At the start of 2017, many people expected the newly elected administration to place numerous roadblocks before sustainable investing, and to deregulate in ways that freed companies to be as unsustainable as they wanted to be. Gloom and dread were the prevailing sentiments in sustainable investing.
Many of us, especially those who have been around for more than two decades, have been through some major political transitions before, and while they do change things, they never—not “almost never,” never—accomplish everything they promise during the campaign. Concern, preparation and extra effort are warranted when the winds of change blow against us, but despair is not. Here are a few examples of why.
We had a remarkably successful season of shareholder engagement in the first half of 2017. The largest success was a resolution that received a majority vote of over 67% at Occidental Petroleum that Pax World co-filed with the Nathan Cummings Foundation and Wespath Investment Management. The resolution asked the company to assess the long-term impacts of climate change on its business, something that every company should do if their business model is bonded to the fate of fossil fuels as a source of energy. The recent uptick in penetration of renewables into both the electricity generation market, and electric vehicles in the transportation market underscores the risks associated with business models that assume fossil fuels will be the dominant sources of energy for the foreseeable future.
Pax also co-filed climate change-related, or renewable energy-related, resolutions at UPS, ConocoPhillips and Dominion Resources. We were able to withdraw the resolution at UPS, and the votes at the others were 6.7% and 47.8%, respectively.
We continued our engagement on gender pay equality in 2017, expanding from the technology sector following successful engagements last year with Silicon Valley companies into financials. We achieved some progress in each of those engagements, though it wasn’t everything we wanted or asked for. Goldman Sachs, for example, agreed to publish a commitment to equal employment opportunity, including compensating all employees equitably at all levels. The company also agreed to analyze gender pay parity for U.S. employees across all job types and levels.
In all, we filed seven shareholder proposals asking that companies publish gender pay equity reports, and were able to successfully withdraw five of them after reaching agreements with the companies—Goldman Sachs, Bank of New York Mellon, Qualcomm, Verizon Communications, and AT&T—to do at least part of what we asked. Oracle’s shareholder proposal is going to a vote at the company’s annual meeting in November. The seventh, MasterCard, went to vote at the company’s annual meeting and received a 7.8% vote in favor. That’s not a high vote, of course, but it’s enough to permit the resolution to be refiled next year. It can often take more than one year for shareholders to see the importance of certain issues, so a mediocre vote total the first year is not necessarily discouraging. The votes on climate change this year are ample proof: when shareholders first began filing proposals on climate change-related issues with the oil majors, the vote totals were often somewhere between low and, well, meh.
And that brings us to the macro picture, or the political landscape. As the time of this writing, the House of Representatives has passed the Financial CHOICE Act, one provision of which would make it essentially impossible for any but the very largest funds on the planet to ever file a shareholder proposal. Pax has been active in a coalition of investors that has mobilized to urge the Senate not to pass the Financial CHOICE Act, and has provided resources showing that the shareholder engagement process is aimed at improving company performance, and often does.
We see engagement as a primary tool in our effort to invest sustainably, and make all investing more compatible with sustainability. That means working not only with companies in our portfolios, but working in the public policy arena when necessary to help assure that shareholders keep their right to communicate with their representatives—boards of directors—at companies they are part owners of.