Companies, especially large, publicly-held ones, have a major impact on the world in so many areas, from the environment to worker’s rights to human rights. Shareholder engagement is an essential mechanism for investors to communicate directly with firms about that impact, but it’s often considered a complicated and inaccessible one.
The Sierra Club Foundation is helping to change that, alongside voting technology platform iconik, who aims to transform stock ownership through a voting experience that reflects each investor’s unique values and preferences. Its now possible, with essentially the click of button, to vote all your proxies alongside the Sierra Club Foundation, for free. The idea of this collaboration is to offer a much simpler pathway for individuals and institutions alike to shape a more sustainable and just future for the companies they own.
I spoke with Pedro Henriques da Silva director of Shifting Trillions at Sierra Club Foundation to discuss how this exciting partnership came to be, how they hope to use it to advance environmental justice, and how others interested in values-aligned investing can use the impressive tools offered by iconik.
Q: What is this voting solution now being offered by SCF and iconik, and how do you access it?
A: The Sierra Club Foundation launched a pilot partnership with voting technology platform iconik. The iconik platform makes the Sierra Club Foundation’s shareholder voting policy available to all investors, and anyone who holds shares in a company.
Signing up is pretty easy. You head to iconikapp.com/sierra-club-foundation and create an account. Then, you’ll be walked through a series of questions to help you identify your organization type. For example, you’ll be able to indicate if you are voting shares first as an advisor/institution or an individual. If you’re an advisor/institution, you’ll have further control in selecting whether your institution is an asset manager, family office, broker dealer, among several other options. There is also an option for fund managers who want to provide this to their clients.
You can either have iconik vote your shares directly by forwarding the proxy notification emails, or just access our recommendations if you prefer to do the voting manually for any reason. But having them automate your voting is likely a huge perk!
Importantly, voting to match the Sierra Club Foundation’s policy is free to all investors. Iconik offers additional impact reporting, vote analysis, and advisor dashboard features that have an additional cost, but are not required for access to their voting tool.
Q: Why did the Sierra Club Foundation decide to do this?
A: Publicly traded companies account for 40% of greenhouse gas emissions. It’s very likely that, if you hold shares, have an employer-provided retirement plan, or attend a university with an endowment–your money is your biggest contribution to climate change.
For the last several years, the Sierra Club Foundation has worked alongside other responsible investors to push public companies to better serve their shareholders and clients by changing their behavior and helping to usher in a more just and less extractive economy. But there’s two problems: first, 88% of investors don’t vote. And the investors who do vote – fund managers, governments – typically don’t support proposals asking companies to take responsible action.
Second, this work has raised fundamental questions. Some of them may be familiar to you:
- How are our financial managers voting on our behalf?
- Is it in alignment with our mission? How do we know?
- How can other similarly-minded investors efficiently coordinate their voting and engagement efforts?
Through this pilot, we’re hoping to help answer some of these questions. The landscape is changing, and this partnership is part of a movement of investors reclaiming their voice as shareholders to build a better future. This solution makes it so that any organization or individual who own shares in a stock can automatically vote those shares to match Sierra Club Foundation’s voting policy. Free of charge.
Q: How does the Sierra Club Foundation decide how to vote?
A: The Sierra Club Foundation has developed a voting policy that uses iconik’s Voteforge technology and our own existing research to identify which issues are most important to mitigating risk and supporting a healthy planet for all. We look at key issues relevant to investors who recognize the systemic risks posed by environmental injustice, climate change, biodiversity loss, and other factors. We also vote alongside other organizations with expertise in a number of non-climate areas. We plan to share key principles of our broader investment stewardship guidelines in the coming months.
Q: Nowadays there’s a handful of resolutions that are, in my opinion, filed with confusing language that can sometimes make it hard to decipher their real purpose, like ones that ask for diversity data but are actually seeking to diminish DEI efforts. What are examples of some proxy votes where you’ve needed to do deep research to understand whether a yes or no vote is more in-line with your values?
A: That’s a great question. It’s very unlikely that our votes will be out of step with your values, because there are only a few organizations that file those sneaky proposals. And the same way the platform allows you to vote alongside an organization, our policy automatically votes against proposals filed by organizations that are out of step with our values and interests as a shareholder. Meaning, if an investor votes alongside us, they will automatically vote against those, too.
And to be clear, we don’t vote for you–by signing up, you vote with us. You retain full control over your voting policy, including the ability to set voting rules that deviate from Sierra Club Foundation’s policy. iconik includes granular vote reporting in key areas like climate change and conservation.
Q: Will voting your proxies in this fashion impact your investment returns?
A: Potentially, and likely, positively. First, there is no inherent reason that exercising your rights as a shareholder would impact returns. But, second, voting alongside policies like ours–which account for key risks related to climate, society, and governance–is one way to potentially mitigate risk and enhance returns. And there are two reasons for this:
The first reason is that encouraging companies to take steps to strengthen their environmental management practices can help improve their performance. And for publicly-traded companies, this effect translates to the value of the stock–one recent study found that US corporations that are more efficient in managing their GHG emissions tend to have higher valuations. Similar effects have been identified at companies that take meaningful action to manage their social impact, but the same research indicates that to get these positive outcomes, it’s crucial that the actions companies take are meaningful, and integral to the company’s strategy.
The second reason is much simpler: the effects of pollution and injustice pose systemic risks to the global financial system. Not protecting the company against these risks, in part by aiming to reduce them, creates a fundamental risk to investors.
Conversely, not voting your shares forfeits your right as a shareholder to have a say in how a company approaches issues that are important to you. And companies that do not comprehensively address risk–companies that ignore the risks related to inequity, pollution, and environmental damage–to their shareholders and from their operations–are putting your money, your endowment, your retirement at risk.
That’s why we believe it’s so important to offer solutions like these to support investors who are serious about protecting their returns and continuing to align their assets with their objectives.
Q: If someone isn’t ready to move into proxy voting just yet, what might be their best next step?
A: First, they can start by learning about it. Shareholder engagement is an important part of owning any stock. You can learn more by visiting iconikapp.com/sierra-club-foundation. You can also get a broader introduction from Bankrate and Investopedia.
But, importantly, proxy voting isn’t the only part of an effective engagement strategy. Institutional Investors have an important voice at the table by owning shares, and should indicate the topics that matter to them and their stakeholders to company management. Most of our work is behind the scenes, engaging with some of the largest companies to support efforts to protect our assets against the risks I previously mentioned. We would welcome investors who would like to add their voices to that conversation to reach out to us directly.
Finally, this isn’t a journey investors need to go on alone. If you’re an institutional investor or own a lot of shares, a simple step is letting your financial advisor or wealth manager you’d like to better align your values and money–and asking about some of the options they’d recommend. Not all advisors have expertise or authenticity in this area, which is why sometimes, the most effective step is finding an advisor who is.
Q: Or if someone is already voting and looking to move deeper into impact investing…what can they do?
A: There’s a great primer by The Global Impact Investing Network (GIIN) called “What is Impact Investing.” In addition, consider learning from and investing with some of the groups doing this work. A great way to do this is following the work of the Transformative 25, an initiative by Collective Action for Just Finance.
And finally, look to groups who specifically exist to support families, foundations, and investors who want to move deeper into impact investing. Larger institutions who want fully outsourced services might also look to outsourced chief investment offices who have specialized impact investing solutions.
Especially as the threat of climate change grows, it’s essential that our values and, critically, our collective needs see representation in the marketplace. Together, we can safeguard our common heritage, the Earth, and its beautiful ecologies.
Read the full article here
