THE CORPORATE EXAMINER Vol. 38, No. 5, Summer 2015

The Art (and Science) of Shareholder Engagement

INTERFAITH CENTER ON CORPORATE RESPONSIBILITY Inspired by Faith, Committed to Action A Faithful Voice for Justice

ABOUT ICCR

Currently celebrating our 44th year, the Interfaith Center on Corporate Responsibility has been a leader of the corporate responsibility movement for four decades. Beginning with our calls for corporations to withdraw from South Africa in opposition to apartheid, ICCR members have been actively engaging the world’s largest companies in an effort to trans- form corporate practices on a host of issues from rooting out human trafficking and supply chain abuses to ensuring safe food and water, to calling for financial and health care reform to protect the world’s most vulnerable. Today our membership is comprised of 300 institutional investors with over $100 billion in invested capital. Representing faith- based communities with congregations all over the world, SRI asset companies, unions, pension funds and a global network of allies, ICCR members are not only shareholders, but trusted partners in corporate responsibil- ity initiatives that promote a more just and sustainable world.

We do this in a variety of ways:

• CORPORATE DIALOGUES: As active shareowners who have built produc- tive and long-term relationships with management, ICCR members conduct hundreds of dialogues every year to advance a wide range of issues. Because we have a vested interest in a company’s success and propose realistic solutions as opposed to making demands, these dialogues often bear fruit in the form of meaningful reform and have a positive impact on long-term profitability.

• SHAREHOLDER RESOLUTIONS: When dialogues are unproductive, ICCR may issue shareholder resolutions to engage ICCR founding member and former Executive Director management and other investors’ attention around a specific issue. Tim Smith, Xerox AGM, 1982.

• CSR TOOLS: ICCR’s database offers members a historical record of shareholder actions with hundreds of companies. Known for our insightful reports on emerging trends such as our Invested in Change: Faith-Consistent Investing in a Climate-Challenged World, Extracting the Facts (an investor guide to hydraulic fracturing operations) and Effective Supply Chain Accountability, offering investor guidance on the California supply chain legislation, along with our ability to convene key stakeholders from the business, NGO, community and investor sectors, ICCR is a resource for all those working in corporate responsibility.

OUR MISSION

ICCR seeks a global community built on justice and sustainability through transformation of the corporate world by integrating social values into corporate and investor actions.

We invite you to join us. We are inspired by faith and committed to action. THE CORPORATE EXAMINER

TABLE OF CONTENTS

Islamic Finance: An Opportunity for Interfaith Collaboration for Economic Justice 3

Invested in Change: Faith-Consistent Investing in a Climate-Challenged World 4

Climate Capital and the Power of Collaboration 6

ICCR’s Climate Finance Roundtable 8

ExxonMobil Shareholders Call for Stronger Leadership to Address Climate Change 9

Smoking Out Human Trafficking 11

Unethical Recruitment: A Gateway to Slavery 12

2015 Proxy Season Update 13

Why Talk? ICCR and the Art (and Science) of Shareholder Engagement 15

The Corporate Examiner Spotlights: The Hewlett-Packard Company 17

ICCR Member Profile: Everence Financial 19

THE CORPORATE EXAMINER • 1 n several pieces in this issue of The Corporate change since 1989, anticipating many of the con- Examiner we explore the mechanics of our nections made in the Encyclical. On April 15, Earth members’ long-term work to transform compa- Day, ICCR published Invested in Change: Faith- nies from the inside to promote greater justice Consistent Investing in a Climate Challenged World, Iand sustainability. What are the elements common a comprehensive white paper chronicling the work to productive engagements? What happens when en- of ICCR members on climate-related themes, and a gagements stall or fail? ICCR has begun monitoring fuller discussion of shareholder engagement as a tool engagements in an effort to develop best practices. In to advance corporate climate change solutions. This a look at two studies “The Art (and issue includes an excerpt and a number of case stud- Science) of Shareholder Engage- ies which demonstrate our members’ impact on this ment” a piece written by guest urgent issue. columnist Robert Kropp of Social On April 29 and 30, we conducted a local pilot Funds, we shed light on what makes project in Cincinnati — “Climate Capital and the for a good process. Power of Collaboration”, to bring our message to a On June 18th, Pope Francis well-established local network and strengthen com- released his much-anticipated munity capacity to accelerate the shift to low-carbon Encyclical on the environment, and sustainable energy sources. With 200 individuals Laudato Si’. I was fortunate to be introduced to our work at a large, public gathering, speaking at the Milan EXPO that 90 people from the Cincinnati region joined us for a week and the excitement across all two-day event which brought together local repre- communities was palpable. With sentatives from the business, academic, investor and What are the elements Laudato Si’, the Holy Father has media communities to explore practical and action- common to productive issued a vital message regarding our able solutions to build local capacity around the engagements? What shared moral responsibility to live financing of climate solutions. That event introduced happens when engagements stall or fail? in harmony with the environment; a new model of working for ICCR, one which we it is also an urgent call to action hope to replicate and scale up in the coming year. that we hope will be heeded by Inside this issue, you’ll see photos of some of the day’s all people around the globe. The participants. Encyclical builds much-needed momentum for the We hope that this and the issue’s other articles will Road to Paris — a strategic campaign in advance of inspire and energize your work in the months ahead. the coming historic UN climate change conference With appreciation for all you contribute to our (COP21). You can follow ICCR member comments mission, at www.iccr.org/our-issues/environment/interfaith- investor-response-papal-encyclical-climate-change or Twitter @ICCRonline. Our readers know ICCR members have been Laura Berry engaging corporations on the impacts of climate Executive Director

2 • THE CORPORATE EXAMINER Islamic Finance: An Opportunity for Interfaith Collaboration for Economic Justice By Samir Safar-Aly

