Springtime in North America – A Time Featuring Corporate-Investor Engagement and Proxy Voting on Critical Issues

April 20 2021   Spring is in the air!  Proxy Season 2021 getting underway.  So how did we get here?  Some history and springtime news. 

by Hank Boerner – Chair & chief Strategist – G&A Institute

Springtime comes to the USA and and the Northern Hemisphere countries with pretty flowers in bloom, trees budding, the onset of warmer weather.  And…

Asset owners and their managers participating willingly or reluctantly in the peak months of corporate proxy voting season in North America.

Typically, the corporate issuer develops the resolution(s) for voting by the shareholder base – for example, election of slate of nominees for the board and approval of the outside auditing firm.

And then… there are the resolutions prepared by the shareholders, and these are usually not to board and executives’ liking.

Thought you might be interested in some of the history of shareholder activism.  In the earlier days of shareholder activism certain “gadflies” would offer up their resolutions for inclusion in the voting (typically then, by individual investors).

Brothers John and Lewis Gilbert and a few others of similar thinking would gin up their resolution drafts and then face the challenge by the target company could be expected.

Some still around remember the ever-present at annual meeting Evelyn Davis, a Dutch Holocaust survivor with strong feelings and lots to say about how companies she invested in were being managed .

The Gilbert siblings operated “big time” in proxy season; they owned shares in 1,500 companies and attended at least 150 corporate annual meetings each year. T

They were often characterized as showmen (kicking up a storm at companies like Chock Full o’ Nuts and Mattel and other companies’ meetings.) Right after WW II John Gilbert got the SEC on the shareholders’ side; the regulatory agency started to require that companies include relevant shareholder resolutions in the annual proxy statement (of course certain conditions applied then and now).

Over time, this process became more sophisticated as many institutional owners put corporate equities in portfolios and steadily a certain number became activist investors. (

It really helped that the US Department of Labor leveraging ERISA statutes and rules  reminded US institutional investors that their proxy was an asset and voting was a clear responsibility of the fiduciary-owner.

In 1988, Assistant Secretary of Labor Olena Berg reminded pension fund managers of the “Avon Letter” that posited that corporate proxies are a pension plan asset and should be taken seriously and voted on.

One of today’s proxy voting / corporate governance experts with wide recognition and respect is California-based James McRitchie (principal of Corpgov.net).

In a communication to the US SEC in November 2018, he explained that he and other investors engage companies on ESG issues “to enhance their long-term value and to ensure corporate values do not conflict with the long-term interests of a democratic society.”

He suggested: “Corporations should welcome shareholders into the capitalist system as participants in major decision.”

In proxy season 2021, the “crisis stories” of 2020 and earlier years continue as public dialogue at least in the form of shareholder requests / demands / expectations of the companies that are in the portfolio on important societal issues.

Climate change action, racial justice/injustice, diversity & inclusion, inequality – these are high on the list for this year’s voting.

We have selected three Top Stories for you on the themes of 2021 voting. The not-for-profit Ceres organization, long active in ESG proxy voting issues, highlights the focus on science-based emissions reduction plans, and corporate policies aligned with the goals of the 2015 Paris Agreement. There are 136 climate-related shareholder-sponsored resolutions submitted to public companies as of April 2nd for 2021 voting.

The good news is that a number of these have been resolved in investor-corporate dialogues at Domino’s Pizza, Citigroup, JPMorgan Chase, and other firms. Others were withdrawn at Duke Energy, CSX, and Valero.

Climate-related themes for resolutions include “Banking on Low Carbon”, “Carbon Asset Risk”, and “Say on Climate”.

Long-time shareholder activist Tim Smith is Director of ESG Shareowner Engagement at Boston Trust Walden and member of the Ceres Investor Network. Ceres continues to track such resolutions and information is available at www.ceres.org.

The authoritative Pensions & Investments publication shares news about a new website — Majority Action’s “Proxy Voting for a 1.5 C World”.

Four key sectors are in focus: electricity generation, oil & gas, banking, and transportation, with summaries of corporate current emission targets, capital allocations and policy activity relate to climate change. (Reaching net-zero emissions by 2050 is an example of issue in focus.)

The web site offers recommendations for voting against director nominees at companies failing to implement plans “consistent with limiting global warming” by industry/sector.

In banking the web site names Wells Fargo, Goldman Sachs, and JPMorgan Chase. Issues in focus overall include Climate Change, Community Development / Investment, Gender Equality, and more.

