Tag Archives | ESG

Review: Business Ethics and Corporate Sustainability

Business Ethics and Corporate Sustainability contains fourteen essays examining mainstream business models with the aim of designing more sustainable systems with regard to corporate responsibility issues, such as the environment and human rights, while reducing overall risk profiles and increasing legitimacy.

Christopher J. Cowton, for example, examines the moral status of corporations, their collective responsibility and systems of blame distribution. While it makes sense to blame a corporate entity as a first approximation, that should be only the first step in determining blameworthiness. Leaving blame as resting with BP for the Gulf oil spill, risks failing to identify and blame culpable individuals. Cowton moves us away from reified notions of corporate moral agency, to focus on methods of tracing responsibility in detail to specific individuals according to governance and responsibility frameworks. People are moral agents; corporations are not.  Johan Wempe advances this notion further, examining notions of role responsibility.

Kevin T. Jackson retraces Aristotelian notions of generosity as a moral virtue and ends with a promising direction in his discussion of venture philanthropy, which in some respects, harkens back to businesses during the Middle Ages. Wouldn’t it be great if entrepreneurs started measuring themselves not by how much money Continue Reading →

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Reframing Corporate Social Responsibility

Reframing Corporate Social Responsibility: Lessons from the Global Financial Crisis, edited by William Sun, Jim Stewart, and David Pollard, is volume 1 in an important new series: Critical Studies on Corporate Responsibility, Governance and Sustainability. Disclosure: I’m on the Editorial Advisory and Review Board of the series at the request of William Sun, who I’ve already identified as an important voice in corporate governance. See my review of his How to Govern Corporations So They Serve the Public Good: A Theory of Corporate Governance Emergence.

This new volume reflects on corporate responsibility (CSR), focusing on what role, if any, it played in the financial crisis and, perhaps more importantly, how such events might be avoided in the future by more fully integrating CSR into mainstream corporate practices. The editors argue that business discourse and values are currently viewed as Continue Reading →

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Risks of Fracking

The companies most likely to be trusted by investors and most readily welcomed by local communities will be those that:

• Have an across-the-board, transparent record of voluntary actions to reduce the quantity and toxicity of chemicals;

• Develop innovative methods for reducing use of fresh water — for example, recycling fracturing waste waters or using saline or industrial waste waters for fracturing;

• Systematically inventory and reduce air emissions from operations, including using green completions where appropriate and substituting closed waste storage structures for open pits;

• Closely oversee their contractors to prevent shoddy well construction and demonstrate rapid emergency response capability;

• Know what’s in their waste and what happens to it;

• Anticipate and respond to local community noise, road damage, and other nuisance concerns; and

• Acknowledge regulatory transgressions and lessons learned from them.

via The Real Story About the Risks of Fracking, Richard Liroff, GreenBiz.com, 7/18/2011.

Good advice from a trusted source.

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Video Friday: 6 Degrees Warmer: Mass Extinction?

Will we actually be frightened enough to do something more than install solar panels on our roof, buy a Prius and recycle our garbage?

It doesn’t take an economist to understand the basic economic principle that you can’t grow an asset if you have destroyed the asset base. This fundamental principle seems to make perfect sense to us when we are talking about money, so why do we continually fumble with the equation when it comes to the natural asset base that our economic activity and human welfare depends on? What am I talking about? Well let me explain… (Growing from what?, CSRWire.com, 7/14/2011)

During an ice age, the most probable climate sensitivity is six to eight degrees Continue Reading →

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CalSTRS Advance Board Diversity

CalSTRS withdrew all eight of its board diversity shareholder proposals filed during the 2011 proxy season after successfully engaging companies to consider diversity in director searches.

In recent years, the issues of board of director leadership and oversight roles have taken on increased significance to long-term investors, such as CalSTRS. Today’s economic challenges highlight the importance that board diversity plays in enhancing value and providing companies with a full range of fresh talent and experience. According to Anne Sheehan, CalSTRS Director of Corporate Governance:

We’ve advanced the ball in the name of board diversity and are committed in our conviction that corporate boards and their nominating committees consider diversity in the larger context of improving shareholder value. One lesson from the financial crisis was the role corporate board group-think played in fostering management short-term priorities that proved detrimental to sustainable value creation. We think improved board diversity will address that problem.

