Las Vegas Review-Journal (Sunday)
Green investors target markets beyond energy
Boards urged to take environment into account
INEW YORK T’S not just big oil and power companies that investors are pushing to do better for the environment. In the next few weeks, Amazon investors will vote on a proposal made by shareholders and workers to push the company to describe how it is curbing its use of fossil fuels. In California, investors in Ross Stores are asking the off-price clothing retailer to set goals for reducing greenhouse gas emissions. And in Kentucky, Yum Brands shareholders are pushing for an annual report on what the parent of KFC, Pizza Hut and Taco Bell is doing about deforestation caused by its suppliers.
Shareholders with the environment in mind are increasingly targeting consumer businesses, internet companies and others that don’t come to mind at first as big polluters.
Every year, shareholders try to place proposals on the agenda for their companies’ annual meetings. Five years ago, only 33 percent of all proposals related to the environment were aimed at companies outside the energy and utility industries. So far this year, 60 percent of such proposals are targeted at companies outside energy and utilities, according to ISS Analytics.
“Climate change will affect all industries,” said Kosmas Papadopoulos, executive director at ISS Analytics, the data intelligence arm of Institutional Shareholder Services, “and I think we’ll see more in other sectors.”
Once limited to a niche group of mutual funds that simply promise not to own tobacco or gun stocks, sustainable and responsible investing has grown increasingly mainstream and more comprehensive in its decision-making. These investors see additional profits to be made — and losses to be avoided — by considering how companies are affecting the environment.
Consider Pacific Gas & Electric. It filed for Chapter 11 bankruptcy protection this year due to potential liabilities piling up following devastating wildfires in northern California.
Sustainable, responsible and impact investing currently accounts for $1 of every $4 invested under professional management for a total of $12 trillion, according to The Forum for Sustainable and Responsible Investment. That’s double the proportion from 2010, when it was roughly $1 of every $8.
“You’re definitely seeing investors ask for it, but you’re also seeing companies wanting to talk a lot more about it,” said Peter Reali, senior director of responsible investing at Nuveen, the asset management arm of TIAA. “We have meetings or phone calls with hundreds of companies annually, and boards are really interested in what investors think about this stuff.”
Of course, most proposals pushing for environmental action fail to pass. Company managers typically recommend voting against them, with many saying they’re already paying more attention to the environment.
At Starbucks’ annual meeting in March, for example, shareholders voted against a request for a report on progress in recycling cups and reducing waste that ends up in the ocean. Recommending against the proposal, Starbucks’ management said it has already committed to eliminating plastic straws, among other sustainability moves.
The proposal lost by a 5-4 margin, which may be a stronger signal than it seems.
“It’s very difficult to achieve majority support on shareholder proposals, even for some of the issues where you may have seen consensus in the market,” said Papadopoulos. “Anything above 30 percent, we generally consider as significant.”
On Thursday, shareholders of Flowserve, a company that makes pumps and valves, will vote on a proposal for the company to set goals for greenhouse gas emissions.
Flowserve is recommending that investors vote against the proposal, saying that it already writes an annual sustainability report and that disclosing strict emissions goals “would not provide significant incremental benefits” to the company, shareholders or the environment.