Tag Archives | Green Century

Morningstar Direct Uncovers ESG Hypocrites

Morningstar Direct is planning to offer its clients important voting data. The firm recently published a preview of what I impolitely term ESG hypocrites – funds that advertise themselves as allowing us to invest in our values but then vote proxies against our values.

For example, last week, students around the world participated in a massive #ClimateStrike. Some have called it a tipping point. With BlackRock, Fidelity, TIAA-CREF and Vanguard all offering ESG funds to invest in our values, we must be heading for a low-carbon economy, right? That assessment may be premature. Not all ESG funds are alike.

New Morningstar research – published for Morningstar Direct users – uses Morningstar’s Fund Votes database to examine how ESG funds voted during the 2018 proxy season on climate-related shareholder resolutions. The research reveals a striking difference in voting patterns from funds sponsors by ESG-specialists vs. ESG funds from more traditional, non-ESG fund companies.

Morningstar Direct Findings

A huge positive is that more funds are starting to “get” the importance of ESG, not only as a screening tool for investing but also in casting proxy votes. Morningstar research found votes cast by the largest asset managers across all funds shows a year-on-year increase in support for all climate resolutions voted since 2016. That is certainly good news. Morningstar surveyed 14 resolutions with a positive vote of 40% or higher. Notice the two largest funds, BlackRock and Vanguard, with combined assets under management of $11.5 trillion, are laggards. Changing how they vote would make a significant difference.

Moningstar Fund Votes ESG Trends

ESG funds from BlackRock, Vanguard, Fidelity Investments, and TIAA- CREF, among others, cast a number of votes that appear to conflict with an ESG mandate, especially for funds specifically aimed at the environment.

ESG votes by Mainstream funds

By way of contrast, among nine fund companies with an long-term ESG focus, not a single vote was cast against climate-change resolutions that garnered more than 40% of the shareholder vote. Asset managers with an ESG orientation unanimously voted for the 14 climate-related resolutions that garnered more than 40% of the shareholder vote across all funds managed.

Votes by SRI asset managers

Underlying Assets

It also might be useful to look at underlying assets. For example, compare holdings of the Trillium P21 Global Equity Fund with BlackRock’s Impact US Equity Fund. BlackRock’s Impact fund contains investments in coal, oil and gas, fossil-fired utilities, etc. They constitute only a small portion of the portfolio but that is enough to get them 0 out of 5 “badges” from Fossil Free Funds. In contrast, Trillium P21 Global Equity Fund wins 5 out of 5 badges.

Research based on Morningstar’s Fund Votes database will help Morningstar Direct clients differentiate ESG hype from ESG reality. The service is likely to increase demand for mainstream fund families to be more consistent in voting and investing within a transparent ESG framework. Traditional SRI funds have been investing and voting ESG concerns for decades. Some, like Calvert, Domini, Pax World, Praxis, and Trillium even announce their votes to the public before annual meetings. Do not expect that from mainstream ESG funds any time soon.

   

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Procter & Gamble (PG): Proxy Score 43

PGProcter & Gamble Co (NYSE:PG), provides consumer packaged goods. Their annual meeting is coming up on October 11, 2016.

ProxyDemocracy.org had collected the votes of 3 fund families when I checked. Vote AGAINST pay, committee; FOR reports on political activity and how PG is addressing pro-discrimination laws. I voted with the Board’s recommendations 43% of the time. View Proxy Statement via iiWisdom. Continue Reading →

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Vanguard’s Political Disclosure Vote: Wrong!

Vanguard's Political Disclosure Vote is Wrong (2nd from bottom on graph)

Vanguard’s Political Disclosure Vote is Wrong (2nd from bottom on graph)

VanguardLet’s change Vanguard’s political disclosure vote. Our nation’s largest mutual fund voted against all resolutions submitted by shareholders asking for companies to disclose their political spending. Shouldn’t we have the right to know what candidates our investments are supporting?