To assist boards in the enhancement of diversity on corporate boards and of shareholder value, CalSTRS and CalPERS launched the Diverse Director DataSource, known as “3D,” by announcing the selection of corporate governance vendor Governance Metrics International to develop and operate the DataSource. 3D is expected to go live later in July and begin accepting nominations from board candidates. The database will offer shareholders, companies and other organizations a valuable resource for identifying candidates.

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Call for Papers: Ethical Finance & Governance

A December 16, 2011 on Ethical Finance & Governance is planned for Paris, chaired by H. Jemel (Amiens School of Management & LEM UMR 8179, Fr), JM. Sahut (HEG Geneva, Ch & CEREGE EA 1722-Univ. Poitiers, Fr) & F. Teulon (IPAG LAB, Fr). Guest speaker at the conference will be Z. Sardar, a Visiting Professor at City University London and the editor of the forecasting and planning journal, Futures. He is also a member of the UK Commission on Equality and Human Rights. His journalism appears most often in The Guardian and The Observer. He has written or edited 45 books over a period of 30 years, like “Islamic Futures.”

The Paris workshop aims to consider the development of financial activities in an ethical perspective and problematic of corporate governance. The conference will focus on opportunities within sustainable and ethical finance arenas considering, in particular, Islamic finance as a sub-sector of ethical finance. Topics for this conference include, but are not limited to: Ethic and Continue Reading →

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Corporate Valuation

From Enron to Lehman Brothers and the subprime financial disaster, we’ve seen the worst decade ever in my lifetime for equities, down 3.3%. Is it time to start stuffing our money into the mattress or is it time to learn something about corporate valuation from two experts?

Corporate Valuation for Portfolio Investment: Analyzing Assets, Earnings, Cash Flow, Stock Price, Governance, and Special Situations by Robert A. G. Monks and Alexandra Reed Lajoux will inevitably be compared with Security Analysis: The Classic 1934 Edition by Benjamin Graham and David Dodd. Corporate Valuation comes out favorably.

Yes, we have learned a lot during the last seventy years; Monks and Lajoux take readers on a tour Continue Reading →

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California to Allow Corporations to Blend Mission and Profit

A California bill, SB 201, authored by state senator Mark DeSaulnier, proposes a new corporate form that blends money and mission.

The idea is to allow social enterprises, which are often organized as either non-profits or for-profit/non-profit hybrids, to access capital from mainstream investors. As a Flexible Purpose Corporation (Flexible Corp.), a company could make profits while pursuing at least one do-good purpose akin to the charitable missions traditionally pursued by nonprofits, or promote the interests of employees, suppliers, customers, creditors, community or public interests like the environment.

via Responsible Investor, March 6, 2011.

One basic idea is to relieve directors of the obligation to maximize long-term Continue Reading →

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Ontario to Require ESG Disclosures of Pensions

The Canadian province of Ontario is scheduled to become the first in the country to oblige its pension plans to publish a Statement of Investment Policies and Procedures (SIPP) and publicly state whether the SIPP takes ESG (environmental, social and governance) issues into account. The SIPP introduction could act as a major boost to the take up of responsible investing in Canada…

via Responsible Investor, 3/30/2011. I hope this requirement spreads to the U.S. as well.

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EU Offers Prize for ESG Integration

The overall objective of this call for proposals is to enhance market reward for sustainable and socially responsible enterprises, so facilitating the transition towards a sustainable economy.

The specific objective is to build the capacity of mainstream investment actors to better integrate environmental, social and governance information into their valuations of enterprises. This call for proposals is also an opportunity for the investment community to further align its practices with the expectations of European public policy.  Latest news from DG Enterprise and Industry.

Yes, the European Unions wants to drive ESG into the heart of investing considerations. The deadline for responses is set for May 20. Can anyone imagine the United States offering a prize of over $350,000 to prompt the integration of environmental, social and governance issues into the valuations of mainstream institutional investors? Please let me know when you see it. Hat tip to SHARE newsletter. Don’t miss out; subscribe now.

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AFL-CIO Key Votes

The AFL-CIO released its 2010 Key Votes Survey report on investment manager proxy voting. They also released an updated list of AFL-CIO Key-Votes-as-of-Feb-4-2011 for the current proxy season.

Upcoming votes include those at Apple on CEO succession planning (item 5) on February 23, Navistar on golden parachutes (item 6) on February 15, and Whole Foods Market to permit removal of directors (item 5) on February 28. Disclosure: James McRitchie, the publisher of CorpGov.net has investments in Apple and Whole Foods.

