Shareholder advocacy is no longer just a strategy for pressuring bad actors. It’s blooming in the ESG sector, and investment advisers who take note can provide unexpected value to their sustainability-minded clients.
Three factors are driving this shift. As interest in ESG products grows, so does scrutiny of what’s in ESG funds and portfolios. Those who look closely find that even companies delivering strong social or environmental benefits may have closets of shame in their operation. And because they’re already concerned about positive impact and the brand value it creates, they’re often receptive to shareholder receptions — which can make the interaction rewarding for everyone.
Nia Impact Capital’s experience with our recent foray into shareholder advocacy illustrates what’s possible. We invest in companies working on innovative solutions to our world’s most pressing social and environmental problems. We genuinely love the companies in our Global Solutions Equity Portfolio and the game-changing products and services they produce. And yet, no company is perfect. We know that when it comes to change, the investor voice can be paramount. We use it to speak up for the change we want to see.
Working with Meredith Benton of Whistle Stop Capital, we devised a campaign focused on portfolio companies ranking on the low end of our diversity and inclusion spectrum. We approached them as allies — not adversaries — with our concerns about the relatively low number of women on their boards, executive teams, barriers to workplace equity and the use of forced arbitration policies. Our goal was to build relationships, share current research on the benefits of building diverse teams, and help them become even better, more profitable businesses.
About six months in, we have real results to report. Of the 23 companies we’ve engaged with, six have made substantive changes. We’ve had more than 18 calls with corporate leaders and filed nine shareholder resolutions (six of them withdrawn based on productive conversations). Several of them thanked us for the nudge.
“Sometimes it takes something like a shareholder resolution to get things like this moving,” acknowledged one corporate counsel. “Our board chair, he really appreciated us keying this up for him. Thank you for being a catalyst,” said a human resources executive.
Another reported a surge of energy among employees stemming from the board commitment to diversity.
Our success thus far indicates that budding shareholder activists have a ready audience among companies in their ESG portfolios. Advisers can encourage or help clients with these efforts in several ways:
- Choose active managers who will hold even the best companies accountable and encourage them to use best practices when it comes to diversity and inclusion.
- Analyze the holdings of clients’ ESG portfolios for performance on key client concerns, and help clients write letters to corporate leaders. Or get assistance with corporate engagement from California-based As You Sow, a nonprofit that promotes corporate social responsibility through shareholder advocacy and legal strategies.
- Team up with other advisers and investors on coordinated campaigns. Groups like Investors for Human Rights, the Intentional Endowments Network, an PL+US Paid Leave all invite investor participation in their engagement strategies.
During these times, helping our clients to own what they own and use their investor voice is more important than ever. Empowering motivated clients with proxy voting and company engagement can be incredibly rewarding. As we are seeing at Nia, corporations are made up of individual people and through this work, change can happen, one conversation at a time.
Kristin Hull is founder and CIO of Nia Impact Capital.
