Understanding Shareholder Advocacy

Making change

The interest and investment in Sustainable and Responsible Investing (SRI) has grown tremendously in the last decade. Environmental, Social, and Governance (ESG) funds received an inflow of $51 billion dollars in new money last year.

As advocates of this strategy may already know, the shareholder advocacy approach focuses on leveraging the power of stock ownership in publicly traded companies to encourage environmental, social, and governance awareness and action. Shareholder advocacy has been around for quite some time, but today the term is more aligned with ESG. Investors dedicated to this approach believe that improving a company’s sustainability will ultimately make the company a better long-term investment.

As an example, Impax Asset Management includes areas of focus like board and executive diversity. They do so by voting “no” on companies with all-male boards and by proposing policies aimed to change the gender imbalance. Impax also pursues pay equity through advocacy. Research shows that companies attract more talent when they work to close the gender wage gap.

Calvert, another fund management company, engages in ESG in many creative ways. One of their most notable stances is their take on gun control. Calvert does not own any gun manufacturers in their investments; they believe guns are high risk to both investors and the community. After the Parkland school shooting in 2018, Calvert reached out to retailers who sell firearms and urged them to eliminate the very small portion of their business, involving assault rifles and automatic weapons. After Calvert’s recommendation, one retailer did announce it would take action and they changed its policy on gun sales.

It is important to recognize the impact of raising these concerns, no matter how small the stake in one company. These are only a few small examples of shareholder advocacy. In a time where “greenwashing” makes investing responsibly even more challenging, it is important to partner with experts. Reach out to Sarah and Paige; they’d love to tell you more about what your investments can do.