2021 Shareholder Advocacy Review: The Winds at Our Back

Natural Investments remained active in advocacy efforts in the past year to bring about needed improvements to the economic system while fostering equity and justice for women and people of color. We continued to engage major corporations on their policies and practices, funneled more capital to traditionally marginalized populations and educated policymakers about appropriate oversight of the finance industry.

But having a supportive administration in Washington, D.C., which embraced the priorities socially and environmentally responsible investors value, pushed the needle forward significantly.

First, the Securities and Exchange Commission (SEC) issued guidance affirming that environmental, social and governance (ESG) issues are relevant to mainstream investors, and that as such, shareholder proposals to companies may address such matters when they state a clear, relevant, material and specific request for company action. This ruling was of critical importance to our collective efforts to improve corporate practices that preserve shareholder value.

Another win was Congress re-instituting methane emissions regulations in 2021, effectively overturning the position of the previous administration.

And our petition to the Department of Labor regarding its proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” resulted in guidance clearly stating that considering ESG criteria in retirement investments is material, prudent and in accordance with longstanding notions of fiduciary responsibility. Below are more wins in 2021, organized by government advocacy and company advocacy.

Government Advocacy

Our advocacy with government agencies and lawmakers focused on human capital, primarily worker rights and racial equity.

HUMAN CAPITAL We corresponded with the SEC several times.

  1. We co-signed a letter with industry colleagues representing nearly $1 trillion in assets under management supporting the SEC’s plan to develop rules for consistent, comparable and decision useful public disclosures addressing human capital management. This would require companies to publicly disclose their Equal Employment Opportunity-1 reports documenting the gender, race and ethnicity of employees across job categories. Such public disclosure would respond to investor demand for data on U.S. workforce demographics at virtually no additional cost.
  2. We additionally asked the agency to require that companies be required to disclose:
    • Workforce policies and audits on racial, gender, ethnic and disability diversity
    • Workforce voluntary and involuntary turnover and retention rates, plus the internal hiring and promotion rates disaggregated by race, ethnicity, gender and disability status
    • Policies and practices on recruitment, retention and promotion related to diversity
    • Plans for workforce retention and redeployment of workers whose jobs are eliminated because of climate change or its management of the physical and transition risks associated with climate change
    • Information on the training of employees
    • Summary data on education, experience, certifications and training of the workforce
    • Percentage of workers who are covered by a collective bargaining agreement, disaggregated by job classification, race, gender and disability status
    • Incidents of verified workplace harassment in the previous five fiscal years
    • Policies and practices on disability inclusion and steps taken to achieve competitive, integrated employment for people with disabilities
    • Description of outstanding National Labor Relations Board complaints and related legal costs
    • Frequency, severity and lost time due to injuries, illness and fatalities
    • Total dollar value of assessed fines and actions taken against the company per the Occupational Safety and Health Act of 1970
    • Total workforce compensation disaggregated by race, ethnicity, gender, disability status and job classification
    • Pay equity ratios by gender, race/ethnicity and disability status • Human rights principles, commitments, implementation measures used to evaluate supplier and operational risk, due diligence and constituency consultation processes
  3. We wrote a letter in full support of petition 4-774 requesting a rulemaking on corporate Black Lives Matter pledge disclosure, as companies that pledged $65 billion in financial support thus far have contributed less than $1 billion. Companies that benefitted reputationally from making public pronouncements in support of racial equity should be held accountable for their pledges.
  4. We signed a pledge organized by the Investor Circle toward Decarceration network indicating we will not invest in, nor standby idly and watch capital market participants expand incarceration. Alabama is issuing a $1.2 billion bond to build new prisons for 7,000 new prisoners using federal COVID-19 relief funds, sidestepping a recent Treasury ruling prohibiting it, and now 16 other states have proposed to follow suit.

REPRODUCTIVE RIGHTS We co-signed a letter with colleagues, coordinated by Rhia Ventures, to the legislatures of Alabama, Arizona, Florida, Maryland, Missouri, Minnesota, Ohio, Oklahoma, West Virginia and Wisconsin discouraging them from supporting bills that would restrict public access to abortion by establishing bans at 15 weeks and in some cases 6 weeks of pregnancy. We co-signed a letter to the President and Vice President to assure the right to abortion care, remove restrictions on the use of federal health insurance for reproductive care and guarantee paid family medical leave.

