Pressure on companies from investors and government regulators offers hope that the kind of change needed to make measurable progress towards an equitable and sustainable future may be possible. Proxy season serves as a particularly salient reminder of the powerful role that shareholders can play in how businesses operate, including determining the makeup of the board of a corporation as large as Exxon Mobil Corp. This pressure will only continue to mount as investors are reminded of just how significant the financial stakes are for corporations who fail to take action to protect against risks and take advantage of opportunities to address issues ranging from climate change to racial justice to gender equity and beyond. Shareholders are in a unique position to push the companies in which they invest forward, both for their own financial benefit and for the good of the world around us. The stakes are too high to be ignored.
In the News
Barclays will no longer be underwriting a municipal bond sale to fund prison construction by private corrections company CoreCivic Inc. in Alabama. The move comes in response to criticism from investors and industry groups that the transaction would be in direct contrast to Barclays’ pledge to not provide funding for for-profit prisons. Barclays had initially defended the deal as not being at odds with its divestment from private prisons because the facilities would be leased and run by the state of Alabama.
Wall Street Journal
Proposed EU regulations would require publicly-listed companies in Europe and large private firms, including U.S.-based banks with European subsidiaries, to report standardized data on their ESG practices, including their impact on the environment and employment practices. One major open question for banks is whether these new disclosure requirements will also apply to the companies and projects they finance. These new rules come on the heels of recently imposed requirements that funds back up their ESG claims and the announcement of new green investment classifications that will go into effect next year.
Ballots for this year’s annual corporate meetings include a record 30 resolutions focusing on diversity, equity and inclusion. These resolutions are another reflection on the continued demands for businesses, particularly in the leadership ranks, to reflect the diversity of the world around them. These resolutions come at the end of a year in which job losses due to the global pandemic disproportionately impacted women and people of color, further hampering diversity. Resolutions on diversity, equity and inclusion are joined on ballots by 92 resolutions targeting social issues and 43 resolutions involving corporate governance.
Already this proxy season shareholders have voted in record numbers for climate- and environment-related proposals. Among this trend, 98% of General Electric shareholders voted to request details of how the company will achieve net-zero emissions and 81% of DuPont shareholders voted in favor of a stronger plastics pollution policy. This is not simply a reflection of humanitarian goodwill on the part of shareholders. Investors have become starkly aware of the financial risks and opportunities associated with climate change. 2020 saw a record $96B in climate-disaster-related losses and the global move towards net-zero policies is forecast to be worth $26T in new technology and market shifts.
The pressure on boards to do better on diversity is showing dividends, even in advance of the Nasdaq proposal requiring listed companies to have at least one woman director and one underrepresented director receiving final approval by the Securities and Exchange Commission (SEC). The SEC requirement is just the most recent in a series of similar moves, including California’s state laws and Goldman Sachs’ refusal to underwrite the IPOs of companies without sufficient board diversity. 145 S&P 500 companies have added at least one Black director since June of 2020, Latino board appointments at public companies quadrupled from the prior year, and for the first time women hold almost a third of all seats on the S&P 500. While these numbers do not yet fully reflect society at large, it is a reminder of how much progress can be made with sufficient encouragement.
An executive order signed in May asks Treasury Secretary Janet Yellen to recommend steps to reduce climate risks to financial stability and allow regulators to require stronger disclosures. Under the same order, the Office of Management and Budget will identify the primary drivers of federal climate risk exposure and develop ways to quantify climate risk for use in federal budget projections. It is expected to take around six months for the proposals to be drafted.
Wall Street Journal
Upstart hedge fund, Engine No. 1, successfully placed three of its own candidates on the board of Exxon Mobil Corp., thanks to support from individual investors and big players including BlackRock, Vanguard and State Street.1 Engine No. 1 argues that Exxon’s leadership has not taken climate change sufficiently seriously and has not prepared the company for the reality of a future with decreased fossil fuel demand. The board appointments come after a protracted argument between Exxon and Engine No. 1 and a number of failed proposals by Exxon to try and appease the hedge fund.
Wetherby Asset Management
Wetherby is incredibly proud and excited to be recognized as one of the Best for the World B Corps™ of 2021!
The Best for the World are B Corps who earn scores in the top 5% of all B Corps worldwide in one or more of the five impact areas assessed in the certification process. For 2021, Wetherby has been recognized for our efforts in Governance, which encompass ways in which we hold our leadership accountable for meeting social and environmental goals and our dedication to following our mission. With the 2020 Best for the World postponed due to the COVID-19 pandemic, this marks our second consecutive recognition in the category. Wetherby was also recognized in the Workers, Customers and Changemakers areas in prior years.
1Barron’s. “Engine No. 1’s Win Over Exxon Mobil Gets Even Better With Third Board Seat.” June 2, 2021.