Introduction These ‘screens’ typically remove stocks from Church “rejects the secular logic of sepa- Long before the merchants of Venice in the industries not compatible with the Shariah, rating the market and morality”. Islamic 1500s, Muslims in the European Middle such as alcohol, pork, adult entertainment, teachings on the economy bear a great deal Ages conducted business as far and wide as gambling, the arms industry and conven- of similarity with Catholic Social Teachings Spain and China. With the Quran’s 370-odd tional interest-based banking. Companies and Social Gospel ideology. From workers’ references to commerce, Islamic law (which that are highly leveraged beyond certain rights, environmental justice, animal welfare, some would term the Shariah) provided thresholds (generally no more than 33% or good corporate practice, Islam has much Muslim merchants with a moral compass debt-to-equity) are also filtered out. As to contribute towards the challenges facing on how to make investment decisions; these completely interest-free corporations are few the economy today. teachings can also be reflected upon in our and far between, companies are typically The Vatican newsletter, Osservatore modern corporate world. With a global allowed a minimum percentage of profits to Romano in 2008 stated that, “the ethi- Muslim population of around 1.6 billion, an be derived from otherwise Islamically pro- cal principles on which Islamic finance is Islamic financial industry has developed to hibited sources (typically no more than 5%). based may bring banks closer to their clients provide an alternative approach to finance. However, any derived profit or dividends and to the true spirit which should mark received must be donated to an approved every financial service.” The IFI can learn Contemporary Islamic Finance charitable cause, before profits can be realized much from the great efforts of the ICCR, Currently the contemporary Islamic finance (in what is called a ‘purification’ process). its members, and the power of shareholder industry (“IFI”) is estimated to be worth activism. Organisations such as SEDCO and more than USD 1.66 trillion1 and grow- A Judeo-Islamo-Christian Arabesque have already successfully launched ing fast, having fared relatively well during Economic Tradition? Islamic investment funds that are also com- the recent financial crisis. The IFI typi- All property is reviewed in Islam as ulti- pliant with the UN Principles of Responsible cally provides finance through a number of mately belonging to God. Consequently, as Investment. Azzad Asset Management, profit and risk sharing arrangements based with Christianity, stewardship and charity is located in Falls Church, VA, is another lead- on Islamic principles, such as a prohibition a fundamental principle. Indeed, alms-giving ing Islamic mutual fund company. Similarly, on usury (riba)— a concept shared with (zakat) is one of the mandatory five pillars of Saturna Capital, headquartered in Belling- the Bible. All financing agreements must Islam. Closeness to God is something that ham, WA, has experienced strong financial be approved by the financial institution’s the Quran shares with both the Bible and performance through its Islamic mutual Shariah (“SSB”), typi- the Torah: funds, attracting both Muslim and non- cally comprised of three Islamic scholars, “Fair in the eyes of men is the love of Muslim investors alike. who review and approve transactions by way things they covet… heaped-up hoards of gold As a Muslim having gone to a Catholic of issuing a legal opinion. Those sitting on and silver… and (wealth of) cattle and well- high school in London, I have seen SSBs must have the authority to issue such tilled land. Such are the possessions of this first-hand the benefits of interfaith dialogue opinions, having completed years of semi- world’s life; but in nearness to God is the best across faith-based communities. Given nary schooling. of the goals (to return to).” (Quran 3:14) the global complexities of the challenges Apart from lending arrangements, “Be Just! For Justice is nearest to piety.” for justice in the economy, it is likely to another aspect of the IFI are official Shariah (Quran 5:8) be only a matter of time before interfaith ‘screens’ or filters, applied to market indices, “Is the reward of goodness aught save economic dialogue between the IFI and including NASDAQ, the S&P Dow Jones, goodness? Which is it, of the favors of your ICCR and its members takes place for Canada’s S&P/TSX, and the UK’s FTSE. Lord that ye deny?” (Quran 55:60-61) positive global change. Similarly, Pope Benedict XVI’s Encyclical 1 ICD Thomson Reuters Islamic Finance Development Report (2014) at 5. Caritas in Veritate stated that the Catholic THE CORPORATE EXAMINER • 3 Invested in Change: Faith-Consistent Investing in a Climate-Challenged World

n Earth Day, April 22, ICCR ICCR members began formal engage- released Invested in Change, a paper ments with companies on climate change, Owhich examines the work of faith- then called “planetary warming”, in 1989. consistent investors and the practice of Since then, over 600 shareholder proposals shareholder engagement to advance climate have been filed by ICCR members and hun- change solutions. dreds of corporations have been engaged by Invested in Change lays out the busi- investors on climate-related topics. Invested ness and moral case for private sector in Change builds upon this 25-year history action on climate change and discusses the of shareholder action on climate change and different strategies available to investors describes the current strategies members are seeking to catalyze positive change on this using to confront these issues. issue. Included are examples of investor Investors’ interest in climate change impact from ICCR member engagements stems not only from their fiduciary con- on climate change, from corporate GHG cerns regarding the real and immediate risk reductions and improved energy efficiencies, climate changes poses to their own institu- to public policy advocacy and green tional assets, but from their concerns about energy investing. It is intended to provoke its broader and longer term ramifications discussion around practical solutions for on global economic stability. For faith- investors interested in curbing the impacts consistent investors, these concerns take of climate change and accelerating the on a distinctly human dimension as they constraints, will disproportionately bear the shift to low-carbon and sustainable energy consider the justice implications for vulner- impacts of climate change. The latest Papal alternatives. able communities that, due to their resource Encyclical and calls from other faith leaders

INVESTOR IMPACT: Reduced methane flaring in oil wells Mercy Investment Services

Mercy Investment Services filed a dialogue with the company which resulted in its a resolution with Continental commitment to reduce flaring to as close to zero as Resources asking the company possible. Subsequently, a task force representing oil to adopt quantitative goals to production companies in North Dakota announced reduce or eliminate flaring, a its intention to increase the capture of natural gas byproduct of burning natural gas that releases during drilling, further reducing flaring, and has approximately six million tons of carbon dioxide per stated that it believes in six years it will be able to year into the atmosphere. The resolution prompted capture up to 90% of its carbon emissions.

4 • THE CORPORATE EXAMINER INVESTOR IMPACT: Driving down emissions and driving up fuel economy in the automotive sector The Sisters of St. Dominic of Caldwell, NJ

The Sisters of St. Dominic of implications of climate change on the company’s Caldwell, along with other ICCR strategic planning and overall competitiveness, and members, began engaging Ford in 2008, it established a Greenhouse Gas Reduc- Motor Company and General tion Plan for its entire operation and pledged to Motors in the mid-1990s on climate change, then reduce GHG emissions for its new vehicle fleet by called “planetary global warming”. Ford was the at least 30% by 2020. It now continues to make first U.S. company to leave the Global Climate commitments under this Climate Stabilization Com- Coalition, a well-funded group dedicated to refut- mitment, reducing emissions in both its facilities ing the science of climate change, and when many and in the end use of its products through increased more companies ICCR was engaging followed suit, fuel efficiency— important steps needed to bal- the association ultimately was forced to close its ance environmental and social concerns with the doors. In 2003, a resolution was withdrawn when drive for strong returns for its investors that were Ford agreed to issue a holistic report that included brought about by shareholder engagement. Inves- disclosure of its emissions, elements to increase tor advocacy also facilitated Ford’s support of robust fuel efficient technologies, and public policy. In Corporate Average Fuel Economy (CAFE) Standards 2005, Ford released a first-of-its-kind climate risk to significantly reduce emissions generated by its report in the auto industry analyzing the business products. for climate action only serve to reinforce infrastructure. Collectively, these strategies infrastructure, on February 9th, 2015 ICCR the importance of advancing change for the look to encourage the private sector to adopt convened its first Climate Finance Round global community. more sustainable practices and to actively Table with investors, investment profession- Core strategies for ICCR’s climate change participate as innovators in the coming als and leaders in climate finance to catalyze work include engagements related to: cli- green energy revolution. investments in climate solutions. [See page 8] mate change mitigation, mainly through ICCR members adapt the strategies they Above and left are two examples of carbon emissions reduction; disclosure of use in their engagements with companies corporate advancement in ICCR’s climate corporate public policy activities made via depending on the companies’ current busi- change program. lobbying and political spending initiatives; ness models, disclosures and impacts. They ICCR urges energy companies to adapt improving corporate reporting and account- encourage leadership and public support of their business plans to better manage climate ability through measurement and disclosure climate policy and regulation and request realities because we believe their resources, of carbon footprints; and, encouraging that companies assess and disclose their experience, capital and expertise are needed proactive climate change adaptation plans climate risks, set rigorous, science-based to lay the foundation for what will inevitably that will reduce climate risk. In addition, emissions reductions targets, and support be a carbon-constrained future. We believe members use their influence as shareholders board oversight of climate risk mitigation they can not only be a part of the inevitable to advocate for stronger legislative and regu- strategies. green energy revolution already underway, latory frameworks that will enforce carbon Recognizing that there is a critical role they can help lead it. As our members deliver emissions reductions while advocating for for investors to play in moving the economy their statements at the annual general meet- proactive investing in climate solutions, toward a low-carbon path by invest- ings of energy companies this year, they will including green energy technology and ing in innovative new technologies and be emphasizing this critical message.