The worst performing investment managers as ranked by the Key Votes Survey last year were Metropolitan West Capital Management, NWQ Investment Management, Putnam Investments, State Street Global Advisors, TCW, and the Vanguard Group. The best were Amalgamated Bank, AmeriServ Trust Financial Services, ASB Capital Management, Boston Trust & Investment Management Co.. Capital Management Associates, Chartwell Investment Partners, Colony Capital Management, Comerica Bank, DePrince, Race & Zollo, Garcia Hamilton & Associates, Griffon Capital, Groupe Investment Responsible, ICC Capital Management, Marco Consulting Group, McMorgan & Company, Missouri Valley Partners, Northern Trust Investments, Ocean State Asset Management, Payden & Rygel, ProxyVote Plus, Quest Investment Management, RBC Global Asset Management, Sierra Investment Partners, Stacey Braun Associates, Trillium Asset Management, Turner Investments, ULLICO Investment Advisors, Union Labor Life Insurance Company, and Washington Capital Management.

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Exchange Leverage

Stock exchanges can enhance corporate environmental, social and governance (ESG) disclosure and performance by applying ESG standards within IPO and ongoing listing rules, corporate governance codes, and by offering ESG-related traded products.

A September 2010 paper by EIRIS, a global provider of ESG research, reviews the increasing role that stock exchanges play in enhancing corporate transparency and performance on sustainability issues. (Hat tip to SIF for bringing this to my attention.)

Some exchanges have already incorporated ESG reporting requirements in their listing rules and corporate governance codes. China’s Green IPO policy, which requires companies in 14 energy-intensive industries to undertake environmental assessments before initiating an IPO, is a good working example. Bursa Malaysia and the Johannesburg Stock Exchange are two of the leading exchanges that have incorporated mandatory ESG reporting requirements for all listed companies. The Australian Stock Exchange has incorporated an ESG disclosure requirement on a ‘comply or explain’ basis as part of its Corporate Governance Principles.

…Among the first indices on the market, the BM&F Bovespa ISE Index, the Dow Jones Sustainability Indexes, the FTSE4Good Index and the JSE SRI Index greatly contributed to the improvement of the ESG performance of companies and implicitly to raising the international profile of responsible investment.

However it is apparent that stock exchanges can do more… In June 2010, the UK’s Financial Reporting Council (FRC) revised the Corporate Governance Code to include engagement principles for institutional investors to take the ESG risks of their investee companies into account.

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Harrington Asks Banks to Stem Illicit Transactions

Harrington Investments, Inc. (HII), a socially responsible investment advisory firm filed shareholder resolutions at Citigroup, Bank of America and JP Morgan Chase, calling for the adoption of principles to stem illicit financial transactions which is the result of government corruption and bribery, tax evasion, money laundering, illegal arms deals and the movement of money by drug cartels. (download resolution in pdf)

The resolutions also request that the banks support broad public policies aimed at creating greater accountability for the identification of criminal money by significant non-bank actors in the financial system.

“According to Global Financial Integrity (GFI), the U.S. financial sector, especially international bankers, are under increasing pressure from government regulators to respond to the growing illicit movement of money throughout the financial system,” said Harrington.  “Shareholders, as principals, need to make sure that our agents, corporate executives and bank boards of directors, respond as responsible fiduciaries to protect our banks’ integrity and reputation by developing industry-wide standards.”

Heather Lowe, Legal Counsel and Director of Government Affairs for Washington, D.C. non-profit advocacy group Global Financial Integrity, commented that “These resolutions are all about reducing the risk that illicit funds even get to the banks, and if they do, making it easier for banks to identify the bad actors.  They are based on recommendations put forward Continue Reading →

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Australia's Future Fund More Active

Responsible Investor (Australia’s Future Fund ups engagement and ESG integration, 11/10/2010) reports Fund “is planning more extensive direct engagement with investee firms – on top of taking greater account of environmental, social and governance (ESG) risks in its portfolio.”

Already, the quickly growing fund voted against company boards at 13% of resolutions during 2009. It is certainly becoming one to watch on the global scene.

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Risk Lessons from BP

According to an article in Pensions & Investments, the BP disaster will cause managers and investors to become more aware of how ESG-related risks can be material to a company’s performance, experts say. This will drive managers and investors to pay closer attention to ESG risks and to push for changes in areas such as corporate disclosure that might help investors better understand ESG risks.

