February 21, 2012
Resolutions or Engagement? Ceres Prepares for Proxy Season by Using Proxy Ballot to Encourage Change
by Robert Kropp
SocialFunds.com talks with Rob Berridge of Ceres about the organization's past success and its
plans for driving change in the stewardship of the environment through shareowner resolutions.
The second of the six Principles for
Responsible Investment (PRI) commits signatories to a policy of active ownership, which
includes both the development of a corporate engagement strategy and the filing of shareowner
Traditionally, the approaches of European and US-based shareowner
activists have differed. In a 2009 paper outlining the differences in approach, James Gifford of
PRI wrote, "There is a cultural difference between the US and the UK on the issue of filing
shareholder resolutions, with this tool being much more common in the US due to weaker shareholder
rights leaving shareholders with fewer options, as well as a more confrontational corporate
At least one major US organization of institutional investors appears to be
gravitating toward the UK model. The number of shareowner resolutions filed by members of the Interfaith Center on Corporate Responsibility
(ICCR) has decreased from 308 in 2010 to 160 thus far in 2012. ICCR members are currently
engaged in 170 ongoing dialogues with corporations as well.
Whether ICCR's approach
represents the early stage of an industry-wide evolution in corporate engagement in the US remains
to be seen. And in talking with SocialFunds.com, Laura Berry, the organization's Executive
Director, pointed out that its members continue to vote their proxies in favor of shareowner
resolutions filed by like-minded institutional investors.
One such investor organization
is Ceres, whose recently published Proxy Power brochure highlights the ongoing
strategy of its members to use the proxy ballot to encourage changes in corporate behavior.
"Over the past three years, 230 sustainability-focused resolutions were filed by investors in
Ceres' network," the brochure states. "Nearly half, or 110 resolutions, were withdrawn by investors
after the companies agreed to address their issues of concern."
In 2011, Ceres members
filed 111 resolutions, more than every before. And a glance at the organization's Resolutions
Tracker for 2012 suggests that the number filed this year will be high as well.
According to Rob Berridge, Senior Manager of Investor Programs at Ceres, the organization
provides such coordinating services to its members as focus lists of companies with risks, the
drafting of resolution texts, and helping investors find co-filers.
"We create an
environment where investors can talk to each other and plan with each other," Berridge told
Ceres' brochure highlights three examples of successful shareowner
engagement through the filing of resolutions. A global campaign to replace trans-fat oils in food
and cosmetics with palm oil led to widespread deforestation in locations such as Indonesia.
Shareowner campaigns for sustainable forestry have thus far led major corporations such as Avon,
Hershey, and Nestle to commit to purchasing only 100% sustainable palm oil.
requesting that homebuilders improve the energy efficiency and reduce the greenhouse gas (GHG)
emissions of their products and operations have encouraged KB Homes to build 90% of its new homes
in accordance with Energy Star specifications in 2010.
And resolutions filed with nine oil
and gas companies in 2011 led several of them to improve their strategies for managing water
pollution, chemical use, and other risks associated with hydraulic fracturing, or fracking.
"When you see one or two companies step out, that makes it feasible for us to say when we're
writing resolutions or meeting with proxy advisory services, why can't our company do it?" Berridge
Fracking remains a critical concern for Ceres members in 2012. Thus far, resolutions
have been filed with 18 major oil and gas companies. Most of them address the financial risks
associated with the controversial practice.
"As community opposition and regulatory risks
for fracking operations grow, investors are likewise concerned about how businesses are managing
their exposure to these risks," said Larisa Ruoff of Green Century Capital Management. Green Century coordinates
the filing of fracking resolutions with the Investor
Environmental Health Network (IEHN).
According to the Resolutions Tracker, one
resolution addressing fracking, filed with Penn Virginia by Miller-Howard Investments, has been withdrawn thus far this
year. Penn Virginia has agreed to pursue the use of greener fracturing fluids and is in discussions
on issuing a sustainability report, Berridge said.
"The number of resolutions asking
companies to issue sustainability reports is high, compared to other issues," Berridge said. "If
companies issue sustainability reports, you get at what the material ESG (environmental, social,
and corporate governance) issues are for companies. Companies that issue high-quality
sustainability reports are looking at the issues in a comprehensive way.
to see companies asking their suppliers to issue sustainability reports," he continued.
Ten electric power companies have received resolutions addressing risks associated with climate
change and pending clean air regulations. Several of the resolutions were filed by As You Sow, requesting that companies report on
plans to reduce coal-related risks.
"Electric utilities reliant on coal are exposed to
significant financial risk," said Corinne Bendersky, As You Sow's Energy Program Manager. "We want
companies to report on plans to minimize coal-related risks, demonstrating to investors that they
are prepared to meet these challenges and protect shareholder value."
A first –year
resolution filed with Empire District Electric by the Midwest Coalition for Responsible Investment
has been withdrawn. In an email, Barbara Jennings of the Coalition wrote, "EDE is including the
filer in its Integrated Resource Program 2013 discussions and allowing the shareholder to have a
table at the Shareholder Annual Meeting to put forth his views on the Financial Risks of Coal."
"This was the first year for this resolution and we decided to stay in the dialogue mode,"
Asked if he thought the increasing diversity of resolutions runs the risk
of diluting shareowner support for some of them, Berridge answered, "In a way, the diversity has
"It's become difficult to talk about climate change on Capitol Hill, but
investors have responded with resolutions on such issues as energy efficiency," he said. "There are
ways for investors to address climate change that are a little less direct but which are
"We hope that more investors will ask companies to link executive compensation
to ESG," he continued. "And the New York State Comptroller's Office has been a leader in asking
that companies in the extractive industries add a board member with environmental expertise."