Vanguard’s Political Disclosure Vote Needs Changed

Join more than 59,000 American’s who have already petitioned Vanguard to change their proxy voting behavior. Support shareholder resolutions that seek disclosure of political spending at companies where Vanguard owns a shares. If Vanguard votes with us, instead of against us, it won’t be long before other large funds like BlackRock start doing the same. Within a few years, we could actually begin to know what companies are funneling how much money to which candidates. Vanguard’s political disclosure vote can be changed – with your help. Sign the petition by U.S. PIRG to change Vanguard’s political disclosure vote. Continue Reading →

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Investors Call on Food Companies to Stay out of Washington State GMO Battle

gmoCompanies that gave $46 million to stop California GMO labeling risk negative brand reputation if they fund effort to stop I-522 initiative for transparent labeling of food. Companies that donated funds to oppose ballot initiatives to require the labeling of products containing genetically modified organisms (GMOs) are facing new pressure from shareholders to stay out of future elections.

Leading up to the vote on Washington State’s ballot initiative to require GMO labeling, As You Sow, the Green Century Equity Fund, the Environmental Working Group (EWG), and the U.S. Public Interest Research Group (U.S. PIRG) are filing resolutions asking the top corporate donors to the opposition of the California GMO labeling ballot initiative to refrain from using Continue Reading →

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Reeds, Inc. (REED): My 1st Attempt to Collaborate Through Sharegate

sharegateReedsI’ve started to use Sharegate.com to network with other shareowners around specific companies. The first company I’m working on through Sharegate is Reeds (REED). I think our company’s product line is strong but management and the board appear to be weak in distribution skills. After years of refining and growing their fine products, #REED still is not profitable.

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Trillium & Green Century Mark Citizens United Anniversary With Resolutions Urging Halt to Political Donations

On the 2nd anniversary of the Citizens United Supreme Court decision, two investment firms announce that they have filed shareholder resolutions at three companies, Bank of America, 3M & Target Corporation, urging them to refrain from making political donations in the future. This is the first time institutional shareholders have Continue Reading →

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Good Year for Advocacy at Green Century

As the Gulf oil disaster focuses national attention on the huge environmental problems caused by corporate irresponsibility and the enormous tolls environmental impacts can have on shareholders, Green Century Capital Management (Green Century) shares a more positive story – shareholders are taking action to change the corporate course and advocate for improved corporate responsibility. According to Larisa Ruoff, Director of Shareholder Advocacy for Green Century:

Shareholder advocacy is a critical component of environmentally-responsible investing.  Recent environmental disasters such as the BP* oil well blowout and the Massey* mine tragedy are stark reminders that a company’s environmental performance can have dramatic implications for shareholder value.  Green Century believes it is now more important than ever to use the rights and responsibilities that come along with stock ownership to encourage companies to increase transparency, mitigate risk and protect shareholder value.

Green Century files shareholder resolutions each year calling on companies to address environmental problems related to corporate operations or policies. “The resolutions that we file and the pressure we are able to put on companies are powerful ways to protect both the environment and our shareholder value,” said Ruoff.

The 2010 shareholder advocacy season this spring was a record-breaking season for Green Century. They filed resolutions at 22 companies asking them to increase transparency on issues ranging from hydraulic fracturing, the controversial natural gas extraction process, to coal ash, the toxic byproduct of burning coal that made headlines when the Tennessee Valley Authority coal ash dam collapsed in December 2008.

Nine of Green Century’s resolutions were withdrawn after companies agreed to take positive action, and two were eliminated because of a merger or a technicality. The 11 remaining received groundbreaking votes, including 42%**  voting support on a hydraulic fracturing resolution with the energy company, Williams Companies, Inc.* (Williams). The resolution asked the company to report on the environmental impact of the company’s hydraulic fracturing operations and for a discussion of the potential policies the company could adopt, above and beyond regulatory requirements, to reduce or eliminate hazards to air, water and soil quality from those activities.

According to Securities and Exchange Commission regulations, new shareholder proposals must receive three percent of the vote to be re-filed the following year. Said Ruoff:

The 42%** vote on our new hydraulic fracturing resolution at Williams* is truly remarkable, and our 26.4%** vote on the first-ever resolution asking ExxonMobil* to report on risks associated with oil sands development was similarly impressive. These votes are sending strong signals to companies that shareholders are wary about operations that could carry serious environmental risk and that they need more information on these issues.

