Whatever the issue – corporate governance, consumer protection, the environment, employment practices, human rights, or community impact – our analytical process to assess corporate performance is rigorous and multi-dimensional. We consider company practices relative to industry peers and identify those that exhibit best practices on key issues of concern. We look at trends over time and favor companiess with improving records. When problems arise, we try to determine if they are systemic and we evaluate the company's response. In short, Walden recognizes that companies are complex and evolving entities with both challenges and strengths.
Our dedicated in-house ESG research team conducts primary and secondary research, examining a variety of sources of information on environmental and sustainability performance. Our foremost source of information is gathered from our dialogues with the companies themselves. Additional sources include company publications, governmental agencies such as the Environmental Protection Agency and the Department of Labor, media and internet-based sources, independent research providers, and non-governmental organizations.
Social Research Focus Areas
Portfolio Screening Process
Walden's Social Research Focus Areas - Identifying Client Concerns
We work with our clients to prioritize their environmental, social, and governance (ESG) concerns and to translate them into individually tailored social investment guidelines. Guidelines are developed within the context of an overall investment strategy designed to be consistent with each client’s financial objectives.
Five broad areas of analysis encompass clients’ concerns: products and services, environmental impact, workplace conditions, community impact and corporate governance. Our analysis of these areas is bound by our consideration of a company’s behavior relative to its peer group, trends over time, the effectiveness of management systems and the demonstration of accountability through standardized public reporting.
Walden’s screening process actively seeks to assess and support corporate innovation and best practices. We favor and encourage companies demonstrating strong social and environmental performance. Walden’s general screening guidelines consider the following criteria when conducting an assessment of a company. These guidelines are often modified to fit individual client preferences and values.
Products & Services
- Safe, beneficial, high-quality products or services.
- Effective response systems to address product safety concerns.
- Research and development of solutions to environmental and social challenges.
- Material involvement in the manufacture or sale of products with adverse public health consequences.
- Deceptive or misleading marketing practices.
- Client specified investment prohibitions, such as involvement in alcohol, extractive industries, nuclear power, gaming, junk food, tobacco, handguns sales or weapons manufacture.
- Process, product, or service that conserves energy and natural resources or reduces volume or toxicity of emissions and waste.
- Robust environmental management system, clear policies and strong compliance history.
- Prompt and transparent responses to environmental incidents.
- Inclusion of life-cycle analysis in product development.
- Best-in-class animal welfare policies and practices.
- Constructive public policy involvement on major issues, such as climate change and water scarcity.
- Pattern of serious regulatory violations.
- Negligent response to significant environmental problems.
- Below peer group performance in high impact industries, such as chemical manufacturing or oil exploration.
- Significant contribution to global challenges, such as rainforest destruction or climate change.
- Strong equal employment opportunity programs and policies.
- Diverse representation in management and on boards of directors.
- Above average employment policies encompassing benefits, worklife balance, training, safety, and compensation.
- Constructive union relations or employee participation in decision making.
- Best practice labor standards applied to global operations.
- History of systemic discrimination.
- Pattern of serious National Labor Relations Act violations or other anti-union actions.
- Poor record of employee safety.
- Known to use forced labor, child labor, or violate other International Labour Organization (ILO) standards.
- Lack of Code of Conduct, monitoring or verifications programs in owned or supplier facilities.
- Formal structure for constructive engagement with local, indigenous or underserved communities.
- Commitment to uphold international human rights standards.
- Direct community involvement through innovative volunteer programs and philanthropy.
- “Outstanding” Community Reinvestment Act (CRA) Rating.
- Community opposition on significant issues such as local environmental impacts, facility siting, or local employment.
- Insensitive or disrespectful advertising.
- Complicit in serious violations of human rights.
- Predatory lending practices, redlining of communities, or poor CRA rating.
- Strong corporate governance policies, practices and implementation plans.
- Board structures and practices that foster independent decisionmaking and accountability of board members.
- Director and executive responsiveness to stakeholder concerns.
- Leadership commitment to high standards of business ethics globally.
- Board level oversight of corporate sustainability programs and practices.
- Corporate commitment to robust environmental, social and governance (ESG) reporting.
- Inadequate independence, diversity or expertise on company boards.
- Board structures or governance policies that impede accountability to shareholders, such as staggered boards, plurality votes for directors, and combined CEO-Chair positions.
- Executive compensation policies and practices that do not clearly align pay with performance.
Walden's Social Screening Process
Some companies are excluded from client portfolios because
their primary business purpose is clearly contrary to our clients’ social
investment objectives. More often, the application of social or environmental
criteria is, at least in part, a subjective process that involves weighing
inconclusive, incomplete and contradictory data. In addition, company
performance can improve or erode over time, especially relative to peers. To
guide us in the gray areas of screening and company analysis, we consider a set
of general questions in our research process:
Is there a pattern of noncompliance, negligence or other concerns?
Many companies have been cited for regulatory violations at
different points in time. We analyze the gravity and pervasiveness of the
particular issue. We judge the adequacy of a company's response and seek to
understand how management will prevent problems from recurring. Single or
isolated incidents generally will not lead to an investment prohibition.
Is the company’s performance commendable when evaluated relative to
industry peers and its historical track record?
Walden evaluates companies relative to industry peers given their similar challenges and opportunities and favors firms exhibiting best practices. Similarly, we favor firms with improving records over those with deteriorating environmental, social or governance performances.
Are there mitigating factors?
We are able to prioritize our clients’ social and environmental investment objectives to allow investment in companies with strong records on priority issues despite mediocre or mixed records in other areas. When investing in such companies, clients often favor shareholder advocacy strategies to promote improvement in the areas of concern.
Is the company open and responsive?
We believe companies that are transparent and responsive with regard to their policies, performance, and challenges are more likely to be taking accountability and making progress in addressing concerns.
Are there opportunities for effective engagement?
When deciding if a company is an appropriate client holding, Walden considers the potential to encourage constructive change at the company and weighs our ability to effectively engage with a company against the severity of the issue of concern.