At the heart of the problem is that stock analysis never assumes anything will go wrong, said Ran Fuchs, global head of ESG analytics at RiskMetrics Group: “It is something missing from analysis — not just ESG analysis. In the past few years, a lot of bad things have gone wrong, and we still ignore it in our analysis.”

Most of the best-in-class products labeled ESG had BP in the portfolio (before the disaster), yet there seems to have been plenty of warning signals in hindsight. According to ABC News:

  • In 2007, a BP pipeline spilled 200,000 gallons of crude into the Alaskan wilderness and BP got fined $16 million.
  • Then the Justice Department required the company to pay approximately $353 million as part of an agreement to defer prosecution on charges that the company conspired to manipulate the propane gas market.
  • In two separate disasters prior to Deepwater Horizon, 30 BP workers were killed and more than 200 have been seriously injured.
  • According to the Center for Public Integrity, in the last three years, BP refineries in Ohio and Texas have accounted for 97 percent of the “egregious, willful” violations handed out by OSHA.
  • OSHA statistics show BP ran up 760 “egregious, willful” safety violations, while Sunoco and Conoco-Phillips each had eight, Citgo had two and Exxon had one comparable citation. (BP’s Horrible Safety Record: It’s Got 760 OSHA Fines, Exxon Has Just 1, Business Insider, 6/2/10)

The P&I article says we’ve learned four key things from the BP spill:

  • the importance of inherent sector risks;
  • the potential of politics affecting how a company manages a disaster;
  • media response will be much swifter and more international than ever before; and
  • companies must take responsibility for their suppliers and contractors publicly from the start of the disaster. (Managers learn from the BP catastrophe, 6/28/10)(

As early as 1993, ICCR members filed six resolutions to more closely regulate subprime mortgages. (Two Overlooked Lessons From the Financial Crisis, 12/31/10) We need to pay more attention to signals of excessive risk.

Maybe it’s time for index funds to weight stocks based on risk. David R. Koenig, recently launched The Governance Fund, LLC, a private investment management firm that uses a proprietary model of corporate governance based on several data-sets to capitalize on what he terms “the value gap” between well-governed and poorly governed companies. Hopefully, we’ll see more attention to strategies that eventually may reduce overall risks to our environment. Kenneth Rogoff even speculates the BP spill may rekindle interest in a carbon tax? (Can Good Emerge From the BP Oil Spill?, Project Syndicate, 7/2/10)

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Mercer's Responsible Investment Update

Mercer’s Responsible Investment Newsletter (June 15, 2010) outlines preliminary results of integrating ESG analysis into global equity portfolios.

Our analysis of the beta of ESG integration has so far been quite positive – ESG factors are material and integrating these factors into investment decision-making can reduce investment risk without sacrificing return…

Initial analysis on adding alpha to a global equity portfolio through a tilt towards sustainable themes, indicates the following:

  • A portfolio with a tilt towards sustainable themes has a higher risk/reward ratio versus a broad market index, but has mixed results when versus a comparable themed index.
  • In the sustainable themed space, the risk of bubbles and strategies’ short track records make manager selection key.
  • The themes of renewable energy and water so far show strong return potential versus the broader market.

The Newsletter also addressed the fatalism of many investors, including large funds, who doubt their proxy vote can make a difference, providing several examples to refute that assertion. Even if you are not ready to take the plunge into “active” ownership, Mercer argues an interim step, “informed” ownership. “This could be defined simply as being satisfied, through due diligence, that votes are being cast in the best long-term interests of the end client or owner.”

Of course, Mercer offers due diligence on investment managers, including evaluation of resources and processes dedicated to proxy voting and ESG issues. They also cite membership organizations, such as the Council of Institutional Investors, the Interfaith Center on Corporate Responsibility and the UN’s Principles for Responsible Investment.

Around the world, institutional investors work hard to achieve the best long-term returns for their clients, participants or beneficiaries. We believe that voting and constructive engagement with companies and peer organizations can help mitigate company specific risks for which investors may not be compensated. There is also reason to believe that more shareholder participation over time can raise the bar for corporate governance in the broader market and improve beta. If your organization agrees with these arguments, then voting and engagement may be a low cost way to help achieve these results.