Third – the Yield Positive web platform offers excellent background on shareholder resolutions and the current state of affairs following the dramatic events of 2020 – racial inequality highlighted by the killing of George Floyd; worker health and safety protections in the Covid pandemic; climate change issues – with examples of the resolutions coming up for vote in 2021.

These include Home Depot – Report on racism in the company; Target – Report on/end police partnerships; Wells Fargo – report on financing Paris Agreement-compliant GHG emissions cut, and more.

The 2021 spring season of corporate proxy voting and then the voting at company issues to Fall 20231 will be closely followed by business media and of course, the global investing community. We will continue to share news and perspectives about this annual exercise of “shareholder capitalism”.

TOP STORIES – April 2021

It’s Proxy Season 2021: Investors Focus on Climate Action

FYI

 

Investors & Climate Change – Leading Institutions and their Growing Networks are Urging Expanded Corporate Disclosure

June 28 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

What about the steadily-rising investor expectations for the corporate sectors’ climate change actions and expanded ESG disclosures?

We are able to more closely examine the rising expectations of leading asset owners/key fiduciaries and their asset managers to understand the investors’ views on the ESG / sustainability disclosure practices of issuers they provide capital to.

This includes keeping close watch on individual institutions and especially the collaborations of investment organizations they participate in.

For example, this news out of London: Some 168 investors hailing from 28 countries are now collaborating to urge companies with “high environmental impact” to use CDP’s system to disclose their environmental data.

And note:  The companies being targeted by investors represent US$28 trillion in market cap and emit an estimated 4,700 megatonnes (Mt) of carbon dioxide equivalent…every year.

The investor collaboration is part of CDP’s 2021 Non-Disclosure Campaign, created to put pressure on companies that have not disclosed their carbon emissions through CDP or have discontinued the practice. Beyond carbon concerns,

CDP and its collaborating investors and investor groups are also zeroing in on companies with forest or water security concerns. (Note that some firms disclose to CDP on one theme of concern to the investor but not others – some companies report on climate change but not on water or forestry issues.)

Targeted companies for investor action in the U.S. included at the “top of the As” are such firms as Apple, Amazon, Aramark, Abbott Laboratories, Activision Blizzard, Albemarle Corp, and Alliant Energy. In Switzerland, Alcon; in Sweden, Alfa Laval Corporate AB; in Canada, Allied Properties REIT; in Brazil, Ambev S.A.; in the U.K., Arrow Global Group. The complete list is available here for your searching.

The bold name asset management firms joining the CDP campaign for greater corporate disclosure this year include HSBC Global Asset Management, Legal and General Investment Management, Nuveen, and Schroders.

Investors supporting the campaign include asset managers and separate activist investor collaborations that are part of The Investor Agenda, which has produced a comprehensive framework recently for these investors (HSBC Global Asset Management, Legal and General Investment Management, Nuveen.)

This effort was founded by seven partners including Ceres, CDP, UN PRI, and UNEP Finance Initiative. In the United States, National Association of Plan Advisors, The Forum for Sustainable and Responsible Investing  (U.S. SIF) and Interfaith Center on Corporate Responsibility (ICCR) have joined the effort.

The approach is to set out “expectations” in four areas:

  • corporate engagement,
  • investment (managing climate risk in portfolio),
  • enhancing investor disclosure, and
  • policy advocacy (urging actions to drive to the 1.5C pathway). Part of this is an urging of governments to take action to address climate change, moving toward this year’s COP 26 gathering in Glasgow.

The CDP Non-Disclosure campaign is now in its fifth year, enjoying a 39% year-on-year growth in investor participation since the start in 2017, with investor participation up more than 50% since 2020.

This effort is part of a broad movement of investor participants and investor alliances aiming to drive change in the companies they provide capital to, as governments, investors and corporations adopt goals to be part of the societal move to achieve “Net Zero” by the year 2050.

These alliances include the Glasgow Financial Alliance for Net Zero (GFANZ), gathering signatories to set science-based targets (SBTs).

Members of GFANZ include 43 banks participating in the Net Zero Banking Alliance (NZBA). The United Nations convened the NZBA to aim for a carbon-neutral investment portfolio by mid-century and will leverage the CDP campaign to target specific companies not disclosing their environmental data.

The opportunity for corporate managements to respond to the CDP disclosure campaign and be eligible for scoring and inclusion in CDP reports is at hand; the CDP disclosure system is open until July 28, 2021.

Here at G&A Institute, our team is assisting our corporate clients in responding to this year’s disclosure request from CDP.

For corporate managers: If your firm received the CDP request for disclosure for 2021 and you have questions about responding, or about your responses in development, the G&A Institute team is available to discuss. Contact us at info@ga-institute.com.

