A popular term in the investment industry right now is shareholder advocacy, but what is considered shareholder advocacy and why has it become such a hot button topic? Shareholder advocacy is a tool used by investors to push a company to report on or change a policy, usually around environmental, social or governance issues. Shareholder advocacy takes the form of discussions, shareholder resolutions, proxy votes and other actions. These are very effective ways to drive change toward sustainability in a company or an industry. Shareholder advocacy can also engage laggard companies that need to be held accountable for failing to address risks and push them to catch up to peer companies. The shareholder advocacy program at Green Century centers on environmental issues.
What is Shareholder Advocacy?
Shareholder advocates assess the reputational, competitive, regulatory, and legal risks that a company faces and brings these issues to the attention of corporate management. Shareholder advocates lead dialogues with company executives to learn how the company is addressing an issue. If needed, shareholder advocates press for changes through negotiations, proxy voting, or by filing a shareholder resolution. For example, Green Century shareholder advocates learned that there were gaps in how Starbucks Corporation was addressing risks posed by its plastic waste. Our shareholder advocates held several meetings, filed a shareholder advocacy proposal and earned a commitment from the world’s largest coffee chain. The upshot is that Green Century advocates were successful in getting Starbucks Corporation to agree to Assess Plastic Recyclability Labels and Expand Disclosure on Reuse. Green Century shareholder advocates push for action on today’s most pressing environmental issues, including plastic pollution, animal welfare, reducing carbon emissions and sourcing renewable energy. For us, shareholder advocacy means helping a company reduce its’ material risks while securing changes that improve our air, water, and land.
What is Proxy Voting?
Publicly traded companies are required to hold meetings once a year for their shareholders. At these meetings, certain key items that require shareholder approval, such as resolutions pertaining to corporate sustainability or the election of directors to a company’s board, are voted on. These are known as proxy votes since most shareholders do not attend the annual meetings in person.
At Green Century, we take proxy voting extremely seriously. It is an excellent way for shareholders to impact company decisions. We conduct all our proxy-voting in-house and consistently vote the proxies of all of the holdings in Green Century Funds. Learn more about our proxy voting.
Who Can Be a Shareholder Advocate?
Typically, a shareholder advocate is an individual or group of investors who tries to influence corporate management. An individual who owns stock in a company can engage with that company, provided they meet certain requirements. More commonly, shareholder advocates work for an asset manager such as a mutual fund or an asset owner such as a state pension fund. Green Century is an example of an asset manager stepping in to help with shareholder advocacy.
Why is Shareholder Advocacy Important?
Shareholder advocacy is a very effective way for investors to help change corporate policy concerning environmental or social corporate policies. As investors increasingly become interested in sustainable investing, they want to know if their mutual funds and asset managers have a shareholder engagement or shareholder advocacy program with strong track records. If the shareholder advocacy program is effective, investors see how by aligning their savings with their values, they can contribute to making a positive impact in the world.
Green Century’s shareholder advocates have successfully pushed Costco to reduce its’ plastic use, Conagra to protect biodiversity when sourcing its ingredients, and JM Smucker to reduce deforestation in its supply chain. Green Century’s award winning program has helped change companies, supply chains, and industries for more than two decades.
How Does Green Century Support Shareholder Advocacy?
Green Century negotiates with companies to improve their corporate sustainability practices by reducing their reliance on fossil fuels, protecting ocean wildlife from plastic pollution, adopting sustainable agriculture policies and more. Furthermore, once companies make commitments, Green Century Funds assesses the progress of companies in fulfilling pledges and holds them accountable to their commitments.
If you have any additional questions about shareholder advocacy or would like to begin your journey of sustainable investing, contact Green Century today.