New Year's Resolutions – Trillium Asset Management

If there’s a theme tying together our shareholder engagements this year, it’s aptly summarized in a New Yorker cartoon showing a corporate executive reminding his colleagues at the conference room table, “Let’s never forget that the public’s desire for transparency has to be balanced by our need for concealment.”
Come to think of it, that’s every year’s theme. As active investors placing place careful bets on selected companies (as opposed to passive indexing, which mimics the general direction of the market) we’re in the information gathering business. We ‘crunch’ financial data, then integrate it with environmental, social and governance (ESG) data and analysis to determine which companies belong in our portfolio and when it’s time to sell. Our field is in a fascinating developmental stage because corporate divulgence of ESG data is largely unmandated and thus highly variable in content. This has created a vigorous debate about which ESG indicators are the most valuable to investors and society, and a worldwide movement to require corporate ESG disclosure by law.¹
Transparency is not usually an end in itself. As Louis Brandeis famously said, sunlight is the best disinfectant. At a more utilitarian level, what gets measured (in order to be reported), gets managed.
It is now the case (and may always be so) that the mandated disclosure already on the books falls behind ESG investors’ demand for more data, particularly on emerging issues. Take for example hydraulic fracturing, a method of natural gas drilling that has received growing attention only in the last couple of years for suspected linkages to drinking water contamination and related environmental impacts. Citizens groups are pushing for legislation that would require the disclosure of the specific chemicals used in “hydrofracking fluids.” A level playing field would be the ideal solution, but in the meanwhile, our shareholder resolution at Anadarko Petroleum gets at this issue by requesting a report on the known and potential environmental impacts of Anadarko’s fracturing operations, and for a discussion of steps it might take above and beyond current regulatory requirements to reduce or eliminate hazards to air, water, and soil quality from fracturing operations.
With some notable exceptions², corporations often prefer concealment, and so Trillium’s 2011 resolutions, listed below, reflect just how often we focus on the need for more transparency. The resolutions at ConocoPhillips, ExxonMobil, Dominion Resources and Duke Energy pose a $64,000 strategic question (“What’s the financial risk to shareholders of your company’s reliance on fossil fuel development projects that are becoming increasingly expensive in light of tightening state and federal regulations?”), while others are fare more specific (Home Depot: “What do your workplace diversity statistics look like?”).
St. Jude Medical is being asked to commit to publishing a sustainability report describing the company’s ESG performance, with a focus greenhouse gas reduction targets and goals.
2011 Shareholder Proposals Sponsored by Trillium Asset Management

Climate Change	Dominion Resources, Duke Energy	Report on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and cleaner energy
Climate Change	St. Jude	Issue a sustainability report describing the company’s ESG performance, including GHG reduction targets and goals
Environmental Health	Coca Cola, Dentsply	Report on alternatives to Bisphenol-A
Environmental Justice	Chevron	Add environmental expert to Board of Directors
Environmental Justice	PPG	Disclose environmental impacts at community level
Equal Employment Opportunity	Home Depot	Disclose workplace demographic data
Inclusive LGBT Workplace Policies	Gardner Denver	Ensure nondiscrimination policies cover lesbian, gay, bisexual and transgendered workers
Media Responsibility	AT&T, Comcast, Verizon, CenturyLink	Implement “net neutrality” principles (free and open Internet)
Tar Sands	ExxonMobil, ConocoPhillips	Report on financial risks of tar sands oil extraction
Tar Sands	RBC	Financial risks of lending to oil sands operators
Hydraulic Fracturing	Anadarko	Environmental impacts from hydraulic fracturing operations
Political Contributions	Ford Motor, State Street Bank, Halliburton, Pentair, 3M, IBM, Best Buy, Target	Provide comprehensive disclosure of all contributions used for political purposes
Political Contributions	JP Morgan	Initiate a review of the company’s role on the Board of the U.S. Chamber of Commerce

Bold indicates a “lead filing” where Trillium acts as a primary engagement contact with a corporation. All others are proposals that we have co-filed with other concerned investors who provide leadership.
The companies above may or may not be on our current buy list. Inclusion of holdings in this article is not meant to be a recommendation to purchase these securities. Trillium’s investment team and process continuously and regularly supervise holdings to determine entry and exit prices for all holdings.
You can find the full text of our proposals on our Resolutions page and more specific information about each issue via the search function available at the top of each page on the site.

Footnotes (return to text by clicking reference):

1. See “South Africa Leads the World’s Stock Exchanges on Environmental and Social Reporting” in the Fall 2010 issue of Investing For A Better World.

2. For example, in 2004 The Gap published what the As You Sow Foundation described as a “warts and all” report disclosing considerable noncompliance with wage, hour, and overtime rules, and evidence of environmental, health and safety violations. “The report was recognized as a new benchmark for disclosure, even by critics of the company,” As You Sow wrote in Toward a Safe, Just Workplace: Apparel Supply Chain Compliance Programs (2010). Merck is one of a rising number of companies setting an example with greater transparency of its political contributions.