The details of the CDP campaign and the broad investor network focused on climate change actions and disclosure is our Top Story selection for you here.

TOP STORIES

A record 168 investors with US$17 trillion of assets urge 1300+ firms to disclose environmental data (Source: CDP

And more on the ESG disclosure front:

House-Approved Legislation Would Mandate ESG Disclosures (Source: National Association of Plan Advisors)

What’s the plan? Corporate polluters lag on setting climate goals (Source: Reuters)

“Sustainable Investing” or Just Plain “Investing” – Where Are We in 2021? Important Milestones Provide Answers…

by Hank Boerner – Chair & Chief Strategist – G&A Institute

February 22, 2021

About Sustainable / or ESG Investing: We have traveled a far distance over the past four decades, beginning with “ethical” and “faith-based” and the more frequent “socially responsible investing” (SRI), morphing over time into “sustainable & responsible investing” (still SRI for the traditionalist) and on to “ESG investing”.

And now to… how about “investing”? That is, just plain investing, as our friend and colleague Erika Karp, CEO of Cornerstone Capital Group has been long saying.

At various conferences, Erika (a former head of UBS research) would often say to the crowd, “one day it will be ‘investing’ without the adjectives”. That day appears to be here! Let’s see how and why.

We can start making that “just plain investing” case with the results of the US SIF biannual survey of professional asset managers in the United States (2020) – $1-in-$3 of professionally-managed AUM follows some type of ESG/sustainable investing approach. That is $17 trillion of a $55T market and growing in leaps and bounds. We can expect the next survey to report $1-in-$2 or better. (Source: US SIF.)

More recent news: Morningstar looked at “sustainable funds” for 2020 and determined that more than $51 billion flowed into new investments (double the record year of 2019) …accounting for one-quarter of all newly invested money.

Morningstar’s Jon Hale (author of the report) explains that the worsening climate crisis, the Coronavirus pandemic, and the Black Lives Matter movement are among the many reasons for this apparent flight to safety investing trend.

And, the sustainable funds outperformed (on average) more than conventional funds, with three out of four sustainable equity funds ranked in the top half of their Morningstar category in 2020. (There are about 400 “sustainable funds” available for investment, says Morningstar, up from 139 in 2015 as the firm began to separate sustainable funds for close examination from the usual mutual funds.)

Morningstar applies a Sustainability Rating for funds to help investors measure portfolio level risk from ESG factors, using Sustainalytics ratings to measure a company’s material ESG risk; the scores are rolled up to company level scores to come up with the portfolio score.

The World Economic Forum (WEF, the Davos meetings folks) points out an important factor in 2020 investing growth – 10 million new individual investors began investing since the start of the pandemic. The newcomers to investing are often younger, and Millennial Generation (born 1980-2000 by most definitions).

The post-Baby Boomers (born after 1965) stand to inherit an estimated US$30 trillion as their Boomer parents pass along their wealth in coming years. (Boomers are categorized as the post-WWII baby boom born 1946 to 1964.)

Asks WEF: “As this great wealth transfers, what might this mean for wealth inequality and long-term sustainable value creation?”

An important “add” here to note is the moves by Goldman Sachs to issue $750 billion in sustainable financing, investing and advisory activity by 2030 (according to the firm’s CEO).

In this issue we share four Top Story items that add considerable information to the above. Are we ready yet to follow Erika Karp’s advice – just call all of this ‘investing’?

TOP STORIES

Turmoil in the USA / Washington Capitol Terror Attacks – Corporate Sector Responses to Threats to the Nation

Prepared January 20 2021 – Inauguration Day in the USA

by Hank Boerner – Chair & Chief Strategist – G&A Institute

These are troubled times in the United States of America. After the national elections in November 2020, political and social rhetoric became even more heated and widepread sharing of rumors and lies intensified than even in the weeks leading up to the ballots being cast by well more than 155 million citizens in the 50 states of the Republic.  (There are more than 200 million registered voters in all of the states.)

Moving toward the inauguration of the new president the major social media platforms unfortunately served as rioter assembly stations and important [negative] information sharing tools that helped to spread lies, rumors, and volumes of false and dangerous information.  The large platforms stand accused now of having helped to enable many thousands of protestors to travel to and assemble in Washington, D.C. for a January 6 rally that quickly spun out of control.

There will likely be short- and longer-term fallout here: What was a growing public debate on the role of social media and the focus on tech companies at the center of controversy (think of Facebook, Twitter, Google, others) quickly became a public ranting from all sides of the political spectrum.