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GRI Conference Report

On the eve of Memorial Day weekend, here is some relevant reading from Marcy Murninghan.  As many of you know, the GRI just completed its biennial conference, and by all accounts, it was magnificent.  Some highlights:

  • During the Opening Plenary, GRI’s Chief Executive Ernst Ligteringen outlined two goals for the next decade. Firstly, GRI proposes that environmental, social, and governance (ESG) reporting should become a general practice to help markets and society take informed and responsible decisions. GRI advocates that by 2015 all large and medium-sized companies in OECD countries and fast-growing emerging economies should be required to report publicly on their ESG performance, or if they don’t, explain why.
  • Secondly, GRI proposes that ESG reporting and financial reporting need to converge over the coming decade. GRI advocates that a standard for integrated reporting should be defined, tested and adopted by 2020. GRI is working with leading global organizations in financial markets, accounting, corporate responsibility, ESG reporting, and civil society to establish the International Integrated Reporting Committee. The committee’s purpose is to promote integrated reporting, and to facilitate and coordinate collaboration between key institutions to develop an integrated reporting standard.
  • On Wednesday, the public comment period has opened for thematic revisions to three content areas – Community, Gender, and Human Rights – and will continue through 23rd August.  These revisions will make GRI’s current G3 Guidelines more relevant, transparent, and specific, without adding extra complexity to the reporting process. The G3.1 revisions are available for public comment for 90 days.  The recommendations have been developed by three different international multi-stakeholder Working Groups with representatives from a range of organizations and a diverse number of geographies including among others Australia, Brazil, Chile, Denmark, India, Mongolia, South Africa, the UK, and the USA. Sustainability reporting practitioners and their stakeholders are encouraged to provide feedback on the G3.1 content proposals via an online public survey.
  • On Tuesday, the United Nations Environmental Program (UNEP), KPMG Sustainability, the University of Stellenbosch Business School (USB) and The Global Reporting Initiative (GRI) launched “Carrots and Sticks – Promoting Transparency and Sustainability,” a study on trends in voluntary and mandatory approaches to sustainability reporting. This research reveals that the regulatory landscape has substantially evolved in all parts of the world. The study Carrots and Sticks – Promoting Transparency and Sustainability investigates the latest developments in sustainability reporting and ESG (environmental, social and governance) disclosure in the regulatory field. It is the latest edition of a study initially published in 2006 to provide readers with an easy reference and overview of mandatory and voluntary approaches to sustainability reporting and assurance throughout the world. A co-production of UNEP, KPMG Sustainability, USB, and GRI, the study covers the majority of OECD countries (Organization for Economic Co-operation and Development) as well as emerging market countries such as Brazil, China, India and South Africa.
  • Today, the GRI and the UN Global Compact announced its new agreement to work together to advance the cause of sustainability and transparency.  Under the terms of the agreement, GRI will develop guidance regarding the Global Compact’s ten principles and issue areas to integrate centrally in a next iteration of its Sustainability Reporting Guidelines, a comprehensive framework developed to facilitate transparency and accountability for businesses and other organizations seeking to disclose their environmental and social performance. At the same time, the Global Compact will adopt the GRI Guidelines as the recommended reporting framework for the more than 5800 businesses that have joined the world’s largest corporate responsibility platform;
  • Brazilian companies swept all the Readers’ Choice Award categories, setting a high bar for the rest of the world to follow.  Congratulations to Banco do Brasil, Banco Bradesco, Vale and Natura Cosmeticos!
  • Throughout the Conference, the topic of integrated reporting predominated, as well as the use of interactive tools and social media, the ways in which XBRL technology might be linked to sustainability reporting.  These topics were featured on a number of panels and plenary sessions.  Our friends Bob Eccles and Mike Kruz were speakers, as were other members of COST US, including Ernst Ligteringen, Sean Gilbert, Mike Wallace, Aron Cramer, Laura Berry, Adam Kanzer, Peter DeSimone, Paul Freundlich, Bill Baue, and, of course, GRI co-founders Allen White and Bob Massie.  (Apologies to anyone I overlooked!)
  • Speaking of panels, on Thursday Bill Baue moderated and Laura Berry participated in a panel discussion of the use of interactive tools for stakeholder engagement.  This also was the occasion when the Harvard CSR Initiative report on The Accountability Web: Weaving Corporate Accountability and Interactive Technology was launched, which Bill and I have been working on since last July.  You can download the full report and an executive summary on the CSR Initiative website.  Special thanks to Jane Nelson, Caroline Rees, Shannon Murphy, and Bob Massie for enabling us to do this work, and helping assure it’s the best it can be!
  • Speaking of interactive technology, the Conference was covered by a number of people who used social media to provide an ongoing chronicle of events and opinion.  In the Twittersphere, at least 19 people used hashtags to report, primarily #GRIConference.  Take a look and drill deeper by following some of the individual posts for a fuller picture.  Blogs, too, provided recaps of each day, and links to other sites. This aspect of the conference experience is the tip of the virtual iceburg, as there are many ways in which digital tools can be used to extend the momentum generated, beyond the conference time-frame.  This is something my colleagues and I are working on, so stay tuned!

