New interpretations by the SEC of the Shareholder Proposal Rule (14a-8) in 2017 led to an increase in omissions of climate proposals last year. There is reason for concern that the number of omissions could increase further in 2019, depending on how the SEC applies its latest SEC Staff Legal Bulletin 14J, issued on October 23, 2018. 

Recent Morningstar research shows that the number and size of U.S. sustainability funds continues to grow.  Notable recent additions include sustainable exchange traded funds (ETFs).  Within this universe is a wide variation in strategies and commitment—from considering environmental, social and governance (ESG) alongside other factors, to integrating ESG in the investment process, to impact and green economy-focused funds.

Imagine only 11 percent of people vote in an election. Imagine the perverse incentives that society would create. Now realize that, for the largest corporations that drive our economy, that is exactly what is happening.

The meat and poultry industries have made significant progress in tackling antibiotic resistance over the past four years, encouraged by persistent shareholder engagement on this critical issue.

As companies consider how to reduce their emissions to comply with the goals of the Paris Climate Treaty, they can look to electric vehicles as a feasible option.  Carbon emissions from vehicles contribute significantly to global warming, and the transportation sector is one of the larger contributors to greenhouse gas emissions (GHG) in the U.S. As institutional investors seek to offset and mitigate the rising levels of carbon and other GHGs, electric vehicles (EVs) are an increasingly viable solution. With sales of EVs growing faster than predicted a few short years ago, the outlook for EV production and adoption is becoming increasingly robust. 

New York City Comptroller Scott Stringer, on behalf of the New York City pension funds (the “NYC Funds”), submitted a shareowner proposal to TransDigm Group on September 19, 2019, requesting that the company adopt a policy with time-bound, quantitative, company-wide goals for managing greenhouse gas (GHG) emissions, taking into account the objectives of the Paris Climate Agreement, and report on its plans to achieve these targets. 

The Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) has raised awareness of climate risks and opportunities to new levels. As a global, industry-led initiative formed by G20 nations, it has support from over 500 corporations and has led many other companies to consider its recommendations.

Climate change poses growing risk to the individual companies in which shareholders invest and, significantly, to shareholders’ broader portfolios. As climate related harm accelerates, economy-wide losses are increasing and hurting portfolios. A 2018 analysis in Nature suggests that keeping global temperature rise below 1.5 degrees instead of 2 degrees can prevent over $30 trillion in economic damage.

Plastics and other petrochemical goods are set to overtake the transport sector as the largest driver of global oil demand. Oil and chemical companies have invested a whopping $180 billion in new and projected plastics facilities, largely due to the fracking boom. But calls by governments and a variety of stakeholders to reduce single use plastics raise questions about whether projected demand for plastic products may slump, resulting in stranded petrochemical assets.  Furthermore, extreme weather is creating new risks from flooding that exacerbate plastics pollution risks from petrochemical plants.

As investors analyze the climate resiliency of their portfolios, they should consider risks associated with the agricultural sector and especially the conversion of forests and peatlands to crop and pasture land.  The burning and razing of forests is one of the largest contributors to global greenhouse gas emissions. Deforestation contributes as many greenhouse gas emissions as the global transportation sector, with commodity-driven deforestation itself responsible for two-thirds of tropical forest loss.

For 25 years shareholders have been raising concerns over corporate infringement on Indigenous Peoples’ Rights. Indigenous Peoples have helped to raise international awareness about how pipelines such as the Dakota Access, Keystone, and Trans Mountain projects harm local communities. Companies often minimize the social cost of public protests, even as investors contend that grassroots opposition can impose significant financial and brand risks.

Since mid-2017, Investors for Opioid Accountability (IOA), a coalition founded by Mercy Investment Services and the UAW Retirees Medical Benefits Trust, has become the leading shareholder force in the fight against the opioid epidemic ravaging the United States.  It now represents 54 investors with more than $3.5 trillion in assets under management.  In 2017, more than 70,000 Americans died from drug overdoses, the most ever in a single year. Of the 700,000 American deaths from drug overdoses since 1999, more than two-thirds were from opioids and many involved prescription opioids.

In 2019, the investor campaign for lobbying disclosure is focusing on corporate political responsibility, with an increased concentration on climate change lobbying. More than 30 proposals have been filed asking companies to disclose their federal and state lobbying, trade association payments and support for the American Legislative Exchange Council (ALEC).