The tempo of the public policy debate has sharply increased:  What actions should be taken to address concerns about the tech leaders and their role in spreading false and dangerous-to-democracy content? (Stay tuned to this important public policy debate in 2021.)

To recap what happened:  On January 6th, 2021 a mob of an estimated 8,000-plus men and women attended a rally and then took the point to travel with an even larger group behind them, along the major thoroughfares that lead from the White House and nearby National Mall to the Capitol Hill complex that houses the U.S. Congress (the House of Representatives and US Senate) -– ranting slogans and waving their flags along a brisk and angry 3.6 mile march (4.8 kilometers).

By the time the government complex on the hill was reached the point of the mob was out of control. The “tip of the spear” leadership group quickly pierced the Capitol Hill ramparts and the mob poured in behind to do their damage inside the halls of Congress.

The mob -– characterized by many now as being in fact domestic terrorists -– swarmed the complex, confronted a police force numbering about 1,400, swept past those guardians and into the Capitol Building to wreak havoc, steal items such as the Speaker of the House’s office laptop, and destroy government property.

They were there for hours. And much of this was broadcast live, on various news platforms and including on social media — by participants!

The mob even seemed to be threatening the very lives of the Members of House and Senate — and it seems, the well-being and maybe the life of the Vice President of the United States (Michael Pence) who also served as presiding officer of the US Senate during the crucial vote to accept the 2020 Presidential voting results. (The mob’s intention was to overthrow Congress and change the vote outcome to make Donald Trump the winner.)

The  widespread criticism of these actions was immediate; much of the American public was outraged. Anger was directed at the mob, at the social media platforms helping to spread the messages of the insurrection leaders and participants, at the President of the United States and his political allies for encouraging the unrest.

24/7, major news media published, broadcast and telecast news and the volumes of criticism — and, indeed the collective outrage of most of the nation – out to all of the nation and world.

A Day of Infamy for the USA – and Corporate Response

In Utah, the Deseret News described this in its headline as “Jan. 6, 2021: Another day that will live in infamy for Americans”.

An important sea change:  The corporate community, including major players in financial services sector industries, quickly became very visible among the critics. For some companies the silence about the “Steal the Vote” protests was a form of diffidence or even support. That changed!

Prominent corporate leaders and their trade associations blasted the actions, of both rioters and supporters, and took (and continue to take) actions in response to the horror that they witnessed. We bring you highlights of some of this initial response this week.

Following the attack there was dramatically expanding news of what was to come as a new legislative and executive branch was taking shape  -– the days after January 6th were climaxed by the inauguration of the new president and vice president on January 20th (done!) and the convening of a new US Senate leadership team (in process as we write this).

All of this news and opinion was being shared in the context of the continuing threat posed to the American nation by homegrown, domestic terrorists.

This is usually a time of great celebration of the peaceful transfer of power, a 200-plus year tradition in the USA that occurs every four years following the presidential elections.  Instead, these January days became a time of sorrow and sadness and disappointment.  All that was being reported out to the world as well.

The days leading up to the January 20th inaugural event had most Americans very jittery, with media reports of continued threats (such as possible physical harm to the national and state capitals, more heated partisan political talk, even the possibility of threats to human life posed by armed citizens in so-called ragtag “militias”).

There were more U.S. military members present in Washington DC on Inauguration Day  to protect our capital city than were present in the Middle East conflict zones.

The ongoing turmoil poses a serious threat to the American Experiment in Democracy as well as to the long-term symbolism of the Capitol Hill complex that many citizens of America (and even many in the world) consider to be a shining city on a hill, the citadel of democratic rule.

With this commentary we bring you some highlights of the immediate corporate sector response, and what some see as the responsibility of the corporate leadership to help move the nation forward.  The tempo of the corporate response is quickening and we’ll share more with you in our G&A Institute’s Sustainability Highlights newsletter and in this blog. 

TOP STORIES

Here is some of the immediate Corporate Sector responses to the mob’s January 6 attack on the US Capitol – with specific corporate responses that target the financial of candidate campaigns. The corporation’s role in society is in even sharper focus now.

Looking forward:  The news media is now also focused on the future – there is a new administration in place now, led by President Joseph Biden, VP Kamala Harris, and a  House and Senate led by the Democratic Party.  The focus on ESG issues is intensifying:

We will be sharing considerably more news along these lines in the days ahead. Stay Tuned!

Watching the Major Stock Indexes – For Strong ESG Signals from the Corporate Sector

by Hank Boerner – Chair & Chief Strategist – G&A Institute

October 2020

Indexes – Indices – Benchmarks – these are very important financial analysis and portfolio management tools for asset owners and their internal and external managers.

