Jan. 8, 2020
Vanessa Countryman
Secretary, SEC
100 F St., NE
Washington, DC 20549
Re. File Number S7-23-19
January 8, 2020
Dear Ms. Countryman,
I am writing on behalf of the Sisters of Saint Joseph based in Boston MA. We are a group of women religious who have engaged in ministries of education, health care, social work, and spiritual works since 1873. Our Order is an investor with a modest portfolio but with several investment managers who help us manage our portfolio and vote our proxies. We are also a member of the Interfaith Center on Corporate Responsibility.
For at least twenty years we have also been an active investor, taking our stewardship responsibilities seriously. As such we have cofiled a number of resolutions with companies along with other investors on issues from diversity, to climate change, to disclosure of lobbying expenditures, to Governance reforms. Such filings allow us the opportunity to support values that are becoming increasingly important in the corporate world and that are consonant with our own.
Therefore, we have a real vested interest in the changes in the Rules relating to shareholder resolutions proposed in a 3 to 2 vote by the SEC. We want to register our concerns about the specific proposed changes and the new restrictions on investors involved in using the proxy process to address companies.
We believe the combination of the two proposed Rules clearly aim to limit the ability of investors to present resolutions to companies for discussions and votes at~annual stockholder meetings. The proposals, large and small, all combine to restrict a shareholder’s~ability to file or cofile resolutions. While there have been months of discussions and Roundtables and letters submitted to the SEC, it is depressing to see that the SEC staff has enthusiastically embraced ideas and proposals from companies and their Trade Associations in preparation of the proposed Rules but has ignored the multitudes of thoughtful commentary and studies submitted by investors. Unfortunately, this builds the perception that the SEC is not the “Investors Advocate” but rather protecting the interests of Trade Associations and companies.
One of the realities we see unfolding every day is the rapid expansion of ESG in the investment world but also with companies. Thousands of companies fully understand the importance and financial impact of sustainability issues and have demonstrated leadership in sustainability reporting, diversity and environmental progress. For many investors with trillions of dollars in AUM and to many CEOs, it is self-evident that being active responsible corporate leaders in sustainability is an essential ingredient for future success.
This reality is reflected in thousands of CEO letters and statements as well as investor declarations or letters signed by a cross section of investors. ESG and Sustainability are components of an undeniable wave of the future!
This reality is also reflected in many academic papers, articles in financial newspapers and magazines and in studies published for public consumption. For example, I write to submit~this new Harvard Law School Forum blog focused on a new study by Edelman (study is enclosed as well). This study by a reputable third party like Edelman emphasizes the growing importance of ESG for investors and companies alike.
In light of the many observations noted in the blog below and in the 40 page study, I would ask the SEC to evaluate and study the Edelman~paper. In particular, I believe it is important, as the SEC proposes to restrict resolutions on ESG topics, to ask for study and answers to the following questions:
What work has the SEC done to study and evaluate the growth of ESG investing and the need of investors to have ESG information from companies to make investment decisions?
Has the staff evaluated whether restricting resolutions on ESG issues and information will inhibit the ability of investors or their managers to gather relevant information to make informed financial choices as they integrate ESG factors into their investment decisions?
What work has the SEC done to study the rapid expansion of commitment to Sustainability by companies, including their comments on the material financial importance of such issues?
Does the Edelman study, and its clear case for the importance of ESG issues for investors and companies, change the perception of the Commission about the necessity of these new restrictions?
We look forward to your responses to these questions.
While the understanding of the importance of ESG for investors and companies alike is growing, instead the SEC is trying to limit the influence and power of investors to address companies on these very same issues. This SEC action does not advance long term shareholder interests.
