INSTITUTIONAL INVESTORS LAUNCH ALLIANCE FOCUSED ON HUMAN RIGHTS

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

ICCR Provides Leadership for Investor Collaboration To Advance Corporate Sector and Investor Action on Human Rights Issues

The recently-launched Investor Alliance for Human Rights provides a collective action platform to consolidate and increase institutional investor influence on key business and human rights issues.

For nearly 50 years, the Interfaith Center on Corporate Responsibility (ICCR) has been engaging with corporate managements and boards, coalescing with asset owners and managers and waging campaigns on key E, S and G issues.

ICCR has become a major influence for investors at corporate proxy voting time, and in ongoing investor-corporate engagements.

Consider:  The member institutions have AUM of US$400 billion and influence many other investors (depending on the issue in focus at the time).

ICCR has 300-plus institutional investor members, many (but not all) are faith-based organizations. A good number of member institutions are leaders in making available sustainable & responsible investment products and services. (See representative names in references at end.)

Key issues in focus for ICC members include:

  • Human Rights (key: human trafficking, forced labor, fair hiring practices)
  • Corporate Governance (board independence, CEO comp, lobbying)
  • Health (pharma pricing, global health challenges)
  • Climate Change (science-based GhG reduction targets)
  • Financial Services (risk management for financial institutions, responsible lending)
  • Food (antibiotics in food production, food waste, labor)
  • Water (access, corporate use of water and pollution)

HUMAN RIGHTS IN FOCUS FOR NEW ALLIANCE

On the last issue – Human Rights – ICCR has long been involved in various Human Rights issues back to its founding in 1971 and has been organizing the Investor Alliance for Human Rights since late-fall 2017.  Here are the essentials:

  • Investor Alliance participants will have an effective “Collective Action Platform” for convening, information sharing, and organizing collaboration on action to make the case to corporate decision-makers and public sector policymakers (and other stakeholders) on the need for urgency in addressing human rights issues.
  • The umbrella of a formal alliance will help individual participants to build partnerships and develop collaboration within their own universes of connections (such as NGOs, other investors, community-based organizations, trade groups, corporate leaders, multi-lateral organizations, and other institutions and enterprises).
  • Among the work to be done is the encouragement and support of building Human Rights criteria and methodology into asset owner and manager guidelines, investing protocols, models, and to integrate these in corporate engagements and proxy campaigns, as well as to guide portfolio management. (Buy/sell/hold decision-making.)
  • All of this will help to expand investor reach and influence and strengthen advocacy for best practices in Human Rights by both companies and investors. Leveraging of broader investor influence is key in this regard.

The Alliance will provide participants with a “rapid response” resource to assure that the “investor voices” are clearly heard in corporate board rooms and C-suites, in public sector leadership offices, and in media circles when there are threats posed to effective actions and reforms in Human Rights issues.

The Alliance is outreaching to NGOs, faith-based institutions, academics, media, labor unions, multi-lateral global institutions, trade and professional associations, corporate managements and boards, and of course to a wide range of asset owners and managers.

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The key player at ICCR for the Alliance is David Schilling, a veteran staff member who is Senior Program Director – Human Rights & Resources. (email:  dschilling@iccr.org)

David joined ICCR in 1994 and has led initiatives on human rights in corporate operations in Africa, Asia and Latin America, often visiting factories and meeting with workers on the ground.

David is currently Chair, Advisory Board of the Global Social Compliance Program; member, International Advisory Network of the Business and Human Rights Resource Centre; member, RFK Center Compass Education Advisory Committee; UNICEF CSR Advisory Group; and, Coordinator (with ICCR member institutions) of the Bangladesh Investor Initiative (a global collaboration in support of the “Accord for Fire and Building Safety”.

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ICCR stresses that it sees its work “through a social justice lens.”  For more than two decades members and staff have worked to eradicate human rights abuses in corporate operations and across global supply chains, such as forced child labor in cotton fields in Uzbekistan.