THE CORPORATE EXAMINER • 5 Climate Capital and the Power of Collaboration

n April 29 and 30, ICCR and Xavier Associate Professor of Political Science at University’s Department of Sustain- Xavier to discuss what is currently being Oability hosted an event intended to done to address climate change and what is catalyze discussion and action at the com- needed to speed the transition to the new, Christi Electris, of the Croatan Institute. munity level around investment solutions to green economy. The discussion was moder- climate change. The initiative was facilitated ated by Carolyn Washburn, editor of the by representatives of the Region VI Coali- Cincinnati Enquirer. tion for Responsible Investment and made Breakout discussions focused on the fol- possible through a grant from the Sisters of lowing themes: Charity Ministries Foundation. Productive engagement, how collabora- Roughly 90 people from the Cincinnati tion leads to change and framing what it region joined us at Xavier’s Cintas Center for takes for investors and corporations to work a two-day event including a panel discussion together; what investors are doing now on the evening of April 29 featuring local including asset allocation/diversification, representatives from the business, academic, understanding fiduciary duty and the shifts Christina Herman, ICCR Program Director investor and media communities and a more that are needed in institutional investment informal workshop on April 30 where prac- policies; what we can build together through tical and actionable solutions were explored investment opportunities, and a discussion to build local capacity around the financing of expectations regarding financial and envi- of climate solutions. Panelists included rep- ronmental performance. We were also joined resentatives from Procter & Gamble, Macy’s by a panel of students from Xavier’s depart- and Fifth Third Bank that are headquartered ment of sustainability — the voices of the in Cincinnati, as well as representatives of next generation of sustainable investors. anchor institutions such as Xavier Univer- sity, Mercy Health, Green Umbrella and the The two-day event highlighted the Ohio Public Employees Retirement System. hunger for more information and Participants in the Invested in Change resources including: Len Sauers, for Global Sustainability, Procter & Gamble event included local members of faith, envi- ronmental, academic, investor and corporate • Common platforms to assess and communities with a shared commitment to benchmark corporate performance on explore how they could best combine their climate concerns; talents and resources to make an impact on • Guidance around the incorporation climate change. The main panel on April of ESG considerations in portfolio 29 convened ICCR’s Executive Direc- management; tor Laura Berry; Procter & Gamble’s Vice • Positive climate financing options, with President, Global Sustainability, Len Sauers; an emphasis on local opportunities; and, David Zellner, • Educational programs to help estab- of Wespath Investments; and, Anas Malik, lish common understandings around Scott Hassell, VP and Director, Environmental Affairs, Fifth Third Bank and President of the Board of 6 • THE CORPORATE EXAMINER Trustees of Green Umbrella climate issues and how they are best addressed.

There was particular interest in learning more about community-based investment programs that might catalyze more sustain- able energy solutions and in developing channels whereby local groups might con- nect to broader climate financing efforts. ICCR introduced its new investor toolkit, Invested in Change, which describes the dif- ferent strategies available to investors and offers a set of questions investors wishing to address the issue may want to consider.

“ICCR truly models collaboration and engagement regarding concerns about global economic stability and social justice,” said

Sr. Sally Duffy of SC Ministry Foundation. Left to right: Anas Malik, Carolyn Washburn, Laura Berry, Len Sauers, and David Zellner “The convening in April focused on climate, capital and collaboration, and actions to minimize the real risk of climate change. SC Ministry Foundation is deeply grateful to partner in this convening and grateful to all the sponsors, participants and speakers who shared their expertise and hopes on our collective journey to sustainability and to be change agents for solutions to climate change. We hope that the convening and the toolkit “Invested in Change: Faith-Con- sistent Investing in a Climate-Challenged

World” will serve as resources and catalysts Workshop members discussed solutions-based Anas Malik and Len Sauers to actions leading to fulfillment of ICCR’s climate financing opportunities 2015 climate change strategy through share- holder engagement and policy advocacy.”

Said Anne Dougherty of Xavier Universi- ty’s Office of Sustainability, “Hosting ICCR in our town was an unusual opportunity to connect our friends in a different setting — socially active investors met corporate leaders, who met sustainability students in a forum as equals — and we collectively were surprised by the amount of work already going on. Students, professors, and staff ICCR staff and members with Clare Iery of P&G and Sally Duffy of SC Ministries Foundation of Xavier University were grateful for the opportunity to host and participate in the ICCR forum and round table.” THE CORPORATE EXAMINER • 7 ICCR’s Climate Finance Roundtable

On February 9, 2015, ICCR convened a Roundtable that brought together investors, investment professionals, and leaders in cli- mate finance to problem solve and brainstorm around investment solutions that will help accelerate the transition to renewable energy and mitigate the worst impacts of climate change.

There is a critical role for investors to play in moving the econ- omy toward a low-carbon path by investing in innovative new technologies and infrastructure. The International Energy Agency (IEA) estimates that an additional $1 trillion per year in invest- ment is needed to get us on the path to clean energy at the scale Val Smith, the Director of Corporate Sustainability at Citi was required to respond to current energy consumption. Participants one of the day’s panelists. discussed the vehicles and opportunities to engage in this space and shared strategies to address the obstacles that may arise. The event focused on a whole-portfolio approach to climate finance and provided resources and answered key questions for investors exploring these investments.

Sessions included: • Understanding the Landscape • Exchanging Ideas • Investment Opportunities • A Clearinghouse

Peter Ellsworth, Senior Manager of Investor Programs at Ceres (left) joined event convener Sr. Patricia Daly, for a discussion of fiduciary duty and investment opportunities in climate finance.

Audience members listening intently. Croatan Institute Fellow Fern Jones spoke on the panel “Understanding the Landscape: Why Climate Finance is Critical to Propel Solutions to Address Climate Change”. 8 • THE CORPORATE EXAMINER ExxonMobil Shareholders Call for Stronger Leadership to Address Climate Change

