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February 04, 2014
Investors Push Emerson Electric on Sustainability Reporting and Relationship with ALEC
    by Robert Kropp

For the fifth consecutive year, Walden Asset Management requests that company report on sustainability while two more shareowner resolutions request transparency on political spending and lobbying.

At least year's annual general meeting of Emerson Electric, Walden Asset Management presented, for the fourth consecutive year, a shareowner resolution calling on the industrials company to publish a sustainability report. CDP had given Emerson the lowest score of all responding companies in the Industrials Sector; due to a large extent, as Walden pointed out in its resolution, to the company not outlining “targets and goals on greenhouse gas (GHG) emissions reductions.”

“Investors have no access to evaluative" Emerson's claims to operate in an environmentally responsible manner, Walden continued. Furthermore, the company "does not provide any specific information about sustainability issues in its supply chain, especially in relation to GHG emissions."

One year later, and a look at Emerson's respo nse to CDP reveals that little has changed in terms of the company's sustainability reporting. Questions about governance and strategy, for example, were left unanswered, as were many relating to indirect emissions from supply chain sources. And Emerson indicated in its response that it has not established emissions reduction targets.

So for the fifth year in a row, Walden will return to Emerson's annual meeting with a resolution calling for a sustainability report. A majority of Fortune 100 companies have a renewable energy goal, greenhouse gas goal, or both, the firm stated in a press release; and a 2013 KPMG study found that out of 4,100 global companies surveyed, approximately 71% have comprehensive ESG (environmental, social, and corporate governance) reports.

“We believe that companies that proactively track, manage and report on emissions to air, land and water, as well as other environmental, social, and governance related factors, are better positioned to proactively address risks and opportunities related to their business,” said Tim Smith, Senior Vice President at Walden. “Our resolution urges Emerson Electric to improve transparency in its business practices, which is in investors’ interest since these issues may affect long term shareowner value.”

Emerson also stated in its CDP response that it does not “engage in activities that could either directly or indirectly influence policy on climate change.” Yet according to a second shareowner resolution, filed by the Sustainability Group at Loring, Wolcott & Coolidge; Trillium Asset Management; the Midwest Coalition for Responsible Investment; and Walden, Emerson contributes to the controversial American Legislative Exchange Council (ALEC) which has come under scrutiny due to model legislation that it provides and promotes.

In addition to its high-profile role in the passage of Stand Your Ground legislation, ALEC continues to champion model legislation that would weaken states' renewable energy standards. The shareowners are requesting that Emerson improve the transparency of its reporting on political spending and lobbying.

“We believe Emerson’s affiliation with ALEC is not only misaligned with the company’s sustainability and business objectives, but also that its membership in this controversial group could pose significant reputational risks,” said Larisa Ruoff of the Sustainability Group.

Institutional Shareholder Services (ISS), the influential proxy advisory service, has recommended that Emerson shareowners support all three of the resolutions relating to sustainability, political contributions, and lobbying.


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