The organization has an Advisory Committee of Leaders in Business and Human Rights (formed in late-2016).  Members include representatives of Boston Common Asset Management; Shift; Landesa; The Alliance for a Greater New York; Oxfam America; Mercy Investment Services; International Corporate Accountability Roundtable; and Global Witness.

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ICCR has a long history in Human Rights progress.  The organization came together as a committee of the mainstream Protestant denominations under the  umbrella in 1971 to organize opposition to the policies and practices of “Apartheid” in South Africa.

Over time, the U.S. corporations operating in South Africa stopped operations there.  More than 200 cities and municipalities in the United States of America adopted anti-Apartheid policies, many ending their business with companies operating in South Africa.

Protests were staged in many cities and on many college & university campuses, and U.S. and European media presented numerous news and feature presentations on the issue.

In time, the government of South Africa dismantled Apartheid and the country opened the door to broader democratic practices (the majority black population was formerly prohibited to vote).

Over the years since the Apartheid campaign, ICCR broadened its focus to wage campaigns in other societal issues, including:

  • Focus on fair and responsible lending, including sub-prime lending and payroll lending.
  • Putting climate change issues on the agenda for dialogue with corporations, including the demand for action and planning, and then greater disclosure on efforts to curb GHG emissions.
  • Encouraging investment in local communities to create opportunities in affordable housing, job development, training, and related areas.
  • Promoting greater access to medicines, including drugs for treatment of AIDS in Africa, and affordable pricing in the United States.
  • Promoting “Impact Investing” – for reasonable ROI as well as beneficial outcomes for society through investments.
  • Promoting Islamic Finance.
  • On the corporate front, requesting greater transparency around lobbying by companies to influence climate change, healthcare and financial reforms, both directly and through trade associations and other third-party organizations.
  • Opposing “virtual-only” annual corporate meetings that prevent in –person interaction for shareholders.

Proxy Campaigns – Governance in Focus:

ICCR members are very active at proxy voting time.  Among the “wins” in 2017:

  • Getting roles of (combined) Chair & CEO split – 47% support of the votes for that at Express Scripts and 43% at Johnson & Johnson; 39% at Chevron.
  • More disclosure on lobbying expenditures – 42% support at Royal Bank of Canada and 41% at First Energy; 35% at Cisco and 25% at IBM.

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Notes and References:

Information on the new Alliance is at: http://iccr.org/iccr-launches-new-alliance-amplify-global-investor-influence-human-rights

ICCR’s web site is at: www.iccr.org

And at http://iccr.org/our-issues/human-rights/investor-alliance-human-rights

The Alliance initiative is supported with funding from Humanity United and Open Society Foundations.

Influence and Reach:  The ICCR member organizations include the AFSCME union fund, Walden Asset Management, Boston Common Asset Management, Oxfam, The Maryknoll Fathers and Brothers, and Maryknoll Sisters, American Baptist Churches, Mercy Investments, Christian Brothers Investment Services (CBIS), Wespath Investment Management, Everence Financial, Domini Social Investments, Church of England Ethical Investment Advisory Group, Gabelli Funds, Trillium Asset Management, Calvert Group, Clean Yield, The Nathan Cummings Foundation, and other institutional investors.

 

 

 

 

 

The Results Are In: Sustainable, Responsible, Impact Investing by U.S. Asset Managers At All-time High — $8 Trillion!

by Hank Boerner – Chairman & Chief Strategist, G&A Institute

We have an important update for you today: The US SIF Report on “US Sustainable, Responsible and Impact Investing Trends, 2016,” was released this week.

The top line for you today: In the U.S.A., sustainable, responsible and impact (SRI) investing continues to expand — at a rapid and encouraging pace.

As we read the results of 2016 survey report, we kept thinking about the past 30 or so years of what we first knew as “socially responsible,” “faith-based,” “ethical” (and so on) approaches to investing, and that more recently we declared to be sustainable & responsible investing (SRI). And even more recently, adding “Impact Investing”).