While Information and Communications Technology (ICT) companies are now widely-held components of many investor portfolios, they are also at the center of an escalating trend in children being sexually exploited and abused online. The technology used in sex crimes against children is ubiquitous, from smartphones to gaming consoles, and through various apps, text messaging, social media sites, cloud storage, and more. And yet, ICT companies rarely disclose how they are combating these growing risks, from identifying and blocking child sex images, to investing in new solutions to stay ahead of the abusers.

As a growing number of companies acknowledge the strengths of a truly diverse workforce, an area too often overlooked is executive team diversity.

Since mid-2017, Investors for Opioid Accountability (IOA), a coalition founded by Mercy Investment Services and the UAW Retirees Medical Benefits Trust, has become the leading shareholder force in the fight against the opioid epidemic ravaging the United States.  It now represents 54 investors with more than $3.5 trillion in assets under management.  In 2017, more than 70,000 Americans died from drug overdoses, the most ever in a single year. Of the 700,000 American deaths from drug overdoses since 1999, more than two-thirds were from opioids and many involved prescription opioids.

Globally, it is estimated that over 40 million people living in situations of modern slavery. Approximately 16 million people are in forced labor in the private economy, in mines, factories and fields harvesting raw materials and manufacturing products for global supply chains. Over the past few years, revelations of modern slavery conditions have been traced to the supply chains of major corporations, from smartphones produced with forced child labor in the DRC, to seafood caught by trafficked migrant workers in Thailand.

Thanks to Tarana Burke’s Me Too movement, TIME’S UP and others, it’s no longer possible to ignore the devastating impacts of discrimination, harassment and sexual assault in the workplace. In the business world, we’ve seen many alleged harassers removed from positions of power. But while Les Moonves and his ilk may be gone, it’s not always clear whether companies are taking steps to eliminate not just the alleged harassers, but the policies and practices that helped shield them from accountability in the first place. 

News of Cambridge Analytica’s misappropriation of millions of Facebook users’ data preceded a decline in Facebook’s stock market capitalization of over $100 billion in March 2018. Another 100 billion plus decline in market value—a record-setting drop—came in July 2018 after Facebook’s quarterly earnings report reflected increasing costs and decreasing revenue growth.

Think back to 2014: At the 20th annual United Nations Climate Change Conference of the Parties (COP 20) in Lima, Peru, political action seemed more achievable than, perhaps, it does today.  And think back to last October:  Despite the COP 21 global agreement reached in Paris in 2015, the United States had declared its intention to withdraw and political action on the climate front seemed stalled. 

Board diversity is not a new topic for investors and governance professionals; it is a topic resonating with a new audience: state legislators.

Requests for sustainability reports are evergreen in proxy season; investors have filed more than 300 proposals since 2010.  These requests for companies to provide quantified, comparable metrics about their performance on key environmental and social impacts earn substantial, sustained support from investors, with eight majority votes this decade.  Most companies are responding in some fashion, providing the metrics mainstream Wall Street analysts want to assess performance.

U.S. public companies spend less time communicating with investors about ESG issues than their global peers. They also disclose less. U.S. investors, in turn, fall below the global average when incorporating ESG factors into their strategies, and have less influence over responsible business behavior. This aversion to transparency isn’t surprising, due to the treatment of “materiality” within U.S. securities law.

Each year, investors file approximately 800 shareholder resolutions. In 2018, more than 450 proposals focused on environmental and social issues. For a significant portion of these resolutions, companies and proponents reached agreements and the proponents withdrew. But nearly 180 proposals went to a vote.

Mark Zuckerberg is both the CEO and Chairman of the Board at Facebook and because of his 60 percent voting power, he is, for all intents and purposes, accountable only to himself. Corporate governance experts and the Council of Institutional Investors have argued for years that an independent chair is vastly superior because that person is free of conflicts created by a chair who can excessively influence the rest of the board and its agenda. An independent chair is better able to monitor the management of the company on behalf of its shareholders and we see the structure virtually everywhere. For example, the percentage of S&P 500 companies with a unified CEO/chairman is at a decadal low of 45.6 percent. Leading technology companies like Apple, Alphabet, Autodesk, Microsoft and Intel all have independent chairmen.

Prescription drug expenditures make up nearly 20 percent of all health care costs, and spending for prescription drugs is growing faster than any other part of the health care dollar. A Kaiser Health Tracking Poll in early 2018 found that one out of four patients have a difficult time affording their medicines. December 2018 POLITICO poll showed the public’s top priority for the 116th Congress is taking action to lower prescription drug prices.