Marcy Murninghan was associate at the CSR Initiative at the Kennedy School’s Mossavar-Rahmani Center for Business and Government when she and Bill Baue completed the study mentioned above.  She’s currently joining with colleagues to form a consultancy, The Transition Group, to help leaders and organizations make the transition to a sustainable and just society.

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Shell Pension Fund Engages

Stichting Shell Pensioenfonds, the €15bn scheme for the oil giant’s Dutch employees, engaged with 117 companies on corporate governance and responsible investment issues in the first three months of this year through advisor, Hermes Equity Ownership Services. Issues discussed included board structure, executive remuneration, child labor, climatic change, controversial weapons, water control and corruption. The dialogue was with 68 companies in Europe, 16 in the Americas, 32 in Asia and one in Middle East/Africa. It did not name the firms involved.

I’ve heard of many such campaigns by public pension funds and TIAA-CREF but this is the first I recall by a private pension fund, though I’m relatively certain there have been others. Let’s hope it is part of an accelerating trend. (Shell’s Dutch pension fund engages with 117 companies, Responsible Investor, 5/13/10. Report) Hat tip to Tim Smith of Walden Asset Management for heads up on this issue.

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Sustainability Report Proposal Wins 43%

A resolution submitted to St. Jude Medical requesting the company to publish a sustainability or corporate responsibility report around issues such as the environmental impact of its products and services as well as its workplace practices, such as diversity practices won almost 43% of share votes. Over 20 investors co-sponsored the resolution, among them the Evangelical Lutheran Church in America, Board of Pensions.

The voting results are as follows: 42.81% For; 57.18% Against. (Following the SEC formula for resubmissions, abstentions are not counted in our numbers.) This is in the range of a record vote on sustainability reporting, sending a huge message to the Board and management.

The recent increase in voting percentages supporting corporate disclosure of its performance around ESG issues has mushroomed in the past few years. When proposals receiving 10 or 15% support were singular achievements, we now see resolutions clearly asking for disclosure in the high 30 and 40%. We believe this trend is indicative of a growing awareness by investors of the value of sustainability reporting and the results of this proposal will make the strong case to all companies to develop internal systems to examine ESG risks and opportunities and to report on their progress via a sustainability report for some time to come.

Transparency and accountability are the foundation of good standing; St. Jude shareholders have sent this message clearly to the board and management. (Hat tip to Tim Smith and Marcela Pinilla of Walden Asset Management.

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SEC Requires Disclosure of Climate-Related Impacts

The SEC issued new interpretive guidance that clarify companies must weigh the impact of climate-change laws and regulations when assessing what information to disclose to investors in terms of climate-related ‘material’ effects on business operations, whether from new emissions management policies, the physical impacts of changing weather or business opportunities associated with the growing clean energy economy.

In the 3-to-2 vote, the commission said companies in the U.S. should also consider international accords, indirect effects such as lower demand for goods that produce greenhouse gases, and physical impacts such as the potential for increased insurance claims in coastal regions as a result of rising sea levels. (SEC Sets Climate-Change Disclosure Standards for Companies, BusinessWeek, 1/27/2010)

More than a dozen investors managing over $1 trillion in assets, plus Ceres and the Environmental Defense Fund, requested formal guidance in a petition filed with the Commission in 2007, and supported by supplemental petitions filed in 2008 and 2009.

“We’re glad the SEC is stepping up to the plate to protect investors,” said Anne Stausboll, chief executive officer of the California Public Employees Retirement System (CalPERS), the nation’s largest public pension fund with more than $205 billion in assets under management. “Ensuring that investors are getting timely, material information on climate-related impacts, including regulatory and physical impacts, is absolutely essential. Investors have a fundamental right to know which companies are well positioned for the future and which are not.”

“Today’s vote is a clarion call about the vast risks and opportunities climate change poses for US companies and the urgency for integrating them into investment decision making,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, a network of 80 institutional investors with $8 trillion in collective assets.