At various times over the years we tried to visualize “how” the future would be in practical terms when many more mainstream investors embraced SRI / ESG approaches in their stock analysis and portfolio decision-making.

We’re happy to report that great progress continues to be made. It may at times have seemed to be slow progress for some of our SRI colleagues, especially the hardy pioneers at Domini, Trillium, Calvert, Zevin, Walden, Christian Brothers/CBIS, As You Sow, Neuberger Berman, and other institutions.  But looking over the past three decades, always, in both “up and down” markets, and especially after the 2008 market crash — sustainable, responsible and impact investment gained ground!

And so, we in the U.S. SRI community anxiously look forward to the every-other-year survey of U.S.A. asset owners and managers to measure the breadth and depth of the pool of assets that are managed following ESG methods, SRI approaches, etc.

Here are the key takeaways for you in the just-released survey by the U.S. Forum for Sustainable & Responsible Investment (US SIF), the trade association of the SRI community that has tracked SRI in its survey efforts since 1995-1996, and the US SIF Foundation.

2016 Survey Highlights:

• At the start of 2016, ESG (“environmental/social/governance”) factors were being considered for US$8.72 trillion of professionally-managed assets in the United States of America.

• SRI Market size: that is 20 percent / or $1-in-$5 of all Assets Under Management (AUM) / for all US-domiciled assets under professional management (that is almost $9 Trillion of the total AUM of $40.3 trillion).

• This is a gain of 33% over the total number ($6.572 trillion in AUM) in the previous US SIF survey results at the start of 2014.

• Surveyed for the 2016 report: a total of 447 institutional investors, 300 money (asset) managers, and 1,043 community investment institutions. This can be described as a diverse group of investors seeking to achieve positive impacts through corporate engagement -or- investing with an emphasis on community, sustainability or advancement of women.

Drivers: Client demand is a major driver – the U.S. asset owners hiring asset (money) management firms are increasingly focused on ESG factors for their investments — as responsible fiduciaries.

ESG Criteria: Survey respondents in the investment community had 32 criteria to select from in the survey, including E-S-G and product related activities (ESG funds); they could add ESG criteria used as well.

What is important to the investors surveyed?  The report authors cited responses such as:

• Environmental investment factors — now apply to $7.79 trillion in AUM.
• Climate Change criteria – now shape $1.42 trillion in AUM – 5 times the prior survey number.
• Clean Technology is a consideration for managers of $354 billion in AUM.
• Social Criteria are applied to $7.78 trillion in AUM.
• Governance issues apply to $7.70 trillion in AUM, 2X the prior survey.
• Product specific criteria apply to $1.97 trillion in AUM.

The Social criteria (the “S” in ESG) include conflict risk; equal employment opportunity and diversity; labor and human rights issues.

Product issues include tobacco and alcohol; these were the typically “screened out” stocks in the earlier days of SRI and remain issues for some investors today.

Mutual Funds:
Among the investment vehicles incorporating ESG factors into investment management, the survey found 519 registered investment companies (mutual funds, variable annuity funds, ETFs, closed-end funds). Total: $1.74 trillion in AUM.

Alternative Investment Vehicles:
There were 413 alternate investment vehicles identified as using ESG strategies (including private equity, hedge funds, VCs). Total: $206 billion in AUM.

Institutional Investors:
The biggie in SRI, with $4.72 trillion in AUM, a 17% increase since the start of 2014 (the last survey). These owners include public employee funds; corporations; educational institutions; faith-based investors; healthcare funds; labor union pension funds; not-for-profits; and family offices.

Community Investing:
The survey included results from 1,043 community investing institutions, including credit unions; community development banks; loan funds; VC funds. Total: $122 billion in AUM. (These institutions typically serve low-to-moderate income individuals and communities and include CDFI’s.)

Proxy Activism:
SRI players are active on the corporate proxy front: From 2014 to 2016, 176 institutional investors and 49 money managers file / co-file shareholder resolutions at U.S. public companies focused on environmental (E) or social (S) issues. (The number remains stable over the past four years, the report tells us.) The major development was that where such resolutions received 17% approval from 2007 to 2009, since 2013, 30% of resolutions received 30% or more approval.

