Rob Swystun, Pristine Advisers
Among the growing trends in the investment world is shareholders increasingly calling for companies to be more socially and environmentally conscious.
For proof of this, we need look no further than the recently released 10th annual Proxy Preview report from the shareholder advocacy group As You Sow. As reported by Caitlin Kauffman on the Sustainable Brands website, this year’s report shows a record-breaking 433 social and environmental shareholder resolutions filed for this proxy season as of the publication of the report.
Resolutions calling for more disclosure of corporate political spending before and after elections account for over 25% of this total. Proposals on climate change, corporate sustainability strategies and transparency account for almost 40% of the 433 resolutions filed as of the report date.
This continued increase in the number of social and environmental proxy resolutions has As You Sow CEO Andrew Behar in seeing a lot of promise in the future.
“This year we have once again broken the record on the number of resolutions filed, and this year’s proponents have escalated the connection of critical issues to the boards of directors by demanding that shareholders be enabled to nominate board candidates and continue to link executive pay with sustainability,” Behar said. “This is a systemic critique, pointing out how the board must accept responsibility for excessive political spending, inadequate energy policy, our changing climate, toxic hazards and human rights abuses.”
Kauffman pinpointed the following highlights from the batch of record-breaking shareholder resolutions:
Political Spending: At the time of the report’s release, there were fewer proposals aimed at political spending than the previous year (113 this year, compared with 126 in mid-February of last year). But, that number has almost certainly gone up since the report’s release.
Despite strong support for more disclosure about election spending, proponents have not seen much in the way of a response from the US Securities and Exchange Commission on a proposed rule that could lead to more transparency. According to Kauffman, the main sticking point is the lack of transparency about spending by intermediaries like trade associations.
“The flood of corporate political activity proposals continues unabated, and not just about elections,” executive director of the Sustainable Investments Institute and co-author of the report Heidi Welsh, said. “A broad coalition of investors wants companies to tell stockholders and the public more about so-called ‘dark money’ spent both in campaigns and on lobbying by groups that use corporate money and don’t say where it comes from.”
Climate Change: Proposals that address climate change rose to 76 this year at the time of the report’s release from 66 at the same time last year. Resolutions address carbon accounting and related risk management, methane releases due to energy production, how companies plan to deal with a potential drop in demand for fossil fuel, the high cost of fossil fuel extraction and deforestation. Kauffman also reports that people are increasingly linking ecological concerns with human rights, particularly when it comes to agricultural commodities.
“Shareholders are actively looking to manage climate risks,” CEO of Proxy Impact and co-author of the report Michael Passoff, said. “Most of the climate resolutions ask companies to reduce greenhouse gas emissions or to report on the risks from climate change on business operations. Investors in fossil fuel companies are especially concerned about how their businesses can succeed in a low-carbon economy. There is a growing alarm about the inevitability of stranded carbon assets and the potential of a carbon bubble.”
Human Rights & Labor Rights: The Interfaith Center on Corporate Responsibility, along with various trade unions, are calling for human rights risk assessments. Also on agendas are resolutions addressing the recruitment fees that tobacco workers in the US pay, Holy Land Principles, lethal injection drugs, pay disparity and structural inequality.
Diversity: Seventeen resolutions call for formal protections for lesbian, gay, bisexual and transgender employees. Half the targeted companies of these resolutions have already agreed to them. There are also resolutions that call for greater board diversity.
With investors increasingly flexing their muscles when it comes to having a say in how the companies they invest in are run, the investment landscape continues to change at a gradual, but steady pace. Something tells me we’ll be seeing many more record breaking years in the future for social responsibility resolutions.