expected meaningful commitments demon- strating that Exxon’s board and management aren’t resisting, but are responding to the mounting calls for climate action. “Industry peers look to Exxon for inspi- ration, new strategies and innovation and for the signposts that will set the course for the future of the energy sector. Exxon’s leadership position com- pels it to use that power responsibly, not only for the benefit and enrichment of their shareholders, but for the common good and for future generations,” said Sr. Pat Daly, Executive Director of the Tri-State Coalition for Responsible Investment and call it a liturgy. It is a ritual — it’s going tallied, in a letter to shareholders in advance proponent of a resolution calling on Exxon through the motions,” Fr. Michael Crosby of the vote the board complained that “To to set quantitative and time-bound green- ”Isaid of his attendance at Exxon’s annual set aside one seat for an environmental spe- house gas (GHG) reduction targets. shareholder meeting in Dallas on May 27th. cialist or for any single attribute or area of As GHG emissions reduction becomes Crosby, of the Province of St. Joseph of the expertise would, in our view, not be in the more imperative due to the growing body Capuchin Order, and WIMCRI, was there best interests of the company or its share- of scientific evidence on the impacts of cli- to present a proposal requesting the appoint- holders because it would dilute the breadth mate change, fossil fuel companies are facing ment of a board member with environmen- needed by all directors to tal expertise, given the known environmen- make informed decisions for “There is listening that is coming out of tal impacts of Exxon’s global operations. the company.” true dialogue, and there’s being silent Asked if he felt his message was being heard Impending climate having already made up your mind.” by Exxon’s CEO, Rex Tillerson, Crosby regulation means that GHG Fr. Michael Crosby conceded: “There is listening that is coming emissions pose serious and out of true dialogue, and there’s being silent material risks to the long-term health of increased scrutiny from policy-makers, inves- having already made up your mind.” fossil fuel companies; for that reason, inves- tors and the public. This scrutiny has only Crosby’s resolution was only one of sev- tors have advocated for ambitious reduction intensified in recent months as world leaders eral shareholder proposals on the company targets and increased investments in carbon prepare for the climate talks in Paris this fall, proxy that called for a thoughtful response to mitigation technology and research into and faith communities around the world the growing threats of climate change. While more sustainable forms of energy produc- anticipate the imminent release of Pope the environmental expert proposal won a tion. Frustrated by what they view as slow Francis’s Encyclical on the environment. strong result of 23% when the votes were and insufficient gains on these concerns, they THE CORPORATE EXAMINER • 9 Said Daly, “While some of these climate paying for the health effects of air pollution Funds of the California Public Employ- resolutions have been on the proxy before, and climate change mitigation costs. Unless a ees’ Retirement System (CalPERS), New given the devastating climate impacts we are way is found to put an end to the externaliza- York City and the States of Connecticut, already seeing, the stakes have grown expo- tion of such costs, they are certain to increase Massachusetts, and Vermont; many major nentially higher, as have the expectations of dramatically in a short period of time.” faith-based funds including the Presbyterian investors. Mr. Tillerson needed to demon- Said Laura Berry, ICCR’s Executive Church USA Board of Pensions, the Unitar- strate to the investors who are still here, that Director, “Tillerson made it clear that Exxon ian Universalist Association, Bon Secours he and his company aren’t tone deaf to what continues to define itself narrowly as an oil Health System, and dozens of Catholic is perhaps the most urgent threat currently & gas company, as opposed to adopting institutions, and the asset management com- facing the planet and its people. Rather than the broader more socially relevant identity panies Calvert Investments, Walden Asset dig in their heels and resist the inevitable, we of energy company. Given the financial, Management, Zevin Asset Management and had hoped they would have the vision to take legal and reputational risks of this model, Christian Brothers Investment Services. advantage of the many business opportuni- it is therefore incumbent on management In a pre-AGM statement Rev. Séamus ties the new, green economy will present.” to demonstrate to its shareholders that this Finn of the Missionary Oblates of Mary Crosby reinforced this message, saying, vision is sustainable for the long-term. If Immaculate and ICCR Board Chair “Even Saudi Arabia last week indicated they resources won’t be deployed to research and observed, “There is wide consensus among see solar as the future for their country...The explore alternative forms of energy, then they those in the investment community that weaning has to begin...yesterday...We hear need to be deployed to adequately account these companies need to make more sig- what you are saying about future energy for the externalities produced by continu- nificant and faster progress to address the needs and demands. It’s true, we are a fossil- ing to burn fossil fuels - and they should be growing threats of climate change. Many fuel driven society, but we can’t remain so. deployed proactively, so the company will of our faith-based members have mission- The company has to be making plans for be ahead of and not behind the curve when ary presences in the world’s most vulnerable the future...” regulation hits.” communities. We are acutely aware of cli- But if shareholders expected an indi- Berry continued, “Exxon has gone on mate change’s potential to exacerbate the cation that company management was record as saying it favors carbon pricing inequality at the root of the social justice registering their concerns, they were dis- that levels the playing field; it needs to join problems these communities already face. appointed. In his prepared remarks, Mr. its European counterparts and publicly The moral imperative for leadership on Tillerson failed to mention climate change promote carbon pricing policy and ensure climate from ExxonMobil is clear; its failure even once. that its lobbying and political activities are to model best practices for the sector will be Tillerson questioned the reliability of consistent with this messaging. And if it seen as just that, a failure.” current climate models and rejected the idea wants to continue to be a carbon burning “Mankind has an enormous capacity to of transitioning to renewables by saying company then it will need to make seri- deal with adversity and those solutions will “We choose not to lose money on purpose,” ous investments in the technology that will present themselves as the realities become adding that the renewables market is heavily mitigate its impacts, e.g., carbon capture clear, either through proved modeling...or subsidized. When reminded that Exxon and and sequestration or some other appropriate as they are evidenced to us,” Tillerson told other fossil fuel companies receive subsidies technology. What clearly is unacceptable, is a the audience at the AGM the next day. “I far greater than those accorded renew- “business as usual”, “milk it for all it’s worth know that is a very unsatisfying answer to a ables, Tillerson said, “We don’t receive any approach”, as this is literally burying one’s lot of people.” subsidies.” head in the (tar) sand.” Said Crosby, “Tillerson’s response According to Robert Kropp, a journalist The GHG reduction targets proposal, led sounded like thinly veiled climate change for Social Funds, “[Tillerson’s] statement is by the Sisters of St. Dominic of Caldwell, denial, or at the very least, a climate change belied by a recent study by the International NJ, was supported by a coalition of global dodge - a déjà vu from our days fighting the Monetary Fund (IMF), which reveals that in investors that collectively represent over $1 misinformation campaigns of the Global addition to $492 billion in direct subsidies to trillion in assets including global funds AP2, Climate Coalition in the 80s and 90s. I had the fossil fuel industry globally, $5.3 trillion AP3, AP4, and AP7 of Sweden; CCLA, the hoped we were beyond that. And I’m most a year is spent on indirect subsidies such as Northern Ireland Local Government Offi- certain that the communities already being cers’ Superannuation Committee, and the hardest hit by climate change will find his 10 • THE CORPORATE EXAMINER West Yorkshire Pension Fund; U.S. Public answer quite unsatisfying indeed.” Smoking out Human Trafficking in U.S. Tobacco Fields Domestic labor trafficking is a growing challenge for the U.S. agricultural sector. ICCR members have held long-standing

dialogues with tobacco companies on questions of public health and, as significant agricultural employers, questions around

recruitment practices became a natural addition to tobacco engagements.

ndocumented workers are often the main workforce in many U.S. agricultural areas. In their countries of origin, Uthey often must pay contract labor brokers thousands of dollars to cross our borders; once here, these workers are under the control of labor contractors. This practice results in forms of forced and compulsory labor on many, if not most, U.S. farms, including tobacco farms. According to the Centro de los Derechos del Migrante: • 58% of workers surveyed reported paying a recruitment fee; • 52% were not shown a work contract; and, • 1 in 10 workers surveyed reported paying a fee for a non- existent job. Working conditions on U.S. tobacco farms can also be harsh. A common occupational hazard is Green Tobacco Sickness — acute nicotine poisoning. Because of their vulnerable status, undocumented workers are less likely to have access to formal ICCR is a founding member of the Farm Labor Practices grievance mechanisms and/or compensation, should they fall ill Group (FLPG), a multi-stakeholder initiative comprised of tobac- or suffer abusive working conditions. co manufacturers, leaf merchants, growers, workers, faith-based Since 2009, members of ICCR have worked with tobacco investors, the Consulate General of Mexico and the U.S. Depart- companies to improve conditions for farm workers. Said Cathy ment of Labor. Formed in 2012, the group seeks to help both Rowan of Trinity Health, who co-leads ICCR’s tobacco work, farmers and farmworkers in production of labor-intensive crops “Most tobacco companies don’t hire farm workers directly, but better understand and cooperatively ensure compliance with rather contract with suppliers. We are asking them to comply applicable labor laws and regulations, and to foster a level playing with the ILO’s “Recommendation on Supplementary Measures field that promotes good farm labor practices to improve workers’ for the Effective Suppression of Forced Labor” which recom- lives on farms. Facilitated by The Keystone Center, participating mends eliminating the charging of recruitment fees to workers tobacco companies include Alliance One, Altria, Japan Tobacco, and requires transparent contracts that clearly explain terms of Philip Morris International, Reynolds American and Universal employment and conditions of work.” Leaf. To date, the FLPG has designed and sponsored labor man- ICCR members, led by the Province of St. Joseph of the agement training for thousands of farmers in ten states. Said Fr. Capuchin Order, filed a shareholder resolution at Alliance One Michael Crosby of the Capuchins, “If you directly, or indirectly International, Altria Group, Lorillard, Philip Morris Interna- through your suppliers, use labor brokers to recruit and place tional, Reynolds American and Universal in the fall of 2014. The migrant labor, you may be at risk for forced labor and trafficking resolution asked the boards of directors of each company to create in your supply chain. Through our participation in the FLPG, we a policy which ensures that their suppliers do not hire laborers are working to develop industry-wide procedures which integrate who have had to pay to cross the U.S. border to work or, once internationally agreed-upon core human rights conventions, and here, to work on U.S. farms. ensuring that suppliers are enforcing these as well.”

