{"id":1040,"date":"2018-03-30T05:46:28","date_gmt":"2018-03-30T00:16:28","guid":{"rendered":"https:\/\/ga-institute.com\/to-the-point\/?p=1040"},"modified":"2018-06-22T17:08:12","modified_gmt":"2018-06-22T11:38:12","slug":"second-in-the-series-a-big-year-shaping-up-2018-developments-in-corporate-sustainability-responsibility-in-sustainable-investing-in-1q","status":"publish","type":"post","link":"https:\/\/ga-institute.com\/to-the-point\/second-in-the-series-a-big-year-shaping-up-2018-developments-in-corporate-sustainability-responsibility-in-sustainable-investing-in-1q\/","title":{"rendered":"Second in the Series: A BIG YEAR SHAPING UP, 2018 \u2013 Developments in Corporate Sustainability \/ Responsibility & in Sustainable Investing in 1Q"},"content":{"rendered":"

Update — on First Quarter 2018 ESG \/ Sustainable Investment Developments<\/em><\/span><\/h2>\n

Continuing our commentary on the theme suggested by MSCI’s Linda Eiling Lee<\/strong> of Volume and Velocity<\/em>\u00a0in 2018 (of change) \u2013 current developments have been signalling dramatic and rapid changes in sustainable investing and corporate sustainability in the First Quarter of 2018.<\/p>\n

We’re sharing here recent developments that signal that we\u2019ve arrived at the Tipping Points for both the investment community and the corporate community in terms of \u201csustainability\u201d.<\/em><\/p>\n

Here’s a summary for you:<\/p>\n

Activism in the 2018 Corporate Proxy Voting Season \u2013 Notes for You As the Contests Are Underway<\/strong><\/h3>\n

It\u2019s Annual Corporate Proxy Voting season once again, and the investment community has been developing its primary issues \u201cexpectations and demands\u201d for the share 2018 voting.<\/p>\n

\"\"According to Bloomberg LP<\/strong>, as we entered March and the voting was about to get underway, ESG issues were firmly in focus for shareowners of the Russell 3000.<\/p>\n

An important perspective we share with our corporate clients and connections:\u00a0 \u201cESG\u201d has become a holistic evaluation of the publicly-traded company.<\/p>\n

The \u201cG<\/strong>\u2019 (governance) factor continues to apply to such traditional governance issues as makeup of the board, having a single class of shares for voting, separation of chair and CEO post, majority vote requirements for director candidates, and assured shareholder access to the proxy development process.<\/p>\n

More recently, with adoption of \u201cESG\u201d as the approach to investment decision-making, the governance of the other elements (the \u201cS\u201d and \u201cE\u201d issues) are also considered to be important indicators of the quality of the company\u2019s management and board.<\/p>\n

So an \u201cS<\/strong>\u201d (social or societal) issue such as Diversity & Inclusion naturally becomes a \u201cG\u201d issue as well, as shareowners and stakeholders express their rising expectations about what the public company in focus is or is not<\/em> doing in terms of developing board of director diversity.<\/p>\n

\"\"The \u201cE<\/strong>\u201d becomes a \u201cG\u201d interconnection as well when shareowners and powerful forces such as the global Financial Stability Board\u2019s Task Force on Climate-related Disclosure<\/strong> recommendations are being urged on companies for adoption.<\/p>\n

\"\"<\/p>\n

BlackRock<\/strong>, the world\u2019s largest asset manager, would like to see more companies consider the TFCD recommendations on climate change planning.<\/p>\n

In Focus:\u00a0 Social \/ Societal Impact Issues<\/strong><\/h2>\n

We’re tracking more than 200 shareholder-sponsored “S” issues, including focus on the diversity practices (and make up) of corporate boards of directors, and among the workforce.<\/p>\n

\"\"<\/p>\n

Example:
\nGovernance advisor Glass Lewis<\/strong> will reportedly vote \u201cno\u201d in director elections if there are no women on the board.<\/p>\n

Issues: Environment \u2013 Energy \u2013 Climate Change<\/strong><\/span><\/h3>\n

There are more than 100 “E<\/strong>” resolutions filed to date by shareowners.<\/p>\n

Climate change<\/strong><\/em> is the biggie; investors want action and disclosure \u2013 what does the company intend to do in a changed environment?<\/p>\n

\"\"Becoming a factor now:\u00a0 T<\/b>he<\/strong> \u201cTCFD<\/strong>\u201d recommendations for organizing comprehensive climate change scenarios in the financial services sector and in the corporate sector so that leaders (and investors, lenders, credit rating agencies, insurers) can consider what happens to a company in a 2-degrees C operating environment. (The COP 21 Paris Accord<\/strong> intention is to limit warming to that level.)<\/p>\n

TCFD suggests company regularly perform 4-degrees and 6-degrees exercises as well.\u00a0 If companies are not ready, a growing number of investors are \u2013 and demanding action.<\/p>\n

\"\"<\/p>\n

BlackRock<\/strong> and Vanguard<\/strong> are encouraging companies and especially financial services firms to use the TCFD recommendations; we\u2019re seeing a trickle of interest on the corporate side now in trying to understand the implications for their firm.<\/p>\n

And in “G<\/strong>” — the governance \/ environmental inter-connectivity, we see actions such as New York City Pension Funds<\/strong> (five funds in the complex) focusing on public companies having more \u201cclimate-competent\u201d directors on boards.<\/p>\n

Institutional Investors Press Companies on Lobbying $$$ Disclosure<\/strong><\/h2>\n

One consequence of the election in November 2016 of a president who then appointed heads of cabinet offices (such as EPA<\/strong>, Interior Department<\/strong>) who with the head of state seem bent on relaxing environmental regulations is the increase in demands by shareholders to have more information on lobbying and political payments.<\/p>\n

\"\"More than 70 institutional investors have filed proposals at companies asking for lobbying reports (including federal and state lobbying payments, trade association payments used for lobbying, and payments to tax-exempt organizations like the \u00a0American Legislative Exchange Council<\/strong> (ALEC<\/strong>) that write and endorse \u201cmodel\u201d legislation for states).<\/p>\n

More than US $3.3 billion was spent in total on such activities in 2017, the investor coalition points out, with the corporate sector putting up $2.6 billion of this.<\/p>\n

\"\"And at the state level?<\/strong><\/em> \u00a0Lobbying in the states can be less visible but very impactful; the investors say that $1 billion-plus is spent at state level by companies\u2026and trade associations lobbying on behalf of the corporate members \u201cindirectly\u201d \u2026and this is an enormous money item for companies (the US Chamber of Commerce<\/strong> has spent $1.4 billion on lobbying since 1998 said the investors).<\/p>\n

And there are \u201cundisclosed payments\u201d as well, and the investor coalition wants information on the undisclosed payments for the trade associations lobbying on behalf of companies.<\/p>\n

Why?<\/em> Because such an organization may be lobbying on issues that are contrary to the company\u2019s public statement or values.<\/p>\n

The 2018 shareholder resolutions are capturing some of this, explains the coalition, whose members include public pension funds, labor pension funds, asset management companies, foundations, non-profit institutional investors, religious files, and some individuals.<\/p>\n

\"\"Many institutions are members of the Interfaith Center on Corporate Responsibility<\/strong>. \u00a0The investor coalition includes:<\/p>\n