Accountability through Public Policy

by Timothy Smith

Since the 1970s Walden Asset Management has worked with portfolio companies to promote leadership on environmental, social, and governance (ESG) issues. Through letters and meetings, private negotiations and public shareholder resolutions, we have been an active shareholder voice engaging the business community. We have addressed dozens of topics from executive compensation to climate change, employee diversity to unsafe and abusive working conditions, and from board structure to recycling. Certainly, investors have been and continue to be an important catalyst for change in company policies and practices.

Equally important, however, is the enactment of meaningful public policy to govern business behavior. Whether the policy originates from regulatory agencies such as the Environmental Protection Agency (EPA), Federal Trade Commission (FTC), or Securities and Exchange Commission (SEC), or is legislated by Congress, it creates “rules of the road” for all companies to follow. In that sense, right thinking public policy, accompanied by meaningful enforcement, creates fair and uniform standards for business. In fact, on issues like Say on Pay or disclosing greenhouse gas emissions, many companies tell us they feel more comfortable if they are not acting alone but in concert with other companies—safety in numbers.

On a multitude of issues Walden pursues along with similarly minded investors, the new administration in Washington demonstrates a fresh and open mind, as well as willingness to work actively to create new laws and regulations. Thus while Walden has been involved for the last decade in joint and individual calls for action on public policy, in 2009 and beyond we are optimistic that reasonable new legislation and regulation will advance good governance, help protect the environment, and address corporate responsibility.

Therefore Walden, in collaboration with other investors, has ramped up its public policy advocacy in the belief that now is a propitious time to have a positive impact. For example, this summer Walden will be encouraging the SEC to require that companies do meaningful ESG reporting to enable investors to better compare performance and evaluate risks and opportunities. Members of industry associations Ceres and the Social Investment Forum will be sending letters in tandem, urging action by the SEC.

Recent initiatives in which Walden participated include:

• In December we joined an open letter to President Elect Obama, orchestrated by the Social Investment Forum and signed by dozens of investment organizations, laying out our common priorities for the new administration. We sent another joint letter after the president’s inauguration, reiterating our suggested policy priorities.  

• In February we joined a broad range of pension funds, asset managers, and institutional investors with more than $3 trillion in assets under management, urging Congress to enact a strong national Energy Efficiency Resource Standard and calling for a national policy to reduce greenhouse gas emissions. Recently, we were one of 150 signatories to an Investor Statement on a Global Agreement on Climate Change, representing institutions with $9 billion in assets under management.

• In March Walden responded to an invitation from CalPERS, one of the largest pension funds in the United States, to join it in endorsing a set of Principles of Financial Regulation Reform. The Principles called for transparency, independence of regulatory agencies, accountable corporate governance, and analysis of systemic risk as component parts of future financial reforms.

• Under the leadership of the OMB Watch, Walden encouraged a restoration of stricter Toxics Release Inventory reporting rules, which had been weakened under the Bush administration. In early March the new administration did just that, and now communities can more easily identify and track toxic emissions from facilities in their neighborhoods.

• We joined appeals to the Uzbek President, International Labour Organization, and U.S. State Department to address the extensive use of child and forced labor in cotton production in Uzbekistan. Some of the world’s largest apparel companies, including Wal-Mart, now refuse to buy Uzbek cotton.

• We joined with other investors in urging the United Nations Global Compact to address the complicity of Chinese oil company Petrochina in the human rights crisis and genocide in Darfur.

On behalf of our clients, Walden will continue to call for public policy reforms that we believe help advance sustainable business practices.