THE CORPORATE EXAMINER • 11 Unethical Recruitment:

A Gateway to Slavery Ethical labor recruitment has three characteristics: • Workers do not pay fees to obtain employment; • Workers retain full access to personal documents including passports; and cross the globe, millions of workers become trapped in • Workers receive a written contract at the point of slavery through the actions of unscrupulous labor bro- their recruitment. Akers who charge exorbitant recruitment fees, either do not provide contracts or change contract terms, impose unrea- sonable deductions from promised wages and leave workers Recruitment Practices, and Sharing Best Existing Practices. Said vulnerable to exploitation. Two years ago, ICCR launched its Senior Program Director David Schilling, “Corporations have a “No Fees” initiative, a program designed to lead companies to responsibility to ensure that human rights are respected through- create robust management systems to ensure that workers in their out their supply chains, and that all of their suppliers adhere to immediate and extended supply chains are not forced to pay for company policies, and are not contributing directly or indirectly employment. to slavery. The day’s panels were intended to provide corporations ICCR uses its position as respected, long-term investors to with valuable insights that will help them address one of the most convene roundtables — a powerful and effective mechanism for intractable labor issues affecting their supply chains.” promoting multi-stakeholder collaboration — to rapidly advance “Labor recruitment is, for the most part, a legitimate business, progress on a given issue. By offering a range of services that include arranging work permits, getting the key decision-makers housing, transportation and payroll,” said Associate Program from a group of peer companies Director Valentina Gurney. “It serves as a vital link the in the together in one room to brain- labor markets of many countries, and helps connect workers with storm along with investors and industries looking to fill a wide range of jobs. Human rights risks subject matter experts from gov- arise, however, when unscrupulous and unregulated brokers are ernment agencies, NGOs and involved. All too often, these brokers take advantage of migrant civil society, solutions to some of workers’ vulnerability, and abuse them with impunity.” the most intractable issues pres- As an effective countermeasure, ICCR recommends imple- ent themselves sooner and, due mentation of direct hiring and recruitment. Direct recruitment to sector-wide buy-in, remedies eliminates the need for corporations to deal with the complex, become easier to implement. and often shadowy labor broker system. And as an interim step, On January 23, 2015, ICCR effective monitoring of suppliers is vital. convened a Multi-Stakeholder Several corporate representatives raised the question of best Roundtable on Ethical Recruitment. Over 60 participants came courses of action when their suppliers receive poor audits, as together for a discussion of how recruitment impacts workers, well as the appropriate grounds for closing a troubled operation, the risks it presents for the global supply chains of many indus- particularly in countries where the rule of law is weak. Rather tries, and best practice tools and frameworks being utilized by than suspending a relationship with a troubled supplier in need leading companies. Over the course of the day, Roundtable par- of remediation, the “No Fees” Initiative recommends continuing ticipants discussed the challenges of labor recruitment, and the relationships, while implementing mandatory training for suppli- need for additional worker-driven initiatives, and for programs ers, which has the power to catalyze change and protect workers. that enhance communication between workers and management ICCR released a public report summarizing the key findings throughout supply chains. of the Roundtable in April of 2015, and in the next year, its The program included three panel discussions: Building members will continue to work to strengthen corporate policies, Expertise on Ethical Recruitment, Monitoring and Verification of practices and disclosures regarding human trafficking and slavery.

12 • THE CORPORATE EXAMINER 2015 Proxy Season Update

s of May 18, 2015, ICCR members have filed 251 shareholder propos- Aals at 186 companies for the 2015 season. Of these proposals, 58 withdrawals have been negotiated as a result of agree- ments with management. Below, we are pleased to highlight just a few early successes from the 2015 proxy season.

Board Diversity and Inclusiveness The ability to draw upon a wide range of viewpoints, skills and experiences is criti- cal to a company’s ability to succeed, and a diverse board increases the likelihood that a company will make the right strategic deci- sions. Until 2015, eBay had just one woman on its . Within months Lobbying Expenditures Disclosure Sexual Orientation and Gender Identity of receiving a shareholder proposal, eBay Corporations lobby both directly and indi- Discrimination increased the number of women on its board rectly via third party groups to promote a Employment discrimination on the basis of and revised its Guidelines to state that when legislative and regulatory environment that gender identity or sexual orientation dimin- searching for new directors, its Board would is more favorable to their businesses. Because ishes employee morale and productivity, actively seek out highly qualified women. there is often no transparency regarding how and many corporations are now taking lobbying dollars are invested, investors seek steps to ensure safe and respectful work- Climate Change greater disclosure to ensure that these funds places. Over the past three years, Walden The urgency of climate change is propelling are managed responsibly and not deployed Asset Management has persuaded 32 com- investor and corporate action to mitigate the to promote agendas that may run counter panies to improve their workplace policies. impacts of climate change. After receiving to a corporation’s publicly stated positions. In 2014 and early 2015, Texas Capital a shareholder resolution, Bank of Ameri- As a result, broad-based investor support Bancshares added sexual orientation and can, once the largest funder of U.S. coal, for lobbying disclosure resolutions has been gender identity provisions to its policy. announced that it was officially committing growing steadily across many sectors. The Franklin Electric increased the transparency to slashing its financing of coal. And after average vote received by lobbying resolutions of its EEO policy and also amended its shareholder engagement, Costco publicly this year was 27.5%, a very strong show of medical plan to offer spousal and depen- acknowledged the importance of climate support when one considers the majority of dent benefits. Resolutions filed for 2015 change, and adopted greenhouse gas emis- shares are held by management. A first-year annual meetings at Cullen/Frost Bankers, sions goals. Across the pond, the boards of CenterPoint resolution received just over First NBC Bank, and IDEX Corporation directors of both Shell and BP this year sup- 41%, as did an Ameren lobbying disclosure were withdrawn after the companies agreed ported shareholder resolutions calling for resolution. to improve the inclusivity and visibility of multiple actions on climate change. their nondiscrimination policies.

