A new clearinghouse has been established under the auspices of the United Nations to give institutional investors and like-minded shareholder activists a chance to share information about corporate initiatives on environmental and social matters.
The UN Principles for Responsible Investment program and its “Engagement Clearinghouse,” as it is known, launched last year. It has scores of signatories from around the world, including activist titans such as Hermes Pensions Management, the New York City Employees Retirement System, and the California Public Employees Retirement System. In total the signatories control more than $2 trillion of investment dollars.
The UN-PRI declined Compliance Week’s request to access the clearinghouse, citing the need to allow signatories to post their thoughts and concerns freely. Individual organizations, however, say the clearinghouse is a welcomed opportunity to exchange ideas.
“The purpose of the clearinghouse is to act as a place where the signatories to the PRI can come together and share initiatives that we’re working on that we’d like to collaborate on with others,” says Kelly Forrest, a CalPERS investment officer. Such collaborative efforts may involve initiatives spearheaded by CalPERS or ones where another organization has posted something about an issue that interests CalPERS, she notes.
Forrest points to a carbon-disclosure project as one where CalPERS has “received some interest from signatories.” Although the clearinghouse is still very new, Forrest says it does get used and she hopes it will continue to grow. “I’m very interested to see it used even more.”
Ashley Hamilton, a research analyst with SHARE—a shareholder association in Vancouver, B.C., that has been one of the most active voices to date on the clearinghouse—says the clearinghouse has been helpful in trying to identify others interested in collaborating on issues.
One issue SHARE has been pushing is the Global Reporting Initiative, a movement to prod companies to disclose more about their operations’ impact on local communities and the larger environment. “We’ve put out a call ... looking for other investors that are interested in asking companies to use the GRI to increase the quality of their corporate responsibility report,” Hamilton says.
She notes that funds interested in social-responsibility issues have been looking for ways to work more cohesively and cites the Interchurch Coalition for Social Responsibility as one long-established group that has established its own system for identifying companies that its members want to target—and for identifying other potential members. “They have a very sophisticated system,” Hamilton says. “If the [UN-PRI’s] clearinghouse does take off I expect it would take a similar form.”
‘All-Time Record’
Meg Voorhes, director of Social Issues Services for Institutional Shareholder Services, says in the last year some 333 shareholder proposals on social issues have been filed at U.S. companies, 181 of them coming to votes. Although “very few shareholder proposals get majority support,” a resolution doesn’t have to pass in order to create some effect, she says.
“Quite a few were withdrawn by proponents,” says Voorhes, noting that withdrawal frequently occurs after shareholders meet with management to discuss the issue and achieve some kind of positive movement. She says companies are likely to pay attention to any issue that gathers as much as 10 percent support, because the matter can then be refiled and “could be around for a while.”
ISS statistics, which go back 30 years, indicate that support for shareholder proposals on social and environmental proposals increased considerably in recent years and appear to be at an all-time record, says Voorhes.
“The average, of course, masks a lot of variations,” she says. “Proposals asking companies to expand their EEO [equal employment opportunity] policies or programs—e.g., by including sexual orientation—received an average of nearly 30 percent support. In contrast, proposals from social conservatives asking companies to drop mention of sexual orientation from their EEO policies averaged less than 3 percent. In another area, proposals asking companies to issue sustainability reports did relatively well last year, averaging 24 percent support.” One proposal, at Terex Corp., received 48.4 percent support, she says.
Uptake In Interest
Jabusch
Garvin Jabusch, of the Sierra Club Mutual Funds, hadn’t been aware of the UN-PRI clearinghouse but says his fund has been interested in collaborating with like-minded investment groups.
“We’ve seen a definite uptake in the amount of interest in our fund and in sustainable business across the board,” he says. “Awareness and concern about climate change and the environment” has moved “from the fringe into the mainstream.”
Jabusch says that his fund “prefers to engage in shareholder dialogue with management off the public stage” and only files shareholder resolutions when it encounters resistance on issues of importance.
While there may be a certain amount of corporate lip service paid to environmental issues (sometimes referred to as “greenwashing”) Jabausch suggests that “a lot of companies are taking sustainability seriously these days. A lot [of companies] will start by greenwashing, but before long the rhetoric starts to take root.”
Not all investors are jumping on the social-responsibility bandwagon, however.
Tom Borelli, an investment manager for the Free Enterprise Action Fund in New York, tells Compliance Week that sometimes “shareholders have lost green when the company goes green.”
Borelli says his $9 million fund is one of the first “to be pushing back, to increase shareholder value to advocate for free-market principles. For companies to engage in social policy is in most cases a bad idea. It’s kind of ironic that a lot of people are skeptical of CEOs and yet want to give them more power to develop social policies. CEOs have enough trouble trying to obey the law and make money.”
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