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Sustainable Investment Engagement on Campus: Shareholder Activism and the 2011 Proxy Season AASHE Annual Conference Pittsburgh October 10, 2011.

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Presentation on theme: "Sustainable Investment Engagement on Campus: Shareholder Activism and the 2011 Proxy Season AASHE Annual Conference Pittsburgh October 10, 2011."— Presentation transcript:

1 Sustainable Investment Engagement on Campus: Shareholder Activism and the 2011 Proxy Season AASHE Annual Conference Pittsburgh October 10, 2011

2 Proxy voting as a corporate engagement strategy Regulatory change affecting proxy season Growing support for sustainability shareholder proposals Hot topics raised by activists in 2011 Does it make a difference? Overview

3 Proxy Plumbing –July 2010 concept release, Oct. 2010 comments under consideration –First revision of U.S. proxy voting system in three decades New SEC Disclosure Requirements –Material climate risks/opportunities now in annual reports (Jan. 2010 guidance) –Board diversity considerations now in proxy statements (Dec. 2010 rule) Dodd-Frank Financial Reform Act Mandates –New 10-K disclosure rules promised on pay disparity, conflict minerals, mine safety, resource extraction payments to host governments – but backlash/delays EPA Greenhouse Gas Emissions Reporting –2009 Clean Air Act rulemaking, but implementation delays extended in Aug. to 2013 & 2015 on corporate reporting; Agency actions remain political battleground Political Spending Disclosure Proposed in July to SEC Corporate Disclosure and the SEC: Regulatory Ferment

4 Historical Context

5 Voting Trends

6 2010 vs. 2011 Proxy Season Filings

7 Current Status 2011 Proposals Number up >50% from 2010

8 2011 Season Hot Topics Five Majority Votes (A Record) –Layne Christensen (mgt-supported), sustainability, 93% –KBR, sexual orientation/gender ID policy, 62% –Tesoro, refinery safety & accident prevention, 54% –Sprint Nextel: political spending, 53% –Ameren: coal risks, 53% 20 Votes Above 40% (Unprecedented) –Most (9) on political spending disclosure –5 on coal (Ameren) and fracking (Chevron, Carrizo Oil, Energen, Ultra Petroleum) –2 on refinery safety & accident prevention (Tesoro, Valero) –Diversity (KBR, Leggett & Platt) & human rights (OM Group – conflict minerals)

9 New Issues & Results in 2011 (1) Environment –Climate Change: New regulatory context for GHG disclosure and goals requests (but average support down from 2010) –Natural Resource Management: Coal, fracking with most support (note Energen 49%) Sustainability –Continued high votes for disclosure (34% avg) but less enthusiasm for links to pay (<8%) Political Spending –Continued big Center for Political Accountability campaign (34% avg) –New proposal focused on reputational risks, e.g., Target & Best Buy (withdrawals) –“Say on spending” just one low vote so far at Home Depot (5%); P&G on Oct. 11 –Labor lobbying proposals newly approved at SEC (IBM decision precedent) – 5 mostly high votes –Increased intensity in campaign for disclosure of industry “secret spending”

10 New Issues & Results in 2011 (2) Human and Labor Rights –New UN Framework on Business and Human Rights released March 21 by Prof. John Ruggie –Conflict minerals (cobalt) at OM Group (43%) –Process safety at oil refinery companies – AFL-CIO proposals (deal at Sunoco, moot at ExxonMobil. Varied votes: ConocoPhilips (8%), Marathon (7%), Tesoro (54%), Valero (43%) Banking –NYC proposal votes at BoA (39%), Citi (29%), Wells Fargo (23%) on disclosure about loan modifications, foreclosures. SEC: not “ordinary business.” Health Care –Religious group attempt to raise drug affordability issue, but little investor support – national legislative solution clearly needed and individual company action largely ineffectual. –Insurance premium affordability filed at 5 biggest insurers but excluded on “ordinary business.”

11 Does it make a difference – What more can you do? Responsible investing started in the social protest politics of the 1960s and the anti-Apartheid movement. Students questioned the institutional status quo and changed it: Schools used endowment money and institutional prestige to help create the opportunity for democracy in South Africa. South Africa divestment, anti-sweatshop campaigns, Sudan divestment, pressure for action on climate change – all are about reshaping the capital markets for long-term sustainability. “Occupy Wall Street” protests today tap into current widespread feeling that financial markets and large companies are responding inadequately to growing societal inequality. Three questions to take home: 1 Shareholder resolutions bring sustainability issues inside the board room and focus top-level corporate attention on issues that otherwise often are ignored. Does your school vote on shareholder resolutions? 2 Integrating environmental, social and corporate governance (ESG) objectives into investment management can change “business as usual.” Does your school have an ESG investment strategy? 3 Community investing in local institutions brings access to capital and economic opportunity, another key responsible investment concept. How does your school invest in its local community?

12 About Si2 Briefing Papers In-depth analysis of hot topics: Climate Change Natural Resource Management Sustainability Reporting Corporate Political Spending Equal Employment/Diversity Human Rights Labor Rights Industrial Food System Drug Pricing Engagement Monitor Searchable online tool - detailed prospective proposal identification and tracking of outcomes Action Reports Impartial company- and resolution-specific research and analysis for proxy voting decisions Contact Heidi Welsh, Executive Director Tel. 301-432-4721 Organization Non-profit membership association launched in 2010, funded by consortium of 14 of the largest-endowed U.S. colleges and universities and two large pension funds. Tracks organized efforts to influence corporate behavior, shareholder proposals, related topics Special Projects October 2010/ November 2011 political spending governance studies, first to benchmark S&P 500 Forthcoming: Hydraulic Fracturing Environmental & Human Rights Risks in the Niger Delta

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