Working Together to Protect
Our Common Resources
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It’s been a busy month at The Shareholder Commons! We launched our new website at the end of January, and have been proactively responding to interest from funders and prospective
partners, while continuing to produce thought leadership content (see below). Our Advisory Board member, Alan Horowitz, attended Green Fin 2.0 in Scottsdale AZ a few weeks ago, which he recaps and reflects on as a guest contributor in this month's ramble. We are looking forward to a full Spring schedule, beginning with the CII conference in DC next month as well as a closed-door policy convening with B Lab and the Ford Foundation. If you'd like to find time to connect with us, send us an email.
OUR LETTER TO THE SEC
We are excited to share the letter we filed with the Securities and Exchange Commission objecting to their proposed new rules, which would make it harder for ordinary citizens to have their voices heard at the companies they
invest in, especially on social and environmental issues. We think it is critical that the SEC consider how its rules and regulations affect citizens saving for retirement, education and other long term goals, and not just Wall Street investors focused on the next quarter.
If you agree, let the SEC and your representatives in Congress know how you feel. And if you invest through a mutual fund company like BlackRock, Vanguard or Fidelity, let them know how you feel about these matters—they work for
you!
WELLS FARGO OPTS FOR
SHAREHOLDER PRIMACY
In a prior issue, we reported on the Business Roundtable’s Statement on the Purpose of a Corporation, and questioned whether signatories
where really ready to prioritize stakeholder interests if they ever conflicted with the interests of the shareholders. That proposition was recently tested, and at least one signatory failed the test.
In October, new Wells Fargo CEO Charlie Scharf signed onto the Statement. But when a shareholder asked the company to hold a shareholder vote on studying a conversion to benefit corporation governance, which expressly rejects shareholder prioritization, Wells sought the advice of its lawyers, who advised that it would be confusing to abandon the rule that whenever the interests of shareholder and stakeholders diverge, management must favor the shareholders. Wells Fargo’s acceptance of this
advice runs contrary to the very heart of the a new paradigm where employees, communities and customers matter as much as shareholders.
Click here to read the full article on our blog (originally published on ImpactAlpha)
FEBRUARY RAMBLE:
THE DAY AFTER GROUNDHOG DAY
A REFLECTION ON GREENFIN '20
BY ALAN HOROWITZ
Earlier this month I had the pleasure of attending GreenFin at the scenic JW Marriott Camelback Resort in Scottsdale, AZ. As the finance-focused gathering that precedes the broader annual GreenBiz summit, GreenFin provides an opportunity for current, former and would-be Wall Street and Fortune 100 sustainability-minded “titans” to gather at the resort that bills itself as the place “Where Time
Stands Still.” Attendees gather to figure out how to collectively convince everyone else that sustainability really is a thing, that ESG doesn’t stand for “Eggs and Smoked Gravlax” and that the future of capitalism and the planet are in fact interconnected – and collectively at stake!
This was my first invite to GreenFin, and I must say I walked out quite impressed by the depth and seriousness of the discourse, albeit not fully sanguine about the direction of travel. What began as a rather predictable and pedestrian discussion over the “Tyranny of Short-Termism” and the challenge of quantifying “non-financial” risks evolved into a quite rigorous examination of the likely
implications of Larry Fink’s letters; the maturing dialogue between portfolio managers, investor relations professionals and sustainability leads; and, perhaps most relevant to The Shareholder Commons agenda, the need for a more sophisticated, sustainability-focused search for “Better Beta”: in other words a marketplace where all companies are doing their “fair share” across the ESG landscape. I was particularly primed for a debate on this latter point but, to my pleasant surprise, the
room was fairly aligned: yes, pension funds, institutional investors and other universal owners have a critical role to play, given their broad market exposure and long-term lens. Reaching consensus on what that role is, independently and relative to active investors, proved more elusive.
In parallel, it was clear to me that equity markets, while increasingly aligned on the relevance of ESG as a tool for identifying winners and market-beating “alpha,” are still struggling to translate company sustainability information – some quantified and some not – into actionable data. This is unsurprising given, among other challenges, 1) the lack of consensus on reporting frameworks (GRI vs. SASB
vs. TFCD vs. 100 other schemes); 2) the inability to quantify the inherently unquantifiable; and, perhaps most significant, 3) the struggle many companies have of incorporating sustainability factors into business risk, strategic planning and other governance processes. Yet interestingly, there was a collective sense that ESG is emerging as financial sector vernacular for “21st Century Risk” and that the more consensus there is on this point, the more effective markets will be in integrating
social, natural and human capital into valuation decisions. Presumably the customers, employees and investors of Wells Fargo, Volkswagen, PG&E and Boeing would agree!
Ultimately, the theme of GreenFin was: “It’s the Day After Groundhog Day”— we’re finally talking with rather than over and around each other on ESG. That’s quite gratifying for those of us who for years have been mumbling and grumbling about the imperative of rethinking the way we define and manage business “value,” “risk” and “trust.” Whether as an outgrowth of corporate scandals, scary
weather, or – I don’t know – something like $10 trillion dollars of assets (and the executives behind them) being reexamined for their sustainability bona fides, the dialogue is finally evolving. But now what? Consensus-based measurement, reporting and valuation tools? More sophisticated and transparent enterprise risk management programs? Better C-Suite engagement and storytelling around the business opportunities involved? Public policies that demand transparency and price in
externalities? I’ll take “all of the above.” Ambitious commitments recently announced by my former employers AstraZeneca and Microsoft deserve praise and can help lead the way but will not suffice.
So, on this “Day After Groundhog Day” and every day thereafter, let’s also resolve that the financial and corporate sectors (and perhaps one day federal policymakers) must collectively recognize that it’s high time to both level AND raise the playing field. The search for Alpha must continue –our collective ability to invest, innovate and meet the critical needs of our planet and social systems
depends on that. But what we could also really use right now is some “Better Beta.” After all, there are no winners – only losers – until the bar is raised across capital markets and there is universal recognition that, despite the wishes of JW Marriott’s owners and guests, time is NOT standing still. Not for our economy, not for our progeny and certainly not for our planet.
THE LAUNCH OF CLIMATEVOICE
As readers know, at TSC we focus on the interests that investors have beyond financial return, like their interests in an environment that will support generations of humanity to come. But just as shareholders have interests beyond financial return, employees have interests beyond their paychecks. Bill Weihl, who led Facebook’s sustainability team also was Google’s "energy czar,” before
that, has launched an organization that focuses on giving a voice on climate to employees and students. Learn more in this article, and join me in signing their pledge here.
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That’s it for this month! Keep an eye open for our next monthly newsletter, and don’t forget to breathe.
Founder, The Shareholder Commons
Fellow, B Lab
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