Still “Impactful” After All These Years

Jonas Kron, JD

In the Winter 2011 issue of Investing For A Better World, our colleague Farnum Brown described shareholder advocacy as version 2.0 on SRI’s (socially responsible investment’s) travels towards 3.0, and discussed the importance of directly pressing companies to improve their environmental and social impacts. Similarly, Amy Domini of Domini Social Investments recently wrote passionately in the Huffington Post about the importance of shareholder advocacy as a meaningful way for investors to have a positive impact on the world. Both pieces touched upon the ongoing debate about what to call our field. What was once “socially responsible” or “ethical” investing is now “ESG” (environmental, social and governance) investing or “sustainability” investing. We welcome the newest arrival, “impact investing” into the lexicon as a term that encompasses the new types of enterprises being started by social entrepreneurs as well as one that describes what labor plans, religious shareholders and socially concerned investors been doing for three decades.

Both Farnum’s and Amy’s pieces also noted some examples of successful shareholder advocacy that speak to the impact of SRI/ESG investing. We thought it might be a useful contribution to the nomenclature discussions to devote some space to reviewing some of the most recent “impactful” shareholder campaigns from SRI/ESG firms (with apologies to language purists).

Toxic Chemical Phaseouts. Some of shareholder activists’ “greatest hits” have been in persuading companies to reduce or eliminate their use of toxic chemicals. They are found in virtually every ecosystem in the world, and up to 300 toxic chemicals have been found in humans. The following are examples of company actions taken following shareholder dialogues and/or proposals:

• General Mills announced that it would no longer use bisphenol A (BPA) in its Muir Glen brand tomatoes packaging (2010)
• Apple announced it would stop using brominated flame retardants in its computers (2007)
• Sears Holdings (Sears and K-Mart) began a multi-year process of phasing out PVC products and packaging (2007)
• Whole Foods announced that it would remove baby bottles and other products that contain BPA from its shelves (2006).

Political Spending Disclosures. The Citizens United Supreme Court case of 2010 renewed attention to the role of the corporate sector in politics and the public policymaking process. Shareholders have been working to lift the veil on corporate political spending since 2004. Assisted by the nonprofit Center for Political Accountability, shareholders have persuaded 52 major corporations (including 35 in the S&P 100) to disclose and require board oversight of their political spending with corporate funds, beyond what is required to comply with the laws.

Corporate Sustainability Reporting. Before SRI investors founded Ceres and the Global Reporting Initiative, standardized corporate sustainability reporting was virtually nonexistent, and where it did exist it was guided by trade association criteria that lacked public credibility. Today, thanks to persistent and diligent shareholder advocacy, about 1,800 companies produce reports based on the GRI guidelines, and demonstrating that “what gets measured gets managed.”

Lesbian, Gay, Bisexual and Transgender nondiscrimination policies. Shareholder advocates can rightly claim credit for persuading many of the nation’s most prominent corporations to adopt inclusive nondiscrimination policies. Activists have filed well over 200 resolutions that have led to better policies at 150-plus corporations – affecting the lives of millions of workers around the world. Many additional companies have changed policies simply in response to inquiries from shareholders.

Home Depot Wood Purchasing Policy. In the late 1990s a broad coalition of shareholders added their voices to the campaign demanding that the world’s largest retailer of lumber products stop selling wood products from endangered forests. Using the vehicle of a shareholder resolution and outreach to large institutional investors, the shareholders generated twice as much support as was typical for a resolution in the 1990s. The campaign resulted in a commitment to phase out sales of wood products from endangered forest areas within three years, and the company’s commitment to give preference to Forest Stewardship Council certified lumber wherever possible.