What do Sustainable Shareholders Want from DC?

The annual US Social Investment Forum (US SIF) conference, “Markets, Mission & Materiality,” held this spring in Washington D.C., offered the opportunity for sustainable investors to meet with Congress and the SEC regarding issues of concern to shareholders. Sponsored by UBS, Bloomberg, MSCI, and numerous sustainable and responsible money managers and research firms, the event highlighted the latest developments and national policy priorities of the industry, which represents 11% of all the professionally managed money in the capital markets. Here’s a quick overview of what we were discussing with DC decision-makers.

Eliminating corporate money in politics. In a meeting with SEC Chair Mary Jo White, US SIF continued to press for corporate political disclosure to be put on the rulemaking agenda for the agency. Despite 750,000+ citizen letters of support for the provision – an SEC record – the agency has yet to weigh in. Sustainable shareholders believe corporate political contributions are a potential risk to share value, especially the “dark” money contributed to groups and associations.

The SEC could easily support investors’ right to know and establish criteria for contributions, such as requiring Board oversight and management. Former Senate Majority Leader Tom Daschle, a conference keynote speaker, suggested that only a Constitutional Amendment declaring money is not speech and corporations are not people will provide sufficient redress, given the actions of the Supreme Court and Congress. Senate Majority Leader Harry Reid recently offered support for the Constitutional Amendment sponsored by Senators Tom Udall and Michael Bennet that would reverse the Supreme Court’s 2010 Citizens United and 2014 McCutcheon rulings and restore congressional authority to regulating the raising and spending of money, including that of super PACs. The Amendment is sought to reduce the inordinate influence of corporations and billionaires on the political process.

The Master Limited Partnership Parity Act (S.795, HR.1696) is a top policy priority that would expand this valuable corporate structure to include clean energy resources and infrastructure projects including wind, solar, geothermal, biofuels and combined heat and power. In the Senate, the bill was introduced by Chris Coons, Jerry Moran, Debbie Stabenow, and Lisa Murkowski, while the House sponsors are Ted Poe, Mike Thompson, Peter Welch, and Chris Gibson. An MLP is taxed as a partnership, but its ownership interests are traded like corporate stock in a market. As a result, MLPs are attractive vehicles for investors and help lower capital costs for energy start-ups. Currently, investors can use MLPs to invest in oil and gas infrastructure but not renewable energy or energy efficiency. The MLP Parity Act simply expands the definition of “qualified” sources of MLP income to include clean energy resources and infrastructure projects. Passage of this bill would give all sources of domestic energy a fair shot at success in the marketplace.

Increase funding for the SEC from $1.35 to $1.7 billion. This increase is included in President Obama’s FY2015 budget, and it would allow the agency to hire additional staff to implement essential priorities critical to protecting investors and the financial system. Four years after its passage, the SEC has yet to fully implement dozens of rules set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act, due to inadequate staffing levels. The SEC also oversees nearly 25,000 mutual funds, financial advisors, and broker-dealers (not to mention filings by over 9,000 companies) with half the budget of the FDIC, which only regulates 8,000 banks but has nearly double the SEC’s staffing level.

The Federal Employees Responsible Investment Act. This legislation would require the thrift savings plan to offer a sustainable and responsible investment option for federal employees.

The emergence of Global SIFs. While US SIF has existed for nearly 30 years, there are now very active parallel SIFs in Asia, Europe – where ESG integration is the new normal of defining a quality company – Canada, and South Africa, which is the first stock exchange to require ESG disclosure as part of its listing and filing requirement. The Global SIFs are pursuing joint research and policy initiatives despite the unique nuances of the acceptance and practice of SRI throughout the world.

While working with Congress and regulatory agencies is a thankless task, US SIF is providing a valuable and powerful voice for responsible investment.  It often takes years of pressure and conversation, but slowly and surely, this is how change is made.

This article first appeared in the Summer 2014 edition of the Natural Investment News

Michael Kramer

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