Heating up: Investors’ green targets go beyond just big
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NEW YORK (AP) — It’s not just big oil and power companies that investors are pushing to do better on the environment.

In the next few weeks, Amazon shareholders will vote on a proposal made by one of their own to push the company to describe how it’s curbing its use of fossil fuels. In California, investors of Ross Stores are asking the retailer of off-price clothing to set goals for reducing greenhouse gas emissions. And in Kentucky, Yum Brands shareholders are pushing for an annual report on what the parent of KFC, Pizza Hut and Taco Bell is doing about deforestation caused by its suppliers.

As the earth gets warmer, shareholders with the environment in mind are widening their focus and increasingly targetting consumer businesses, Internet companies and others that don’t first come to mind as big polluters.

Every year shareholders try to place proposals on the agenda for their companies’ annual meetings. Five years ago, only 33 per cent of all proposals related to climate change were aimed at companies outside the energy and utility industries. So far this year, 60 per cent of such proposals are targetted at companies outside energy and utilities, according to ISS Analytics.

“Climate change will affect all industries,” said Kosmas Papadopoulos, Executive Director at ISS Analytics, the data intelligence arm of Institutional Shareholder Services, “and I think we’ll see more in other sectors.”

Once limited to a niche group of mutual funds that simply promise not to own tobacco or gun stocks, sustainable and responsible investing has grown increasingly mainstream and more comprehensive in its decision making. These investors see additional profits to be made — and losses to be avoided — by considering how the world’s changing climate affects companies, as well as how those companies are affecting the environment.

Consider PG&E, which some investors call the first climate change bankruptcy. It filed for Chapter 11 protection earlier this year due to potential liabilities piling up following devastating wildfires in northern California.

Heating up: Investors’ green targets go beyond just big
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Co-founder of the Boston-based investment firm Grantham Mayo Van Otterloo (GMO) Jeremy Grantham. – AP

Famed value investor Jeremy Grantham, who correctly predicted the dot-com and housing bubble crashes, sees climate change investing offering decades of growth. His firm, GMO, launched a climate change fund in 2017. Competitors around the industry have been launching their own funds that value companies’ approaches to environmental, social and corporate governance issues, which are known in the industry as “ESG funds”.

Sustainable, responsible and impact investing currently accounts for USD1 of every USD4 invested under professional management for a total of USD12 trillion, according to US SIF. That’s double the proportion from 2010, when it was roughly USD1 of every USD8.

“You’re definitely seeing investors ask for it, but you’re also seeing companies wanting to talk a lot more about it, in particular on climate change issues,” said Peter Reali, senior director of responsible investing at Nuveen, the asset management arm of TIAA. “We have meetings or phone calls with hundreds of companies annually, and boards are really interested in what investors think about this stuff.”

Of course, most shareholder proposals pushing for environmental action fail to pass. Company managements typically recommend voting against them, with many saying they’re already paying increased attention to the environment.

At Starbucks’ annual meeting in March, for example, shareholders voted against a request for a report on progress in recycling cups and reducing waste that ends up in the ocean. When making its recommending against the proposal, Starbucks’ management said that it has already committed to eliminating plastic straws, among other sustainability moves.

But the proposal lost by a five-to-four margin, which may be a stronger signal than it sounds.

“It’s very difficult to achieve majority support on shareholder proposals, even for some of the issues where you may have seen consensus in the market,” said Papadopoulos. “Anything above 30 per cent, we generally consider as significant.”

Such levels of support are becoming more common, as shareholders increasingly vote in favour of environmental proposals. Nearly half of all such proposals reached at least 30 per cent support last year.

Heating up: Investors’ green targets go beyond just big
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