Shareholder Advocacy: A Positive Use of Power

I’ve aspired to work toward a just and sustainable world for most of my life. My initial interest stemmed, in part, from feelings of dread and urgency about the trajectory of society. Driven by a personal goal of sustainability, I have centered my life around my values by living with my family in an off-the-grid house powered by solar energy and growing our own food.

I have also sought to address root causes of systemic problems through my professional career. With years of hands-on experience and an appreciation of complex issues, I see that the most productive path toward change runs through our economic system.

The greatest power for change—for good or for bad—rests primarily in the financial world.

Studies show that over half of Americans are invested in the stock market. The way most people invest is through mutual funds, whether in employer-based retirement plans or personal investment accounts.

If you’re invested in mutual funds, you’re a part owner of hundreds of companies. What are you doing with that power?

Most people are unaware of this power and they’re not invested in mutual funds that practice corporate engagement, also known as shareholder advocacy. Shareholder advocacy can take many forms, including letter writing, dialogue with company management, and shareholder resolutions. The absence of active ownership through corporate engagement means defaulting to investing convention—the notion that investors are solely concerned with maximizing financial returns.

Some of the shareholder advocacy work taking place at my firm, Praxis Mutual Funds, is concentrated on several priority issues. Our current themes are Promoting Environmental Sustainability, Working to End Modern Slavery, and Addressing Inequality. There are many sub-issues under each theme.

Collaboration is crucial in fostering change and working with many faith-based and values-aligned investors to engage corporations has proven effective. Nongovernmental organizations provide a great source of insight as do ESG organizations that seek to improve the environmental, social, and governance policy and practices of companies. Some of these organizations include the Interfaith Center on Corporate Responsibility (ICCR), Ceres, USSIF: The Forum for Sustainable and Responsible Investment and the Thirty Percent Coalition.

Advocacy reach is further extended by engaging with key stakeholders while pursuing mutually beneficial relationships with companies. Unfortunately, positive outcomes are rarely attributed directly to shareholder advocates as companies want to be seen doing the right thing on their own.

Nonetheless, shareholder advocacy has been able to move mountains. The actual power and influence on the policies of major corporations can be astounding in many cases . Companies have adopted human rights standards in supply chains, sourced fair trade ingredients, transitioned to a low-carbon economy, ended predatory lending practices, and honored the claims of residents affected by toxic waste, to name a few impacts. A small tweak to corporate policy can make a difference to millions of people.

Moving toward a low-carbon economy may seem daunting for some companies, but there is progress! Take NiSource, one of the largest fully regulated utilities in the United States, serving customers across seven states, which is focused on greenhouse gas emissions reductions, climate change scenario planning, and transition to renewable energy. In fall 2018, NiSource announced a plan to retire all its coal generation plants by 2028, reducing its carbon emissions by 90%. The capacity will be largely replaced with renewable energy, and the new wind and solar installations will effectively double Indiana’s renewable energy capacity. The changes will take place within the NiSource’s NIPSCO electric subsidiary which serves nearly 500,000 customers in northern Indiana, including my company’s corporate office.

Another example involves a large investor coalition of ICCR members who approached JPMorgan Chase (JPMC) about its financing of private prison companies. After a series of dialogues centered on human rights policies, JPMC announced that it would withdraw from private prison lending. Nearly all the largest U.S. banks have since followed JPMC’s lead and committed to ending their ties to the private prison industry, illustrating the effect that one company’s policy can have on an industry.

From my experience I’ve learned that real corporate change more often occurs from honest, respectful engagement with the company rather than from pitchforks at the gate. Shareholder advocacy seeks to make a difference, not just a statement.

As I mentioned, I live on an off-the-grid homestead in rural Ohio. I feel out of place walking the corporate halls of power. I’m self-conscious in the elite circles where I professionally operate. And I’m still not comfortable wearing suits. But I’m okay with that dichotomy. I’ve retained my identity and convictions without being consumed by structures of power. I’m also acutely aware of the privileged position I’m in to be able to wield this power and the responsibility that comes with it.

We are all part of society and tied to our economic and political systems. There are many ways to engage in transformative change. Symbolic protests against the system are valid and often necessary expressions to bring issues into the public consciousness. But there is also an incredible amount of work that can be done within the system to make it more just and sustainable.

Powerful recent protests have raised awareness about police brutality and racial inequities as well as the impact of COVID-19 on vulnerable communities including millions of essential yet low-wage employees on the front lines of the pandemic. Many companies have responded with statements supporting the points of the protestors while committing to “do better” on their end.

If meaningful change is to occur, both protestors and companies will necessarily move beyond symbolism and vague commitments to tread the practical and messy path toward progress. Shareholder advocates will be there all along the way.

Chris Meyer is Manager of Stewardship Investing Advocacy & Research at Praxis Mutual Funds® and Everence Financial®.

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