Last June, Ceres, EDF and The Corporate Library issued a report showing that S&P 500 companies – including those with the most at stake in responding to the risks and opportunities from climate change – are providing scant climate-related information to investors. The study was based on an analysis of 10-K and 20-F filings by 100 global companies in 2008. (SEC Issues Ground-Breaking Guidance Requiring Corporate Disclosure of Material Climate Change Risks and Opportunities, Ceres, 1/27/2010)

Social Investment Forum CEO Lisa Woll said:   “This is perhaps the biggest development so far in the long-term campaign to promote wider sustainability reporting.  We welcome today’s SEC action as a critical step in the direction of fuller environmental, social and governance (ESG) or sustainability disclosure.  Today, we renew our call for mandatory corporate ESG or sustainability reporting.

Investors’ efforts to incorporate ESG information into investment decisions have been hindered by a lack of comprehensive, comparable data. Because sustainability reporting among corporate issuers is largely still voluntary, it is far from universal, and often inconsistent and incomplete.

That is why we are asking the SEC to require issuers to report annually on a comprehensive, uniform set of sustainability indicators comprised of both universally applicable and industry-specific components and suggest that the SEC define this as the highest level of the current version of the Global Reporting Initiative (GRI) reporting guidelines.” (Social Investment Forum: SEC Climate Action “Important First Step” Toward Broader Sustainability Reporting For Investors, SIF, 1/27/2010)

Commissioner Aguilar encouraged the SEC’s Investor Advisory Committee to review climate and other ESG risks to see if other disclosure requirements were needed.

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Corporate Library's Free ESG Webinar

Ignites and FundFire are jointly hosting “Social Investing Opportunities And Challenges” a special 45-minute webinar on January 26th, 11:00 AM EDT, helping money managers, financial advisors and investment consultants address the increased interest in investments focused on environmental, social and governance (ESG) issues.

Sponsored by The Corporate Library, an independent corporate governance research firm, this event will explain:

* Which of the areas of ESG promise the most opportunity?
* How do firms identify likely investors?
* What changes to your trading infrastructure does ESG require?
* How will adding ESG impact your distribution strategies?

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Up From Wall Street

Up From Wall Street: The Responsible Investment Alternative by Thomas Croft is a book that should be read by all working North Americans, concerned with the reckless loans and short-term stock market bets that nearly plunged the world’s economy into chaos. The book is especially relevant to those working at and those seeking to influence pension plans. While investment of plan assets must be made solely in the interest of plan participants and beneficiaries, Croft reminds readers that as deferred wages, “it makes sense for trustees to invest these funds in ways that advance the interests of beneficiaries more broadly.”

The first part of the book is an expansive but easily digested primer on incorporating environmental, social and governance (ESG) analysis into investment strategies, current best practices and the role of organizations such as the United Nations in promoting responsible investment practices. Croft familiarizes readers with concepts and practices such as economically-targeted investment, capital stewardship, the “Lanoff letter” that basically okayed consideration of “incidental benefits” for ERISA funds, targeted investments and micro-finance. He also provides links to several excellent information sources, as well as an extensive body of notes and references.

Croft does and excellent job of explaining the rise of “financialization,” short-termism and how buyout and hedge funds “provided some of the black powder that quickened the landslide.” Trustees, union, and members of funds who want to influence them will benefit substantially from the chapter, “Action Steps for Trustees: How to Talk Back to Experts.” Here Croft lays out how to get fund consultants to expand their horizons to include consideration of investments that can earn high risk-adjusted returns over the long-run, which also help sustain employers and communities. The chapter includes 12 steps with specific advice, such as “Ask your consultant to independently verify the sources and amount of returns from private equity funds… disclose cash in/cash out documentation.”

Part two of the book is a “field guide” that provides information on six responsible private equity and venture capital funds. Each fund is profiled for structure, capacity, products, impacts, financial performance, experience of principals and at least a case study or two of the firm’s investments. Yes, you can make money while doing good. These firms have proven that and continue to do so through the financial melt-down.

On a personal note, I met Tom about twenty-five years ago when we were both trying to address plant shut-down issues in California. It is great to see him continuing this work as Director of the Heartland Labor/Capital Network and with the help of the Heinz Endowments. Read more about author, Tom Croft as he chats with United Steelworkers President Leo Gerard about the book at the Hill’s Congress Blog, Talking with Responsible Pension Investments Expert Thomas Croft, 12/28/09)

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