Methodologies/Approaches:
There are five primary ESG incorporation strategies cited by US SIF: (1) Analyzing, selecting best-in-class companies, positive choices for the portfolio; (2) negative approaches / exclusionary approaches for certain sectors or industries or products by/for the fiduciary; (3) methods of ESG integration — considering various ESG risks and opportunities; (4) impact or “outcome” investing, intended to generate social (“S) or environmental (“E”) impact along with financial return; (5) selecting sustainability-themed funds of various types.

Commenting on the survey results, US SIF CEO Lisa Woll observed that as the field grows, some growing pains are to be expected. . .with the continuing concern that too often, limited information is disclosed by survey respondents regarding their ESG assets. While the number of owners and managers say that they are using ESG factors, they do not disclose the specific criteria used. (This could be, say, criteria for clean energy consideration, or labor issues of various kinds.)

The US SIF biannual survey effort began in 1996, looking at year-end 1995 SRI assets under management. In that first year, $639 billion in AUM were identified. By the 2010 report, the $3 billion AUM mark was reached. That sum was doubled by the 2014 report.

Year-upon-year, for us the message was clear in the periodic survey results: The center (the pioneering asset owner and management firms) held fast and key players built on their strong foundations; the pioneers were joined by SRI peers and mainstream capital market players on a steady basis (and so the SRI AUM number steadily grew); and investors — individuals, and institutions — saw the value in adopting SRI approaches.

Today, $1-in-$5 in Assets Under [Professional] Management sends a very strong signal of where the capital markets are headed — with or without public sector “enthusiasm” for the journey ahead in 2017 and beyond!

There is a treasury of information for you in the report, which is available at: www.ussif.org.

Congratulations to the US SIF team for their year-long effort in charting the course of SRI in 2015-2016:  CEO Lisa Woll; Project Directors Meg Voorhes of the US SIF Foundation and Joshua Humphreys of Croatan Institute; Research Team members Farzana Hoque of the Foundation and Croatan Institute staff Ophir Bruck, Christi Electris, Kristin Lang, and Andreea Rodinciuc.

2016 survey sponsors included: Wallace Global Fund; Bloomberg LP; JP Morgan Chase & Co.; Calvert Investments; TIAA Global Asset Management; Candriam Investors Group; KKR; MacArthur Foundation; Neuberger Berman; Saturna Capital (and Amana Mutual Funds Trust); Bank of America; BlackRock; CBIS (Catholic Responsible Investing); Community Capital Management Inc.; ImpactUs; Legg Mason Global Asset Management / ClearBridge Investments; Morgan Stanley Institute for Sustainable Investing; Sentinel Investments; Trillium Asset Management; Cerulli Associates; and, Walden Asset Management.

A footnote on terminology: Throughout the survey exercise and reporting, terms used include sustainable, responsible and impact investing; sustainable investing; responsible investing; impact investing; and SRI. These are used interchangeably to describe investment practices.

About US SIF:  This is a three-decade old, Washington-DC-based membership association that advances SRI to ensure that capital markets can drive ESG practices. The mission is to work to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts.  SIF Members are investment management and advisory firms; mutual fund companies; research firms; financial planners and advisors; broker-dealers; non-profit associations; pension funds; foundations; community investment institutions; and other asset owners.

Governance & Accountability Institute is a long-time member organization of the U.S. Forum for Sustainable and Responsible Investment (US SIF).

As part of the G&A Institute mission, we are committed to assisting more investing and financial professionals learn more about SRI and ESG — especially younger professionals interested in adopting SRI approaches in their work.  G&A is collaborating with Global Change Advisors to present a one-day certification program hosted at Baruch College/CUNY on December 14, 2016.  Details and registration information is at: https://www.eventbrite.com/e/intro-to-corporate-esg-for-investment-finance-professionals-certification-tickets-29052781652