Sister Betty Cawley, CSJ
Justice Promoter
Sisters of St. Joseph of Boston
637 Cambridge St.
Brighton, MA 02135
[redacted]
To view this article online, click here and note the link to the full Edelman report
Source: The Harvard Law School Forum on Corporate Governance and Financial Regulation, December 23, 2019 posting
Wake Up Call for Corporate Leaders
Posted by Lex Suvanto and David Carey, Edelman, on Monday, December 23, 2019
Editor’s Note: Lex Suvanto is Global Managing Director, Financial Communications & Capital Markets and David Carey is Senior Content Advisor at Edelman This post is based on an Edelman memorandum by Mr. Suvanto, Mr. Carey, Laurie Hays, and Josh Hochberg.~Related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors~by Lucian Bebchuk, Alma Cohen, and Scott Hirst (discussed on the Forum here).
What it takes for public companies to pass muster with major investors is changing. Until recently, a laser-like focus on maximizing shareholder returns was singularly paramount. No longer.
A new set of guiding principles, initially set forth in an August statement from the Business Roundtable and reinforced in our survey findings, is gaining acceptance.
Today, stock performance and financial returns are increasingly joined by a new set of investment criteria for leading institutional investors. To measure up, most investors agree, companies must address the needs of a wide range of stakeholders and must implement effective environmental, social-impact and governance (ESG) practices.
These are among the main findings of the new Edelman Trust Barometer Special Report: Institutional Investors. The study, in its third year, surveyed more than 600 institutional investors in six countries managing over $9 trillion in assets.
The report sheds light on pivotal issues shaping major financial institutions’ investment choices, as well as what drives investor trust in companies.
Here are ten insights from this new study:
Investors agree that a multi-stakeholder commitment is essential. 84 percent of investor respondents agree that maximizing shareholder returns can no longer be the primary goal of the corporation, and that business leaders must commit to balancing the needs of shareholders with those of employees, local communities, customers, partners and suppliers.
Overemphasizing shareholder returns can lead to multi-stakeholder activism. 71 percent said that companies will make themselves responsible for employee or consumer activism if they overemphasize shareholder returns at the expense of other stakeholders. Three-quarters say that companies with employee activism are less attractive investments.
Investors are investing more in ESG-excelling companies. 61 percent have increased their investment allocation to companies that excel when it comes to ESG factors, and more than half of investors believe that ESG practices positively impact trust.
More than half of investment firms are hiring more staff for ESG. The growing primacy of non-financial priorities is having an impact on investment-industry hiring, with 56 percent of respondents saying their firms are adding staff to focus on ESG issues.
Cybersecurity, employee health and eco-efficiency are top priorities for investors. 99 percent of respondents expect the Board of Directors (of the companies in which they invest) to oversee at least one ESG topic. Data privacy and cybersecurity, employee health and safety, and eco-efficiency of the company’s operations are the top priorities among other ESG topics in respondents’ plans to engage with the Board in the next 6 months.
ESG has become a leading consideration in voting and engagement policies. 87 percent of respondents say their firms have changed their voting and/or engagement policies to be more attentive to ESG risks, and 86 percent would consider investing with a lower rate of return if it meant investing in a company that addresses sustainable or impact investing considerations.
Investors associate ESG with financial performance. 58 percent of investors recognize a correlation between a company’s operating performance and level of ESG disclosure, and more than half believe ESG initiatives favorably impact a company’s growth and the ability to manage risk.
C-suite compensation should be tied to ESG performance. 52 percent of investors say that linking executive compensation to progress in reaching ESG performance targets would improve their trust in a company.
In the face of activism, Board engagement is as important as management engagement. 86 percent of investors must trust a company’s Board of Directors before making or recommending an investment. The chief ways firms are taking an activist approach are by actively seeking an audience with the Board of Directors and more frequently asking to meet with company’s management.
Company and leadership social media content matters. 96 percent of investors use one or more social platforms on a weekly basis. When evaluating a current or prospective investment, 82 percent of investors consult the company’s social media channels and 79 percent of investors consult the social media channels of a company’s leaders.
Investors are increasingly drawing a straight line between corporate investments and societal value. ESG priorities are no longer optional. This should serve as a wake-up call for corporate leaders.
A new corporate Zeitgeist is emerging—one that promises to shape the economy and society for years to come.