According to an analysis by the non-profit group Ceres, climate change-related resolutions that came to votes so far this year with U.S. and Canadian companies received 25%** average voting support, up from 22%** in 2009. The trend towards higher voting support indicates that institutional investors are becoming increasingly concerned about environmental impacts. Green Century argues that companies should pay attention to this trend by candidly disclosing environmental risks and proactively and effectively working to reduce their environmental impacts.

*As of March 31, 2010, BP plc, Massey Energy Company, and ExxonMobil Corporation were not held by the Green Century Balanced Fund or the Green Century Equity Fund; Williams Companies, Inc. was not held by the Green Century Balanced Fund and comprised 0.25% of the Green Century Equity Fund.  Please refer to the Green Century Funds website for current information regarding the Funds’ portfolio holdings. These holdings are subject to risk as described in the Funds’ prospectus. References to specific investments should not be construed as a recommendation of the securities by the Funds, their administrator, or their distributor. ** The percentage in favor was calculated by (i) dividing the number of votes in support of the proposal by (ii) the sum of the number of votes voted in support of and against the proposal.  Abstentions and broker non-votes were not included in the calculation.

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How I Voted at BP

Per my disclosures, I own a small amount of BP PLC ADS. Maybe because it is a foreign issue, I didn’t find BP as I tried to use MoxyVote.com but I was able to see how CalSTRS voted at ProxyDemocracy.org. Frankly, I’m not as informed as I would like to be, especially with regard to the directors.

I know that investors from both sides of the Atlantic have filed resolutions for the BP, Shell, ConocoPhillips and ExxonMobil annual general meetings, which ask the companies to report on the financial, environmental and social risks associated with their oil sands investments. FairPensions UK, the California State Teachers Retirement Fund (CalSTRS), and Boston-based Green Century Capital Management (Green Century) are coordinating the shareholders’ efforts.

At BP, the only oil company I own, this resolution is identified on the ballot as SPECIAL RESOLUTION: TO INSTRUCT A COMMITTEE OF THE BOARD TO REVIEW THE ASSUMPTIONS BEHIND THE SUNRISE SAGD PROJECT.

Canada’s tar sands are the second largest oil resource in the world, with 173Bn barrels in reserves. However, extraction is energy-intensive and environmentally-damaging, requiring deforestation, extensive water use, and the creation of massive amounts of toxic waste. Even using the most conservative lifecycle analysis, oil from this source emits between 15% and 40% more greenhouse gases than the average of conventional sources, raising doubts about the long-term economic viability of oil sands development. Local indigenous communities affected by oil sands pollution and ecological harm, such as the Beaver Lake Cree Nation, have filed legal challenges that could drastically slow or halt oil sands development.  BP has responded, but not to my satisfaction.

Frankly, I trust the analysis done by CalSTRS, FairPensions UK, and Green Century on this issue. “Shareholders must know how companies are preparing for these costs and mitigating future risks,” says Emily Stone for Green Century. Mindy S. Lubber, president of Ceres and director of the $8 trillion Investor Network on Climate Risk (INCR) says,

Investors are concerned that many companies seem to be moving ahead without a well-articulated plan to manage the environmental and social risks associated with the oil sands. Given the extra-long investment horizons of oil sands projects, it is especially important for companies to invest in solutions to these challenges upfront.

I recall my dad, an engineer, showing me some of the oil sands when we visited his brothers in Canada about 50 years ago. He was very skeptical concerning our ability to extract the oil without ruining the environment. I’m not sure we’re there yet. Since I’m voting with CalSTRS on this shareowner resolution, I’m also going with them and voting against all the director nominees and several management proposals as well.

If you are in the UK, I urge you to go to FairPensions on this issue. Click the take action button. From there, you can send a message to your own pension scheme to try to get them onboard with this issue at BP, Shell, ConocoPhillips and ExxonMobil. I wish we had a similar advocacy organizations in the US.

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