We can think of them as a sort of report card; fiduciaries can track their performance against the benchmark for the funds they manage; financial sector players can develop products for investment (mutual funds, Exchange Traded Funds, separate accounts and so on) to market to investors using the appropriate benchmark.

If the investable products are focused on the available equities of the largest market cap companies for investment, the most widely-used indexes will likely be the S&P 500®, created back in March 1957 by Standard & Poor’s and the Russell 1000®, created in 1984 by the Frank Russell Company.

Today the S&P 500 Index is managed by the S&P Global organization.  The Russell 1000 is managed by FTSE Russell, a unit of the LSE Group (London Stock Exchange Group).

There are more or less 500 corporate entities in the S&P 500 Index that measures the equity performance of these companies (those listed on major exchanges).

There are other important indexes by S&P for investors to track:  The S&P Global 1200, S&P MidCap 400, and S&P SmallCap 600, and many more.

Russell 1000® is a subset of the Russell 3000®; it is comprised of the 1000 largest market cap companies in the USA. The R1000 represents more than 90% of the USA’s top publicly-traded companies in the large-cap category.  Both indexes are very important tools for professional investment managers and send strong trending signals to the capital markets.

The G&A Institute team closely tracks the ESG and sustainability  disclosure & reporting practices and each year; since 2010 we’ve published research on the trends, first with the S&P 500, and for 2019 and 2020, we expanded our research into to the larger Russell 1000 index. (The top half of the 1000 roughly mirrors the S&P 500.)

The 500 and 1000 companies are important bellwethers in tracking the amazing expansion of corporate sustainability reporting over the past decade.  Yes, there were excellent choices of select benchmarks for sustainable and responsible investors going back several decades – such as the Domini 400, going back to 1990 — and we tracked those as well.  (The “400” was renamed the MSCI KLD 400 Social Index in 2010).

But once major publicly-traded companies in the United States began escalating the pace of sustainability and ESG reporting, many more investors paid attention.  And media tuned in.  And then the ESG indexes proliferated like springtime blooms!

Those bigger customers (the large cap companies) of other firms began expanding their  ESG “footprint” and considering the supply and sourcing partners to be part of their ESG profile.  So, customers are now queried regularly on their ESG performance and outcomes.

Once the critical mass — 90% of large-cap U.S. companies reporting in our latest S&P 500 research – how long will it be for many more mid-caps, small-caps, privately-owned enterprises to follow the example?  Very soon, we think.  And we’re closely watching!  (And will bring the news to you.)

If you have not reviewed the results of the G&A Institute research on the ESG reporting of the S&P 500 and the Russell 1000 for 2019, here are the links:

Note:  Click here for more helpful background on the S&P 500 and the Russell 1000 large equities/stock indexes, here is Investopedia’s explanation.

Excellent Wrap up From GreenBiz:
At last, corporate sustainability reporting is hitting its stride

US Banks and Climate Change – What’s the Exposure to Climate Risk?

by Hank Boerner – Chair & Chief Strategist  – G&A Institute

October 27 2020

Banks have long been at the center of the U.S. economy, and federal policies (federal legislation, rules) for the last century have been designed to support, encourage and protect banking institutions, and the customers the banks serve.

The Federal Reserve System – America’s vital central bankers – was one of the last central banks of the industrial nations to be organized (through the 1913 Federal Reserve Act). The Fed plays a critical role in U.S. bank oversight and support.

There is also a robust state-level banking oversight and protection system. Take New York State  — for many years, the state’s bank licensure activities were second only to the Federal governments. Many foreign banks “land” in NY and obtain a state license to begin to operate.

In all this oversight and protection [of the banking system], in all the laws, rules and regulations for the U.S. banking sector, risk is regularly addressed. It is central to bank regulation and the foundation of rules etc.

The questions centered on risk become more critical in this, an era of fast-rising climate change challenges.

What is the broad scope the financial services sectors’ (and the banking industry’s) responsibilities and accountabilities as seas rise, super storms roar ashore, flood waters rise, enormous wildfires occur, and more?

The Ceres organization’s “Ceres Accelerator for Sustainable Capital Markets” looked at the U.S. banking sector’s exposure to climate risk – to ask and try to answer: what are the systemic and financial risks of climate change for stakeholders, for the banking industry, and the broader economy?  That’s our Top Story pick for you this week.

The researchers looked at the risk associated with the syndicated lending of major U.S. banks in climate-relevant sectors of the economy. Key quote: “Our future depends on banks’ understanding of, and disclosure of, their exposure to major risks like climate change” (Steven Rothstein, MD of the accelerator).

