to measure the use of some 2000 chemicals of high concern used in consumer products, health care products, our environment, and found in the supply chains of relevant companies.
With the EPA removing numerous toxic chemicals from the EPA list of chemicals of high concern, the Chemical Footprint Project is used as a higher standard and measuring tool for measuring the progress of companies reducing their use of chemicals on more comprehensive global lists managing our health and safety where the government does not.
As shareowners we need to continue to press for greater disclosure of chemical use, the existence of a chemical management policy, and actions large companies are taking to eliminate these chemicals from their supply chain.
You can find out more about the Chemical Footprint Project by following this link: https://www.chemicalfootprint.org/get-involved/overview
Later Benjamin Allen, the CEO of Parnassus Funds provided further proof that Shareholder Advocacy is a Collaborative Effort, especially when it comes to addressing Environmental, Social, and Governance issues.
Parnassus engages with every company they invest in on where they see that improvement can be made in their processes. One example was an investment that Parnassus made in Sysco, a food distribution company. Parnassus confronted management because their purchase of jumbo shrimp was coming from a Thai company that used slave labor in their practices. When Parnassus explained that should this get out to their consumers and restaurants, their business would be lost to their competition, Sysco discontinued using this source. Sysco later went in to partner with the WWF and Seafood Taskforce, and eliminated 30% of suppliers not up to their new standards.
I then asked Mr. Allen about their ownership of 2+ million shares of Costco in the Parnassus Core Equity Fund given their engagement process and our prior experience dealing with Costco on the same slave labor issues. Several years earlier we had divested from Costco because they were unwilling to switch suppliers and their efforts to change laws in Thailand were insufficient. I understand that to make change it requires someone to stand for change. Parnassus is engaged to make change here and surely their 2+ million share position has more clout than all of our shares. I will be following up to see where that goes. But if you would like to reach out to Parnassus you can contact Iyassu Essayas, the head of ESG research for Parnassus at email@example.com.
Just like I will be following up with Sara Blackwell from the Investor Alliance for Human Rights on the engagement they are pursuing with Microsoft on the issue of their providing software to the Immigration Enforcement Agency (ICE). But these and global challenges that we have today like clean water, climate change, human rights, and any of the UN’s 17 Sustainable Development Goals are only going to be met by the response by all of us including, business, governments, individuals and non-government organizations.
Climate change, for example, is not as much an ESG issue anymore as much as it is a Macro Economic issue. Embarrassingly the financial services industry is among the last to embrace the challenges with the level of urgency that is needed to impact climate change amongst other sustainability issues. Kristin Hull, CEO of Nia Impact Capital stated “The financial services industry currently requires a benchmark. And yet the common industry standard benchmarks are set to indices that represent our incumbent economy; full of companies and industries that have caused environmental destruction and which expose investors to systemic risk”. Perhaps linking CEO compensation to sustainability metrics would light a fire under companies to make the needed impact.
In conclusion, we have some say with making this a world that works for everyone and creating a sustainable world for future generations. By taking the responsibility that comes with owning shares of corporations seriously and accepting where we can engage to improve through our shareholder advocacy, we can do an important part.
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