THE CORPORATE EXAMINER • 13 Global Health Citizenship Coalition adopted a code of Wendy’s agreed to remove sodas from its ICCR members have been working with conduct amendment specifically addressing kids’ meals, in an effort to lower the risk of pharmaceutical companies to encourage trafficking and slavery risks posed by unethi- childhood obesity. Not long after, Burger them to share their licenses for life-saving cal labor recruitment practices. Adding this King and Dairy Queen, urged by some of HIV/AIDS medicines with the Medicines critical “no fees” component to its code helps ICCR’s partners, followed suit. After a share- Patent Pool (MPP), established in 2010 ensure that vulnerable workers desperate for holder engagement, Target agreed to expand to make branded drugs available for generic work in the electronics sector will not be its healthy food offerings and improve its manufacturing. To date, 6 companies have exploited and enslaved. HP has added a For- in-store presentation of healthy foods. After entered the Pool, and this year, Gilead eign Migrant Standard to its Supply Chain receiving a shareholder resolution, Lowes Sciences, AbbVie, and Merck signed agree- Responsibility Program as reinforcement agreed to phase out neonicotinoid pesticides ments with the MPP for key pediatric HIV against the risk of exploitive labor practices to protect pollinator health and help ensure drugs tenofovir alafenamide, lopinavir, among migrant workers. the safety of our global food supply. Dow ritonavir, raltegravir, and drunavir, for use in agreed to safer use of its pest-resistant Enlist low and middle income countries, which are Palm Oil weed control system which pairs GE corn home to 99% of children and adolescents The production of palm oil, a common and soy seeds with Enlist Duo — a mix of living with HIV. In addition, Johnson & ingredient found in numerous processed glysophospate and 2,4-D, which can cause Johnson agreed to work alongside the MPP foods and cosmetics, can have serious envi- cancer. to support the development of new pediatric ronmental and human rights impacts, and treatments. therefore poses tremendous risks for cor- Finance porate supply chains. ICCR members have ICCR members have been engaging the Human Rights been engaging companies to promote sus- leading U.S. banks on risk management Our members have been working with tainable palm oil sourcing. This year, Sysco protocols, responsible lending policies, and Mondelez– to end forced child labor on cocoa became the first food wholesaler to establish improvements to their governance structures farms in West Africa. Mondelez– recently one of the most progressive sustainable palm in an effort to promote more just and ethical implemented a Cocoa Life Program to oil sourcing policies in its industry. Panera financial services. In response to shareholder improve farmer livelihoods. It has set a goal Bread is also ready to issue its first palm oil pressure and billions of dollars in fines and of reaching 200,000 cocoa farmers. Mean- policy after a year-plus of dialogue. Inter- penalties, this year JPMorganChase issued while, Hershey’s announced that it intends national Flavors & Fragrances is making a “How We Do Business” report, detailing to source at least 50% of its global cocoa progress on sourcing sustainable RSPO palm its commitments to transparency and to supply from certified and sustainable sources oil. Yum! committed to sourcing 100% of is strengthening its internal audits and con- by the end of 2015, a full year ahead of palm oil from sustainable sources by 2017. trols. Bank of America and Wells Fargo have schedule. And after a group of shareholders agreed to develop similar reports, for release asked Boeing for more stringent disclosures Food in 2016. of its activities regarding labor practices Widespread use of antibiotics essential to and employee grievance mechanisms, the human health in animal agriculture has Pay Disparity company agreed to implement the Ruggie led to a dangerous rise in human antibiotic This year, both TJX and Walmart raised Principles on human rights, a policy based resistance. After receiving a shareholder worker wages. Long a topic in shareholder on the UN Guiding Principles on Business resolution asking the company to prohibit dialogues, ICCR members saw the moves and Human Rights. use of antibiotics, McDonald’s adopted a to raise wages as a positive step forward for new policy this year restricting its suppliers’ both companies, and a signal to their peers Human Trafficking use of antibiotics in chickens. Under pres- in the retail sector of the need for broader This year, the Electronics Industry sure from shareholders and other groups, wage reforms.

14 • THE CORPORATE EXAMINER Why Talk? ICCR and the Art (and Science) of Shareholder Engagement

By Robert Kropp

ntil 1970, the only shareholder resolutions permitted by the Securities and Exchange Commission (SEC) Uaddressed . But when a federal court allowed a resolution addressing the sale of napalm to be included on the proxy ballot at Dow Chemical, the decision unleashed a flood of resolutions taking up social and envi- ronmental issues. In the 45 years since, the waters have only continued to rise, and such resolutions now number in the many hundreds Ford Motor is now generally recognized as the most sustain- every proxy season. able of car manufacturers headquartered in the United States; but Out of this cauldron of change was born the Interfaith Center in 1993, when ICCR members began their engagement with the on Corporate Responsibility. In 1971, the Episcopal Church company, Ford was funding the Global Climate Coalition, an filed a resolution with General Motors, requesting that it cease organization that denied the reality of climate change. That year, doing business in apartheid South Africa. Not surprisingly for a Sister Patricia Daly of the Dominican Sisters of Caldwell, NJ, filed groundbreaking initiative, the resolution received little support a shareholder resolution asking Ford to endorse the Ceres Prin- from shareholders accustomed to rubber-stamping the position of ciples, a code of corporate environmental conduct. Meaningful management; but it did contribute to the global social movement dialogue did not begin until after the 1998 proxy season; in 1999, that eventually helped end the apartheid regime in that country. Ford announced it was leaving the Global Climate Coalition. Tim Smith, the first Executive Director of ICCR and now the “ICCR’s dialogue with Ford Motor Company,” the authors Director of ESG Shareowner Engagement at Walden Asset Man- state, “suggests that successful dialogue entails a genuine commit- agement, said of the early years of ICCR’s corporate engagement, ment to long-term engagement, and that dialogue is effective by “For the most part, we really filed the shareholder resolution producing a synthesis between the activists’ and the company’s and then had no contact with the company until we went to the position.” stockholder meeting. And in many cases, it was just giving your By examining ICCR’s engagement with Ford and other cor- speech and waiting for the results.” porations, the authors discern several consistent factors leading to But now, as current Executive Director Laura Berry com- successful outcomes. As the dialogue of members with Ford dem- mented, “The only real win is withdrawn resolutions, when onstrates, “a genuine commitment to long-term engagement,” companies look to us as a focus group for risk management.” How often lasting for several years, substantially lessens the likelihood ICCR members have been so successful in conducting corporate of engagement defaulting back to an adversarial relationship. dialogues is the subject of a research paper, aptly titled “Why Talk? The long-term engagement arising from the commitment of A Process of Model of Dialogue in Shareholder Engagement”, co- ICCR shareholders encourages two developments that contrib- authored by Fabrizio Ferraro and Daniel Beunza. utes to the many successful dialogues conducted over the years.

THE CORPORATE EXAMINER • 15 “When you use language around transformation and collaboration, it starts to leave the field of First, over the course of time, ICCR members succeed in raising adversarial conversations and pushes us toward awareness of the issues among their corporate partners, “voicing everyone having a stake in transformation.” their concerns in a setting of civility and mutual respect.” Laura Berry “By adopting a strategy of awareness rather than persuasion,” the authors state, “shareholders can set in motion internal debate time have accumulated definitive signs of success: “Impactful within the corporate polity that they can subsequently shape.” engagement seems to be characterized by 1) collaboration, not The internal debate leads to a second benefit of commitment, only with other investors but also with grassroots campaigns and in that over time there develops a synthesis between sharehold- civil society stakeholders; and 2) escalation, or deepening engage- ers and actors within the corporation itself. Referring to ICCR’s ment over time.” dialogue with Merck over access to medicine in developing coun- An example of collaboration among investors and other civil tries, the authors note that one challenge for members was to society groups occurred following the collapse of a building with initiate a discussion of the issue within the corporation. “By find- five garment factories in it in Bangladesh, killing more than ing internal champions and echoing the concerns, ICCR helps a 1,100 workers. The Rana Plaza building collapse was a tragic process of internal transformation.” reminder of the responsibility of large corporations to monitor In the case of Merck specifically, and in many more instances human rights conditions in their supply chains. as well, ICCR demonstrated what it refers to as its “convening A coalition of institutional investors organized by ICCR power.” As ICCR’s Cathy Rowan described it, “We don’t have released a statement in which 134 investors, representing more a personal interest to gain here. People recognize that.” What than $4 trillion in assets under management, stated, “While com- ICCR undoubtedly does have is a moral voice, based largely on panies that haven’t met their human rights responsibilities face its reputation as a faith-based organization. Yet, “much of their clear legal, financial and reputational risks, the moral mandate for discussions were on the business merits of addressing the activist’s increased human rights due diligence inherent in these principles issue,” the authors found. transcends ordinary business concerns.” Reframing their argument in business terms, the success of “Engaged investors did not initiate or even lead the campaign which is owed in part to the status of ICCR members as share- asking American companies to sign on to the Accord on Fire holders, allows for actors within the corporation to consider the and Building Safety,” IE2 reports. “However, by buttressing the issues in a manner consistent with the goals of a largely profit- efforts of grassroots organizations and labor unions in Bangladesh driven entity. Doing so also “gives ICCR members the chance to and their international NGO partners, engaged investors contrib- voice disagreement in a less tempered, more coordinated and bet- uted towards the goal of sustainable and substantive change in ter-targeted form than employee activists,” the authors observed. working conditions for Bangladeshi factory workers.” Continued Berry, “When you use language around transfor- Acknowledging that “efforts to document the ultimate impact mation and collaboration, it starts to leave the field of adversarial of engaged public equity investing have remained largely anec- conversations and pushes us toward everyone having a stake in dotal,” IE2 has set out to develop a system that accounts for transformation.” One question that remains is, can the successful collaboration and escalation (described as a deepening of the template developed by ICCR be duplicated by other investment engagement process over time). The standardized reporting frame- organizations? Can such effectiveness be quantified to an extent, work being developed by IE2 will ultimately help shareholders and thus be deployed by others as well? monitor the progress of their own engagements while identifying One initiative seeking to do just that is the Impact of best practices to increase effectiveness and maximize leverage. Equity Engagement (IE2), a coalition of institutional investors When fully developed, the standardized reporting framework that includes several ICCR members. “IE2 seeks to develop a envisioned by the IE2 coalition is likely to demonstrate the posi- framework that can inform how the impact of public equity tive impacts of shareholder engagement on environmental, social, engagement activities are tracked and reported,” the coalition, and corporate governance (ESG) issues. It is also anticipated that which formed in 2013, states. “Engagement activities are not the framework will help identify those factors that contribute to tracked in consistent ways,” IE2 stated in a recently published successful engagement. Given ICCR’s status as a respected pio- paper, The Impact of Equity Engagement. neer in the art and science of long-term shareholder engagement, IE2 describes a number of engagement strategies that ICCR one can expect that the template for engagement issued by the members and other sustainable investors have employed that over IE2 coalition will expand even further the leadership role that 16 • THE CORPORATE EXAMINER ICCR has assumed for nearly half a century. THE CORPORATE EXAMINER SPOTLIGHTS