The good news is that a growing number of the major U.S. banks have announced moves to look more closely at climate change impacts. Bank of America, for example, joined other big banks in disclosing the “E” effect of its lending practices. The big banks (like Citi Group) have joined forces in the Partnership for Carbon Accounting Financials Initiative.

Some 70 banks and investors from five continents are involved (with US$9 trillion in AUM). Lots going on in banking circles related to climate change challenges these days!

TOP STORIES

The Ceres Accelerator for Sustainable Capital Markets report on banking:

Something we were pleased to be a part of — WSJ Feature Section on “Leadership and Sustainability”. Journalists Dieter Holger and Fabiana Negrin Ocha interviewed the G&A leadership team in the “Show Us The Numbers” feature:

Big News: US SIF Report on US Sustainable and Impact Investing Trends 2020 Released

Big News:   As 2020 Began, $1-in-$3 of Professionally Managed AUM in the United States Had ESG Analysis and/or Portfolio Management Strategies Applied…US$17.1 Trillion Total

November 2020 — Every two years, since 1996, the influential trade organization for sustainable, responsible and impact investment (US SIF) conducts a year-long survey of professional asset managers to determine the total of USA-based assets under management (“AUM”) that have ESG analysis and/or portfolio management applied.

The Trends report just released charts the AUM with ESG analysis and strategies in the United States at $16.6 trillion at the start of 2020 – that’s 25X the total since the first Trends report in1996, with compounded growth rate of 14 percent. (The most rapid growth rate has been since 2012, says US SIF.)

Consider: This means that today, $1-in-$3 of professionally managed assets in the United States follows analysis and/or strategies considering ESG criteria. (The total of US assets under professional management at the start of 2020 was $51.4 trillion.)

This is a dramatic 43% increase over the survey results of the 2018 Trends report – that effort charted a total of $11.6 trillion in ESG-managed AUM in the USA at the start of 2018.

The survey respondents for the current Trends report identified the ESG-focused AUM practices of 530 institutional investors; 384 money managers; 1,204 community investment institutions – all applying environmental, social, and corporate governance criteria in their portfolio management.

What are top ESG issues identified by money management professionals in the survey effort?

  • Climate Change-Carbon: $4.18 trillion – #1 issue
  • Anti-Corruption: $2.44T
  • Board Room Issues: $2.39T
  • Sustainable Natural Resources/Agriculture: $2.38T
  • Executive Compensation: $2.22T
  • Conflict Risk (such as repressive regimes or terrorism, this cited by institutional investors): $1.8T

Note that many strategies and ESG analysis and portfolio management approaches can be overlapping.

Lisa Woll, US SIF Foundation CEO explains: “Money managers and institutional investors are using ESG criteria and shareholder engagement to address a plethora of issues including climate change, sustainable natural resources and agriculture, labor, diversity, and political spending. Retail and high net worth individuals are increasingly using this investment approach, with $4.6 trillion in sustainable investment assets, a 50% increase since 2018.”

The 2020 Trends report counts two main strategies as “sustainable investing” – (1) the incorporation of ESG factors in analysis and management of assets and (2) filing shareholder resolutions focused on ESG issues.

What are the top issues for the professional asset owners, their managers, and other investment professionals participating in the survey? Gauging the leading ESG issues for 2018-to-2020, examining the number of shareholder proposals filed, the Trends report charts the following in order of importance:

  • Corporate Political Activity
  • Labor & Equal Employment Opportunity
  • Climate Change
  • Executive Pay
  • Independent Board Chair
  • Special Meetings
  • Written Consent
  • Human Rights
  • Board Diversity

Looking at the 2020 Trends report, we have to say — we’ve certainly come a long, long way over the years. When first Trends survey was conducted at the end of 1995, the total AUM was just US$639 billion. The shift to sustainable, responsible, impact investment was underway! (The report released on November 16th is the 13th in the series.)

For information about the US SIF Report on US Sustainable and Impact Investing Trends 2020, and to purchase a copy of the report: https://www.ussif.org/trends

Governance & Accountability Institute is a long-time member of the Forum for Sustainable and Responsible Investment (US SIF) and a sponsor of the 2020 Trends report. US SIF is the leading voice advancing sustainable and impact investing across all asset classes.

Members include investment management and advisory firms, mutual fund companies, asset owners, research firms, financial planners and advisors, community investment organizations, and not-for-profits. The work is supported by the US SIF Foundation that undertakes educational and research efforts to advance SIF’s work.

