Research & Engagement in Action

By Heidi Soumerai
From the Winter 2012 Edition of Values

The 2012 election along with the powerful “Superstorm” Sandy brought to the fore many of the environmental, social, and governance (ESG) issues Walden addresses through corporate engagement and public policy initiatives. For instance, in the wake of the storm, New York Mayor Bloomberg endorsed President Obama for his stance on climate change, and Obama’s November 7 acceptance speech identified climate change as a high priority for his second term. In this election a majority of citizens voted in favor of marriage equality in several state referendums. Bipartisan support for immigration reform is growing during the lame duck Congress. Meanwhile countless post-election analyses are examining the influence of outside and secret money in politics (see The Election Money Didn’t Quite Buy). These developments may signal an improved climate for progress as Walden continues to encourage more sustainable business practices.

The Environment

Engagement with companies on issues of water scarcity and climate change is front and center for Walden. We withdrew our resolution calling for a water risk assessment at United Natural Foods based on the company’s commitment to add language to its Supplier Code of Conduct addressing water conservation practices. It also pledged to explore methodologies to identify the sourcing locations of fresh produce in its Albert’s Organics subsidiary and to determine the level of exposure to water-stressed regions. In ongoing conversations, food distributor Sysco provided evidence of progress in integrating water use into its agricultural and broader sustainability strategy. And, Walden provided resources on water management practices and reporting to energy exploration and development company Denbury Resources.

A recent report by the Union of Concerned Scientists, “A Climate of Corporate Control,” identified U.S. companies that take public positions recognizing and responding to climate change yet simultaneously support trade groups and think tanks working to dismantle regulations and laws addressing global warming. Calvert Asset Management and Walden coordinated a letter to many of these companies to encourage consistent company-wide positions on established climate science and public disclosure of third party organizations that lobby on climate policy.

Walden supported a Ceres-led initiative representing $2 trillion in assets that detailed investor expectations on minimizing environmental and social impacts of oil sands development in Canada.

Equal Opportunity

Mettler-Toledo, after several conversations with Walden, is amending its nondiscrimination policy to include sexual orientation and gender identity or expression. DENTSPLY plans to make its inclusive policy more accessible through a website update of its corporate social responsibility platform. Similarly, investment firm T. Rowe Price’s inclusive policy is now available publicly on its website. Walden also commended Minnesota-based General Mills and St. Jude Medical for opposing publicly that state’s proposed constitutional amendment banning marriage equality.

Walden is a leading investor voice in the 30 Percent Coalition, a network of women’s organizations and institutional investors seeking to increase the representation of women directors at U.S. corporations. The Coalition wrote to the 41 S&P 500 companies with all-male boards and follow-up discussions have started. We reached out separately to one of them, NetApp, on board and management diversity. The company provided assurance of its commitment to a diverse board candidate pool as well as diversity statistics documenting representation of women and people of color in official and manager positions. Walden plans to continue to monitor NetApp’s progress.

Human Rights

Walden is addressing corporate responsibility initiatives related to human rights on several fronts. We co-led an investor coalition representing $145 billion in assets that called on congressional leaders to enact comprehensive immigration reform that includes a pathway to legal status for undocumented immigrants. The letter provided testimony of the necessity for such reform to help drive U.S. economic growth, long-term business prosperity, and the wellbeing of our immigrant population.

As part of Dodd-Frank financial reform, the Securities and Exchange Commission (SEC) in August adopted a rule requiring tracing and disclosure of companies’ exposure to conflict minerals—gold, tantalum, tin, and tungsten—sourced from or near the war-torn Democratic Republic of the Congo. Walden revisited a discussion on conflict minerals with St. Jude Medical, which reported that it is reviewing tracking tools that could be implemented globally while also examining materials declarations from suppliers that will address conflict minerals.

Finally, we joined 21 institutional investors with more than $400 billion in assets to provide comments to the U.S. State Department on the new Reporting Requirements on Responsible Investment in Burma. Coordinated by the Conflict Risk Network, the statement supports greater transparency and accountability to ensure respect for human rights in Burma as U.S. sanctions are lifted. This and other human rights issues were discussed with PepsiCo as part of a Ceres-led stakeholder dialogue at which the company demonstrated significant progress in the development of a comprehensive human rights policy, risk assessment approach, and disclosure.

ESG Reporting

Led by New York City Pension Funds, Walden co-filed and withdrew resolutions at Cisco Systems and Oracle requesting that they require sustainability reports from their suppliers. This relatively new strategy seeks to use the leverage of corporate purchasing power to push ESG reporting throughout supply chains. Cisco Systems committed to greater transparency regarding its supplier scorecard methodology and results. Cisco will also encourage and provide training to suppliers on sustainability reporting using the Global Reporting Initiative (GRI) guidelines. Oracle agreed to: encourage its hardware suppliers to report on ESG performance, preferably using the GRI framework; seek progress reports from suppliers; and set a goal of including sustainability performance metrics on supplier scorecards by 2015 to underscore the importance of ESG disclosure and performance in their supplier selection process.

Other current Walden dialogues that promote initial or expanded sustainability reporting are moving in a positive direction as well. Carbo Ceramics plans to report on sustainability efforts on its website and has set a goal to launch a first-time report by its annual shareholder meeting. Commercial Metals’ CEO and CFO met with us for a discussion focused on environmental, health, and safety priorities and actions. We are encouraging management to report publicly on these initiatives. McCormick expects to publish a sustainability report in mid-2013 and will give an opportunity for Walden and other investors to provide input in the development process. New dialogues on ESG reporting are underway at Calgon Carbon and at ICU Medical and Select Comfort following in-person meetings with their CFOs.