Dear Reader: Fall 2013

By Matthew W. Patsky, CFA

The SRI industry can point to an ever-growing list of shared victories as we move corporations toward more sustainable business practices. In the Fall 2013 issue of Investing For a Better World you can read about Trillium’s community engagement with residents of Mossville, LA in their quest for environmental justice.

Following the publication of Total Portfolio Activation (TPA), a white paper which was commissioned by Trillium and Tides last year, an increasing numbers of SRI investors are grappling with where to place public equity investments (stocks) within the growing impact investing field.

TPA provides concrete steps to help institutional investors begin working toward a fuller activation of their portfolio in support of their mission across all asset classes. Given that public equity investments are a substantial allocation of most investment portfolios, the potential for increasing the positive impacts of public equity investments presents a major opportunity for concerned investors.

Trillium and Tides, along with many of our colleagues in the SRI industry, are at the beginning stages of launching a project which proposes to deepen the TPA framework for the public equity asset class by developing a measurable system for understanding the impact potential of active-ownership strategies used by investors.

There is a wide spectrum of shareholder activities an investor can use to affect change, but not all of them have the same potential for impact. Corporate engagement can range from casting proxy votes to much more active, networked, shareholder engagement where the potential for impact can increase exponentially.

To date, most efforts to document the impact of shareholder advocacy and engagement have been anecdotal rather than analytical, so a major objective of this project is to develop new ways to measure the impact potential of active-ownership activities.

Can a standard framework for reporting advocacy activities be created so that investors would commit to using on an annual basis? Is there a way to measure, more quantitatively, the impact generated by the advocacy work? What types of engagement activities can be isolated, tracked and weighted for their impact potential, from proxy voting and shareholder resolution filing to direct dialogs and networked campaigns? These are the questions we will be tackling during this process.

This is a huge undertaking that will require wide adoption across the SRI industry to succeed. Given the chance to broaden the positive impacts of investing, we think it is worth our time and energy to collaborate with our colleagues in creating a framework to measure impact in the public equity market.