Louis Coppola, G&A EVP and Co-founder, is chair of the SIF Company Calls Committee that arranges meetings of SIF member organizations with publicly-traded companies to discuss their ESG/Sustainability efforts.

US SIF Trends 2020 Report Published November16, 2020:

Rising Heat & Humidity, Rising Sea Levels, Up & Down Shifts in Crop Yields, More Large Fires, Huge Human Migration Within the United States -– What We Are Learning Today

September 24 2020

by Hank Boerner – Chair & Chief Strategist – G&A Institute

There is so much going on in the global sustainability space that we could draw an apt analogy – it’s “like drinking water not out of a straw but a fire hose!”

Every week our team seeks out the news, feature and research items that will help you stay informed on developments in corporate sustainability and CSR, sustainable investing, the actions of governments and civil society leadership, activists, academics & researchers…and more.

For the past two or three years the pace of these developments has accelerated and so created a long list of many “possibilities” to share with you.  Sometimes, certain news jumps up and shouts at us from the print or digital page.

Example:  This week we see a powerful accounting of the impacts of climate change as assembled by ProPublica, an independent, nonprofit journalism organization focused on the major issues of the day.   The collaborating journalists – at ProPublica and The New York Times with support from the non-profit Pulitzer Center — focused on “the compounding calamities of climate risk” and the projected impact on the continental U.S.A. over the coming decades.

The issues “stack on top of one another”, they write.  Such as rising heat, excessive humidity, oceans rising, very large fires, crop failures, economic damages, and more…scary projections for the 2040-2060 timeframe.   (That is starting only 20 years, or 240 months, just 1,000+ weeks away!)

ProPublica worked with data from the Rhodium Group, which when presented in the context of the report, tell a story of warming temperatures, and changing rainfall that will drive agriculture and temperate climates from south to north, as the sea levels rise and vast amounts of coastlines “are consumed” and dangerous levels of humidity “swamp the Mississippi River Valley”.

All of this will profoundly interrupt the way that we in this, the world’s largest economy, will live and farm and work later in this century.  This could be an era to be marked by mass migration within the U.S.A., far outpacing the dramatic “Great Black Migration” with large populations moving from southern states to the north, profoundly reshaping this Land.

The data is presented in maps and county-by-county review; you can in the visuals presented see how the temperate zone marches north and more…for corn and soy production, harvests will decrease and increase, depending on location in the country.

Economic impact? (Serious projections to consider today while we experience dislocation now due to the Coronavirus pandemic include rising energy costs, lower labor productivity, poor crop yields, increase in crime and more.

Which counties will rise and which, fall?  The maps tell the story.

This reportage was so important and timely that the NY Times published a comprehensive wrap up this weekend in the Sunday magazine (reaching well beyond two million print and digital subscribers).   We present this important reportage for you in the Top Stories.

Timeliness:  This is also Climate Week, with important digital and some physical meetings around the world to focus on climate change challenges. We’re sharing some of the coverage of that as well.

 

Top Stories

Americans Tuning in to Sustainability During Crises, Expecting “More” from Government and Corporate Sector

August 27 2020

by Hank Boerner – Chair & Chief Strategist – G&A Institute

According to responses to a June on-line survey of 2,000 adults in the U.S.A. for “clean manufacturing” leader Genomatica, sustainability is now a top-of-mind issue, with an overwhelming majority (85% of respondents) of Americans indicating they’ve been thinking about sustainability the same amount or more…and 56% want brands and government to prioritize sustainability even in the midst of the crises (Coronavirus, economic downturn – plus civil unrest).

According to Genomatica CEO Christophe Schilling: “The collective consciousness on sustainability is rising, and certainly faster than most would have expected during these unprecedented times.

While this shift has been underway for decades, and is particularly strong in Europe, many of us in the U.S. have been inspired by the rapid improvement in air quality and traffic that shine a bright light on how our behaviors and decisions impact our environment and quality of life.”

Other interesting survey findings:

  • 59% of Americans say working from home is more sustainable than working in an office.
  • 37% of Americans are willing to pay a little more for sustainable products, even during an economic downturn. Gen-Z is the most willing age group, at 43%.
  • Half of Americans won’t be comfortable using sharing economy services like Uber or Airbnb (53%), riding public transportation (54%) or carpooling (50%) until there is a vaccine, if ever.

There’s more findings in the Top Story link below:

Part of the “sustainability thinking” is about personal investments…and how to do well financially while doing good with one’s financial activities.

A new report published by the foundation of The Forum for Sustainable and Responsible Investment (US SIF) explores the growth of passive ESG investing and the outpace of investor flows into passive vs. active ESG funds.

