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February 21, 2012
Resolutions or Engagement? Ceres Prepares for Proxy Season by Using Proxy Ballot to Encourage Change
    by Robert Kropp 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 resolutions.

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 culture."

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, 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 "Nearly half, or 110 resolutions, were withdrawn by investors after the companies agreed to address their issues of concern."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.

Resolutions 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 said.

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.

"We're starting 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," she continued.

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 benefits."

"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 effective."

"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."


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