October 08, 2011
SRI in the Rockies: Public Policy as a Strategic Tool for Sustainable Investment
by Robert Kropp
Leading voices for shareowner action discuss public policy engagement at this year's SRI in the
The second of the six Principles for
Responsible Investment (PRI) commits institutional investors to active ownership, by exercising
their proxy voting rights, engaging with companies, and participating in the development of
policies and regulations. At this year's SRI in the Rockies, held earlier this week in
New Orleans, a panel of experienced shareowner activists held forth on the practice of public
Moderating the discussion was Tim Smith, Senior Vice President
of Walden Asset Management, who has
focused much of his recent engagement with companies on the issue of political lobbying by the US
Chamber of Commerce. Last year, when the Chamber filed a lawsuit challenging the authority of the
Environmental Protection Agency (EPA) to issue regulations relating to climate change, Walden led a
coalition that wrote to companies serving on the Chamber board, urging them to evaluate "the
significant risks posed" by the Chamber's policy objectives and partisanship.
recently, Walden and Calvert Investments
wrote to companies serving on the boards of the Chamber and the National Association of
Manufacturers, urging them to tell the organizations to "retreat to a neutral corner."
"The Chamber is hugely active in lobbying on positions, and unfortunately says it speaks for
the whole business community. That is hardly the truth," Smith said at the conference. 'You'll
remember that in the last election they had over $75 million to put into the election process. Its
goal was to defeat every member of Congress who voted for health care reform."
But as part
of the financial community, Smith continued, sustainable investors can have influence over policy
decisions made in Washington. As an example, he said, "Ceres has often made the comment that when they go to Washington
and talk to members of Congress, the voice of investors is understood and respected a great deal."
Lisa Woll, CEO of US SIF: The
Forum for Sustainable and Responsible Investment, seconded Smith's observation on the influence
of sustainable investors, saying, "Too often, the only financial sector professionals that Congress
hears from are representatives from groups such as the Business Roundtable."
community often brings a distinctly different voice in the sense of priorities," Woll continued.
"This was absolutely true on the financial reform bill; US SIF and the Council of Institutional Investors (CII) were for the most part the
only investment and financial professional-related fields that were actually pro-reform."
Woll provided attendees with handouts listing the organization's policy priorities, which
include the funding of the Securities and Exchange Commission (SEC) the Commodities Futures Trading
Commission (CFTC), and the Community Development Financial Institutions (CDFI) Fund; the formation
of the Consumer Protection Financial Bureau (CFPB); a sustainable investment option for federal
employees; and EPA's authority to regulate greenhouse gas (GHG) emissions.
developed in DC can impact SRI professionals, their business and their clients, both positively and
negatively by impacting market conditions," Woll said. "Our community investment members will tell
you quite clearly that the predatory lending crisis certainly has affected their clients, their
work, and their ability to lend in low- and moderate-income communities across the United States."
"Public policy is a critical tool for making macro-level systemic change," she continued.
"We could spend the next 40 years getting companies to have better carbon footprints and doing less
damage to the climate, or we could get a bill that addresses it."
"To maximize success we
should use a coordinated and collaborative approach," she added.
Louis Coppola, Senior
Vice President of the Governance &
Accountability Institute, said, "We're in a corporate, financial, and economic crisis, and
possibly in a double-dip recession. The relationship between business and society is changing."
"We also have a sustainability crisis," Coppola continued. "One of the most important
public policy issues to get behind is mandatory corporate ESG (environmental, social, and corporate
governance) disclosure. If we had that in place it could help stop both the economic crisis and the
Coppola also praised the work on behalf of corporate reporting
done by stock exchanges internationally, noting that many now mandate sustainability reporting by
Sanford Lewis, an attorney whose Strategic Counsel on Corporate Accountability supports
sustainable investors in their efforts to improve corporate social responsibility, spoke of
insights gained while working on the Investor
Environmental Health Network's (IEHN) campaign for improved disclosure by companies engaged in
In large part due to the efforts of IEHN and Green Century Capital Management, which together
coordinated shareowner proposals addressing hydraulic fracturing that gained an average 40% of
support this year, the SEC has asked companies to provide it with detailed information on chemicals
used in the process and steps they are taking to mitigate environmental risks.
the public policy goals that I seek for investors include access to information, getting disclosure
on the risks and opportunities that particular companies have, and enabling shareowners to file
resolutions," Lewis said. "Leveling the playing field so that if a company is engaged in the risk
reduction measures that we want them to, they are not disadvantaged in the marketplace, and
providing incentives to companies to do good things like adopting green chemistry."
However, Lewis continued, "The view of the SEC in terms of shareowner advocacy is that until a
public policy issue is basically a front-page issue, it may not be right from the SEC's standpoint
to do a shareowner proposal on it. This is a huge problem, where they will treat issues as ordinary
business if they haven't seen the issue in the news."
Several of the panelists mentioned
the role of the Global Reporting
Initiative (GRI) in developing industry-specific key performance indicators (KPIs) and
advancing the acceptance of integrated reporting.
Lewis said, "In the long term GRI serves
as the de facto standard of what sustainability and disclosure look like. Eventually regulators
will adopt it as a reference."