The Hewlett-Packard Company

In each issue of the Corporate Examiner, ICCR features a corporation and its work to advance ESG issues. Following is a conversation with Zoe McMahon, Director, Global Social & Environmental Responsibility, regarding how Hewlett-Packard Company is responding to the emerging risks of migrant workers.

fees by workers to obtain employment, and Zoe McMahon is Director of Global Social requiring suppliers to hire workers directly & Environmental Responsibility within instead of using labor brokers. How did HP HP’s Ethics and Compliance Office. She is come to this decision? responsible for a global team managing HP’s HP is committed to protecting all workers product and supply chain social and environ- in our supply chain, but we recognize that mental responsibility policy and compliance certain worker groups need special protec- programs including ethical sourcing of HP’s tion. Seeking additional sources of labor, products and packaging materials; HP’s suppliers in some countries have turned to supply chain code of conduct and improve- students, dispatch workers, young workers ment programs for labor, health and safety, and environmental (16 and 17 year olds where legally permit- responsibility; and HP product recycling standards and assurance. ted), and foreign migrant workers—groups She is also responsible for HP’s global human rights program. which have distinct vulnerabilities to potential abuse. We introduced enhanced standards, more focused monitoring, tar- HP has long been a leader in its sector on social In order to protect workers’ rights, we geted capability-building, and KPI tracking and environmental supply chain responsibility. continually refine our Supply Chain to provide additional protection for these What do you see as the critical issues currently Responsibility program to address emerg- groups. It is still early days in the implemen- facing the electronics sector and how is HP ing risks. We remain focused on protecting tation of these measures, and some suppliers addressing them? vulnerable workers, reducing excessive will probably need more guidance to achieve working hours and improving health and conformance, but we will work together Shifting socioeconomic and labor trends safety in the workplace. We view workers with them to advance their capabilities on require us to be alert to new risks and inno- as ‘rights holders’ and believe that the most this important issue. vative in our approach to managing them. effective solutions will be found by involv- Political and economic pressures as well as ing them directly. We have advanced this As HP has moved to address the business and demographic shifts in some sourcing coun- approach through worker interviews and human rights risks posed by migrant workers, tries have led to higher costs and growing surveys during supplier monitoring, and by has the company encountered any unforeseen labor shortages, putting pressure on workers designing our capability-building events to challenges? and companies. Also, in developing coun- empower workers to be part of the solution. tries, weaker rule of law, opaque recruiting The recruitment of foreign migrant workers practices, and less institutional experience In November 2014, the company adopted a is a complex topic that requires action not with social and environmental responsibility new guideline for its suppliers related to foreign (SER) may create additional risks. migrant workers prohibiting the payment of THE CORPORATE EXAMINER • 17 just at the supplier or manufacturer facility company to solve. Because the electronics (vendors) to adopt environmentally respon- level. We need to work closely with labor industry supply base is broadly shared—such sible processing techniques, and to fully agencies to ensure that they understand our as suppliers of optical disk drives, memory, comply with relevant regulations. We also expectations on the responsible recruitment power supplies, and other commodities— require certification to third-party recycling of these workers and we are starting to do collaborating with others in our industry standards (R2 and e-Stewards) in the many that. sends a powerful and consistent message to countries where they are recognized. We suppliers. contract with Environmental Resources What role has ICCR played in the develop- We believe a common and high set of Management (ERM) to audit our recycling ment of HP’s supply chain approaches through standards across our industry provides the vendors. ERM’s audits assess our vendors’ the years? greatest protection for workers in our supply environmental, health, and safety (EHS) chain. When we see gaps in guidance to practices and performance, and also check ICCR has been a great sounding board for suppliers on pressing SER issues, HP often downstream material flows based on ship- HP’s supply chain responsibility program implements policies, standards, and pro- ment and receipt records to certify no over many years. We stay in contact with grams ahead of industry standards. We then “leakage” of materials to facilities outside our ICCR representatives directly, as well as share our experience when advocating to approved vendor network. through multi-industry & multi-stakeholder raise industry standards in line with our own. forums. ICCR is a constant force for good Carbon tracking and reduction is a new in advising companies like HP and in recog- Soaring demand for electronics is fueling the challenge for many corporations, as public and nizing and sharing good practice when they worldwide growth of e-waste, which commonly regulatory pressure to measure, report, and see it. winds up in the developing world where it reduce energy use and associated greenhouse is often treated without adequate controls to gas (GHG) emissions increases. How is HP What monitoring, training, or remediation safeguard human health and the environment. responding? steps does HP take to ensure that its suppliers Can you speak about HP’s product take back comply with its new Supply Chain Foreign and recycling program, and how it is addressing In 2011, HP was the first IT company to Migrant Worker Standard? these risks? publish its global carbon footprint. For the past two years, we have also published a The Standard marks a major step forward HP is an industry leader in product take- complete water footprint. We believe that in the protection of foreign migrant workers back programs, which we began offering understanding environmental impacts across in our supply chain and we are now focused in 1987. Since then, we have recovered our value chain is the first step towards on ensuring that the new protections are 1,683,000 tonnes (3.71 billion pounds) of taking meaningful action. In 2013, we realized. Specialized forced labor assessments computer hardware (for reuse and recycling) introduced our industry’s first supply chain and regular monitoring will confirm supplier and HP supplies (for recycling), and we now GHG emissions reduction goal: to decrease conformance. Suppliers that do not meet offer take-back programs in 73 countries and first-tier manufacturing and product trans- our requirements must correct their practices territories. Our initiatives go well beyond portation-related GHG emissions intensity with urgency or risk losing our business. providing take-back options for our own in our supply chain by 20% by 2020, com- products. We also support the development pared with 2010. We set the goal with input Can you speak about the importance of cross- of electronics recycling infrastructure around and endorsement from Climate Savers, a industry collaboration and multi-stakeholder the world. In 2014, we expanded our World Wildlife Fund (WWF) program that engagement in promoting best practices within product return and recycling network and promotes aggressive private sector action to the electronics sector? launched new collaborations to capture end- reduce GHG emissions. of-life products, including in Brazil, Kenya, Many of the issues we face are large and Mexico, and Panama. complex and beyond the scope of any single We require our recycling partners

18 • THE CORPORATE EXAMINER ICCR MEMBER PROFILES

Everence Financial

In each issue of the Corporate Examiner, we profile an ICCR member organization and its work in corporate social responsibility. Below we spoke with Mark Regier and Chris Meyer.

