Many people are mistaken in thinking that socially responsible and impact investing has simply to do with buying stocks of economically and socially strong companies. SRI investing is far more dynamic than this seemingly linear approach. The "impact" of investing is truly a real "impact" rather than simply engaging in the shifting of funds - it has to do with advocacy. Shareholder advocacy to be exact.
Shareholder resolutions occur when investors use their voice, via voting rights, in order to move corporations to evaluate and act upon environmental and social governance (ESG) related risks and opportunities. Between 2014 and 2016 more than 700 shareholder proposals have been submitted on issues relating to climate change, executive salaries, board chair neutrality, and political spending/lobbying. The changes in their advocacy levels are shown in the chart below.
Professionals use shareowner advocacy methods when ESG analysis shows that the performance of an investment can be improved by engaging the individual corporation toward reform of its operations. You may think that one needs to be a massive holder of the company's shares in order to make a difference, but it is surprisingly easy to be an advocate for SRI investing. In order to file a resolution, shareowners must have held $2,000 worth of shares for at least 1 year. That's it!
Individual investors can file resolutions on their own, but more commonly they will join together with a large group of investors who want to make an impact and petition a larger asset manager to submit a resolution on their clients' behalf. For example, Azzad Asset Management recently created a resolution on behalf of the shareholders of Chevron (CVX) calling for the “adoption of a policy of not doing business with countries complicit in genocide and/or crimes against humanity. The resolution cites the humanitarian crisis of the Rohingya in Myanmar, a country where Chevron continues to operate in partnership with local authorities.”
Another example was noted in the New York Times recently, where Trillium Asset Management (one of the oldest running SRI firms) invited its clients to sign a letter asking the 50 largest employers of the Fortune 500 to continue to provide sexual and reproductive health care benefits to its female employees. It was initiated because the Trump administration enacted rules allowing any employer to request exemptions from the Affordable Care Act mandate that they provide contraception coverage to their employees. Trillium's clients were concerned that these new rules send the wrong message about women’s equality, business prosperity, and the role of women in the American economy. An example of the letter can be viewed HERE.
Shareholder advocacy will be making a massive advancement in the near term as the federal government seeks to cut back on the rights and privileges of certain people and the power then lies with the people and private enterprises to make a difference. And so they shall.
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