From the GreenMoney Journal’s ICONS Series, featuring leaders in socially responsible investing and sustainable business practices
Welcome to the fourth of GreenMoney’s new Icons Series, in which we invite Socially Responsible Investment & Business leaders to interview others who have also assumed SRI and CSR leadership. This issue features Mindy Lubber, President of CERES, the leading U.S. coalition of investors and environmental leaders working to improve corporate environmental, social and governance practices interviewing Matt Patsky, CEO and senior portfolio manager of Trillium Asset Management, a well-respected independent investment firm founded by Joan Bavaria in 1982.
Both Mindy and Matt have been motivating leaders for many years and continue to help us to make money and make a difference.
Here is what Mindy wants to know from Matt…
MINDY: What are your top priorities for company engagement to improve their environmental, social and governance (ESG) performance in the 2011 proxy season and why?
MATT: We engage with companies by means of dialogue, correspondence, meetings and shareholder resolutions. A quick indication of our priorities comes from a glance at the list of the 24 shareholder proposals that we are filing or co-filing this year. Several themes are dominant, one of which is the need to hasten our economy’s transition from fossil fuels to clean and renewable sources of energy. We’re doing that with proposals at oil, gas and electric power companies addressing the climate impacts of their products (more about that in answer to last question.) A related resolution at Anadarko Petroleum addresses the environmental health risks from the hydraulic fracturing technology used to extract natural gas. Natural gas has a huge bridging role to play as we wean ourselves away from coal and oil, but for that to happen, gas drillers are going to have to regain the public’s trust about hydraulic fracturing, which has been linked to contaminated water supplies. Other environmental health issues we are working on include encouraging companies to eliminate the chemical BPA from their packaging (Dentsply, Coca-Cola), and to share more information with communities that live in the shadow of manufacturing facilities (PPG, ConocoPhillips).
Another major priority for us is the preservation of net neutrality, which affects all Americans and their ability to access the content they want online, especially as more people rely on wireless and mobile devices for access. It’s very important to our democracy and the vitality of our economy that wireless Internet Service Providers like AT&T and Verizon not determine what content we can access or services we can use. As the director of Open MIC, a nonprofit we founded to work on new media issues from a shareholder perspective, said, net neutrality is “the free speech issue of the 21st century.”
Without a free and open Internet, moving forward on a number of ESG issues will be difficult. The same can be said of our country’s need to rein in corporate political contributions, rather than to open the door for their expansion as the January 2010 Citizen’s United Supreme Court decision did. Through shareholder resolutions and dialogue, we are educating companies to the risks of political spending (such as consumer backlash) and calling on them to be transparent and accountable in this arena. We have filed multiple resolutions this year addressing political spending, at Target, State Street, Best Buy, 3M, Pentair, Ford and Halliburton, and co-filed a related resolution at IBM that addresses their membership on the US Chamber of Commerce’s board of directors. The Chamber is taking advantage of every loophole in the system to funnel corporate payments into political activity that is not required to be disclosed to shareholders. We think that’s wrong.
MINDY: What would you say to convince a traditional asset manager, like Fidelity or Vanguard, that they should vote their proxies in favor of climate and sustainability-related shareholder resolutions?
MATT: We can already see the impacts of climate change on a wide swath of business sectors – farming, insurance, freight and many others. Supply chains are being disrupted, commodity prices are being impacted, water scarcity is emerging as a serious problem and energy supplies are being questioned. Along with these risks we also see opportunities to create production efficiencies and reduce energy costs.
The answers depend on the particular challenges and opportunities faced by individual sectors and specific firms. For example food processors, commodity companies and food service firms are particularly vulnerable to changes in rainfall patterns – one of the most direct and powerful expressions of climate change. The risk of those changes can mean higher prices and lower quality crops that these companies depend on. As one food company reported in its 10-K, commodity costs “may fluctuate widely due to government policy and regulation, weather conditions, climate change or other unforeseen circumstances.”
Similarly, GlaxoSmithKline reported this year that their operations in the United States and Australia saw threats to their production due to precipitation changes resulting in water rationing. For homebuilders, changing weather patterns and/or extreme weather events may impact construction cycles and delivery times. Equally important are the regulatory changes that may come in response to climate change. Building codes and land use laws are the most obvious regulations ripe for change.
In contrast to these examples, financial services companies are presented with great opportunities because a shift to a low carbon economy requires significant amounts of financing. For these reasons we think a large institutional investor that is seeking to maximize risk-adjusted returns cannot ignore climate change. As Kevin Parker, the global head of Deutsche Asset Management said “climate change is probably the single biggest global investment trend of my lifetime and we would not be serving our clients well if we did not focus our energy on it.”
MINDY: How do you articulate the business case for responsible investing in sustainable companies, clean energy and green projects in terms of likelihood of generating superior returns?
MATT: We believe that focusing on sustainable companies allows us to identify companies that are leaders in higher growth sectors. The easiest way to articulate the business case would be to look at the investment performance of our Sustainable Opportunities strategy. We developed this strategy in 2008 in response to clients that wanted to invest in the most sustainable companies. Sustainable Opportunities seeks to invest in companies that are sustainability leaders and that are highly responsive to the global challenges of climate change, water scarcity, resource constraints, wealth disparity, disease and conflict.