The report shows that “net flows into passively-managed ESG funds have in recent years outpaced net flows into their actively managed counterparts” — despite the fact that “the vast majority of sustainably-invested assets are in actively-managed ESG funds.”

Meg Voorhes, Director of Research at the US SIF Foundation explains:  “The advent of passive ESG funds provides more options to investors seeking sustainable impact, and we encourage these fund managers to make commitments to comprehensive ESG approaches.”

Follow Up to Last Week
In last week’s Highlights we told you about Morgan Stanley’s pioneering move to join the Partnership for Carbon Accounting Financials (“PCAF”).  The update:  Citi and Bank of America are on board, too.  Great news moving toward the low-carbon economy. 

Citi, Bank of America join Morgan Stanley in carbon-disclosure group

Individual news releases from the banks with the details:

Lively Discussions: The Move Toward Harmonized Corporate ESG / Sustainability Reporting

September 22 2020

by Hank Boerner – Chair & Chief Strategist – G&A Institute

There are lively discussions going on, centered on improving publicly-traded company disclosure and reporting – and especially ESG reporting…that is, storytelling about the company’s “non-financials” (in accounting-speak).  And the story of the corporate sustainability story for those-in-the-know!

The proliferation of ESG / sustainability reporting frameworks, standards, information platforms, industry guidance, stock exchange guidance and much more has been astounding in recent years.

We think of all this as about the organizing of the storytelling about a company’s sustainability journey and what the enterprise has accomplished. 

And why the story matters to society…to investors, employees, customers, suppliers, communities…and other stakeholders.

And it has a been a long journey to the state of today’s expanding corporate ESG disclosure.

The start of mandating of periodic financial and business mandated disclosure goes back to the 1930s with passage of landmark federal legislation & adopted implementation (compliance) rules for publicly-traded companies in the United States.

Corporate financial disclosure in concept is all about providing shareholders (and potential investors) with the information they need to make buy-sell-hold decisions.

The sturdy foundations of mandated corporate disclosure in the U.S. are the laws passed after the 1929 stock market crash – the 1933 Securities Act and 1934 Exchange Act.  These laws and the bodies of rules deriving from them have been constantly updated over the years, including with Sarbanes Oxley legislation in 2002 and Dodd Frank in 2010. These mandate or guide and otherwise provide the rules-of-the-road for financial disclosure for company managements.

Disclosure has steadily moved well beyond the numbers – Sarbanes-Oxley updated the 1930’s laws and addressed many aspects of corporate governance, for example.

Voluntary Disclosure & Reporting – ESG Issues & Topics
Over the past 40 years, beyond the financials, corporate voluntary non-financial disclosure has been steadily increasing, as investors first embraced “socially responsible investing” and moved on to sustainable & responsible & impact investing in the 21st Century.

Asset owner and asset manager (internal and external) requests for ESG information from publicly-traded companies in portfolio has steadily expanded in the depth and breadth of topic and issue areas that institutional investors are focused on – and that companies now address in significantly-expanded ESG disclosures.

Today, investor interest in ESG / sustainability and related topics areas is widespread throughout asset classes – for equities, equity-focused products such as imutual funds and ETFs, fixed-income instruments, and now credit risk, options and futures, fixed assets (such as real estate), and more.

With today’s dramatic increase in corporate sustainability & ESG reporting, the maturation of reporting frameworks and standards to help address the internal need for better organizing non-financial data and information and accompanying ESG financial disclosure.

And all of this in the context of trying to meet investor demands.  Today with expanded ESG disclosure, corporate executives find that while there are more resources available to the company, there is also more confusion in the disclosure process.   Investors agree.

Common Complaints:  Lack of Comparability, Confusion, Demand for Change
The result of increasing demand by a widening range of investors for accurate, detailed corporate ESG information and the related proliferation of reporting frameworks and standards can and has resulted in confusion among investors, stakeholders and companies as to what is important and material and what is frill.

This especially as corporate managements embrace various elements of the available frameworks and standards and industry guidance and ESG ratings for their still-voluntary ESG reporting.

So where do we go from here?  In our selection of Top Stories for you, we bring you news from important players in the ESG reporting process as they attempt to move in the direction of more uniform, comprehensive, meaningful and decision-ready corporate ESG reporting. That investors can rely on.

The news for you is coming from GRI, SASB, GSSB, IIRC, CDSB, and CDP (among others) – all working to get on the same page.

The aim: to benefit corporate reporters – and the users of the reports, especially capital market players.

Because in the end, ESG excellence is all about winning in the competition for access to capital. Accurate, timely, comprehensive comparable ESG information is key!

Top Stories