ENVIRONMENT We co-signed a letter with colleagues, coordinated by As You Sow, to the delegations from countries participating in the United Nations Environment Assembly, to lay the groundwork for a global, legally binding treaty to eradicate plastic pollution—by reducing its production and demand, not just focusing on its reclamation and recycling. We-cosigned a letter, coordinated by Trillium Asset Management, to the Environmental Protection Agency, to protect Alaska’s Bristol Bay from mining development and waste leaching, which succeeded.

Company Advocacy

AMAZON We co-signed a letter with colleagues representing $3.6 trillion in assets under management requiring Amazon to publish a tax transparency report, including details regarding country-by-country tax payments, per the well-established guidelines set forth in the Global Reporting Initiative’s Tax Standard.

CLIMATE CHANGE We co-signed a letter by nonprofit advocacy group As You Sow in response to the agency’s request for comment on its proposed climate change disclosure rule. We underscored the importance of the SEC requiring scopes 1-3 value chain emissions reporting as part of the climate risk disclosure rule, so investors have a clear picture of the company’s value chain emissions or its success in reducing those emissions.

RACIAL EQUITY We co-signed letters with colleagues, coordinated by Adasina Social Capital, to the board chairs of all S&P 100 companies, to request that they put forward slates of directors that consist of at least 30% people of color, with particular attention to historically marginalized groups. We also requested that the companies disclose the race and ethnicity of individual board members in each 2022 proxy statement, and encouraged the following practices:

  • Establish time-bound targets for diversity, equity and inclusion, plus link these targets to executive compensation
  • Include diverse directors on the nominating committee
  • Develop effective policies and systems to examine corporate culture and engender a more diverse and inclusive culture
  • Improve the promotion and retention of people of color to further a pipeline of talented and diverse leadership

We encouraged large asset managers to also vote against approval of all-white boards and encourage racial equity audits at key companies that address inequitable workplace practices and discrimination, customer favoritism and abuse, algorithmic bias and community surveillance.

We signed the Statement of Investor Expectations for Job Standards & Community Impacts in the Just Transition, which demonstrates support from investors managing $3.8 trillion in assets for just transition values and principles to be used by policymakers and companies as they develop climate transition plans. This will help properly acknowledge and address the potential impacts to low-income and BIPOC workers and communities.

LABOR UNIONS We co-signed a letter with industry colleagues, led by Trillium Asset Management, to EssilorLuxottica (which makes Ray-Ban sunglasses) asking the firm to allow its 2,000 employees at its Georgia plant to form a union. We signed a similar letter with colleagues that will be presented at the Starbucks annual general shareholder meeting with the same appeal, as employees at more than 100 stores have requested the right to organize and collectively bargain. And, also with Trillium’s leadership, we signed a letter with colleagues to the New York Times, to ask that it allow employees to vote on forming a union. Management did, and the employees voted 404 to 88 in favor of establishing one.

PAID LEAVE We co-signed letters with colleagues representing $2 trillion in assets, organized by the Interfaith Center for Corporate Responsibility, to companies such as Disney, Starbucks, Walgreens and FedEx, to disclose their paid sick time benefits for U.S. workers, including part-time, subcontracted and temporary workers. We stressed the need of investors to understand how companies are addressing the growing reputational, financial and regulatory impacts associated with the lack of a comprehensive paid sick time benefit for all employees.

VOTING RIGHTS We co-signed letters to companies and asset managers requesting that they advocate against state-level efforts to restrict voting rights, and vote against approval of directors at corporations that have not addressed their role in funding elected officials implicated in voter suppression legislation and the Capitol insurrection.

While some of our efforts succeeded, many are long-term advocacy engagements. We remain committed to applying pressure where it’s needed. See full 2021 Social Impact Report – Natural Investments.

Author

Tags: , , ,

Michael Kramer

Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.