Can you talk to us about Everence’s work with When did Everence begin actively exploring its various clients — about the role faith plays shareholder engagement as a way to achieve its in their investing priorities? institutional mission?

Mark: Everence has been involved in some Mark: Everence—then known as MMA— form of socially responsible investing for first became involved during the South 70 years (as of this April). This emerged African divestment movement. We were less as a strategy than as simply “our way of strongly influenced by some of the larger doing things.” Over the years there was an Protestant traditions and their leadership Mark A. Regier, Director of Chris Meyer, Stewardship Investing for Stewardship Investing increasing formalization of our SRI poli- on this issue. As with others, this issue was Praxis Mutual Funds and Specialist for Everence cies leading to, in 2000, the adoption of one of great debate and raised many ques- Everence Financial our Stewardship Investing Philosophy. This tions about what actions we were called to as philosophy, rooted in an understanding of faith-based investors. Our relationship with two main themes have been environmental Christian stewardship from our 500-year shareholder advocacy became more deliber- sustainability and modern slavery. Climate old Anabaptist faith tradition, seeks to hold ate with establishment of the Praxis Mutual change is our primary environmental focus, in tension our responsibility for social and Funds, our family of publicly available, but we are also active on hydraulic fracturing financial productively through company socially responsible mutual funds, in 1994. and toxic chemicals in consumer products. selection, corporate engagement, and com- Our key issues under modern slavery include munity development investing. We’re deeply What social or environmental issues are of child labor in the cocoa industry, conflict committed to all three of these SRI strate- greatest importance to Everence’s clients today? minerals, and a newly emerging focus on gies, however we think that engagement and ethical recruitment practices. community development investing allow us Chris: Our clients and constituents represent to most fully reflect our care and concern a diversity of passionate interests. Clearly, Can you talk to us about your experience of for the planet and its people. We’ve also climate change is near the top, as new and using the power of shareholder engagement to established six Stewardship Investing Core updated scientific reports document its address the climate change crisis? Values that guide our evaluation and devel- accelerating threat. Everence has also col- opment emerging social issues, new screens, laborated with other Mennonite agencies Chris: Everence’s climate change engage- and shareholder engagement opportunities. on a denominational task force on modern ment strategy seeks to impact companies These values were shaped by a panel of theo- slavery, which was tasked with developing a on three key themes: acknowledgement logians, academics and business people and church action plan. of climate change and the development of seek to articulate our highest hopes for busi- We are centering our advocacy program emissions reduction plans, transparency ness’ impact and practice in our world. in these areas. For the past few years, our of political funding and lobbying, and

THE CORPORATE EXAMINER • 19 examination of carbon asset risk. various risks related to inaction, such as can see this in their very names. “Socially We are focusing on oil and gas and utility reputation, regulation, and the sustainability responsible investing” is a directional values companies on these key issues, but we also of the cocoa bean supply itself. We have statement with a goal of hoped-for impact. work on broader initiatives with our advo- also lifted up potential opportunities that “Environment, Social, and Governance” cacy partners. Some of these actions have come with effective action, including better are performance factors—like PE ratios and led to corporate policy changes, while others relationships with suppliers, a more stable growth curves—and are increasingly moni- have not yet yielded fruit. But all of these cocoa supply, and positive press. In order to tored as such. The goal of ESG, however, opportunities send a vital message to the have a deep impact on reducing child labor, remains the same as the investment strate- board, management, and other shareholders we have worked with these companies to gies of yore—increased financial gain. So that climate change issues are critical to the encourage on-the-ground impacts at the where SRI is the light shining on the path future of both the company’s business and farm level—where we feel the fundamental ahead, identifying and engaging issues and the future of our world. changes must take place—and the establish- opportunities because of who we are as val- We also look beyond engagement for ment of standards to measure those impacts. ues-based and mission driven investors, ESG impact on climate change. For instance, in is a more modern, kinder, gentler take—sort 2013 we strengthened our long-standing How does membership in the ICCR coalition of like a hybrid engine—on the existing and environment screen to include newly avail- help Everence enhance its impact? essential economic system we all depend on. able forward-looking climate risk data. Both of these approaches are necessary Additionally, Everence and the Praxis Chris: We value our membership in ICCR if this movement is to continue to grow Mutual Funds have become nationally- for many reasons. Membership helps us in scale and global impact. And for many recognized leaders in the inclusion of green increase both the breadth and depth of faith-based investors, ESG’s mainstream and other environmentally beneficial bonds our advocacy work. ICCR staff provide acceptance and adoption allows them to in fixed income portfolios, contributing to expert input on a number of issues, publish integrate their values where they felt prohib- the clean energy transition. materials that highlight the work of mem- ited in the past. bers, and help us keep up with the latest Another social justice concern for the Menno- developments in the faith-based and social Faith-based investors are sometimes described nite Church is the scourge of human trafficking investment industry. as “prophetic”, able to see social and environ- and slavery. How is Everence working with ICCR also provides a forum in which we mental risks ahead of the curve. Would you say companies to identify and eradicate human can convene with other like-minded inves- that description is still accurate? trafficking risks in global supply chains? tors. We can seek support for our advocacy initiatives within this network, and we also Mark: Our “prophetic” role is sitting at the Chris: The companies we engage on human have the opportunity to join in initiatives junction of environmental/social concern trafficking are often several supply chain led by other members. and the investing marketplace. We seek steps removed from the worst human traf- to translate these concerns into corporate ficking offenses. However, these companies What would you say are the key distinctions actions and policy changes that drive lasting usually have the most power in the supply between, and unique strengths of, SRI and improvements for the planet and its people. chain and are best positioned to influence ESG? This doesn’t change our fiduciary duty to positive change. Additionally, they are those who depend on us, but by looking typically well-known brands that face repu- Mark: I’m increasingly convinced that at the world of investing through a values- tational and supply chain security risks if understanding these two approaches as first lens, we discover new opportunities to they fail to address human trafficking. related but distinct is critical for the long- integrate our values with the investments we We have lead dialogues with Hershey term growth and progress of the responsible manage. and Mondel¯ez for many years on child labor investment field. In short, SRI is about in the cocoa industry. We have highlighted vision and ESG is about practice. You

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©ICCR, July 2015 Photo Credits: cover: zphoto/Shutterstock.com; inside front cover: ICCR; page 3: brandstock/Shutterstock.com; pages 6 & 7: Mary Dee Donovan; page 8: Pushparaj Aitwal, Sisters of St. Dominic of Caldwell, NJ; page 9: NY Times and ImagineGolf/istockphoto.com; page 11: merc67/Shutterstock.com; page 13: Jonathan Woodcock/iStockphoto.com; and, page 15: mopic/Shutterstock.com. The Corporate Examiner was printed with environmentally friendly soy-based inks on FSC-certified Anthem Recycled Matte paper.

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