Subject: Comment on File S7-22-19
From: Robert Andrew Davis

Feb. 4, 2020

Comment on File S7-22-19

Dear Ms. Countryman,

I write as an individual investor who is deeply concerned about the
proposed SEC Rules related to the filing of shareholder resolutions. I
have participated as a cofiler of resolutions on important governance
, social and environmental issues. In doing so I have worked with my
investment manager which manages my portfolio.  I believe it is
important to protect the rights of small individual investors so they
can participate in petitioning companies using shareowner resolutions
if they so wish .

Even though I am a small personal investor , I believe the issues I
have helped raise with companies are important from a personal
viewpoint but also in protecting the value of our portfolios. Yet the
SEC seems to be promoting an anti-shareholder agenda by creating a set
of significant hurdles for any investor wishing to file resolutions.
It makes me worry that I or other small individual investors may need
to hire a lawyer to navigate these new rules if they were put in
place. That is far from being investor friendly !

 So please count me as opposed to this new complicated set of Rules.
We should be opening the door for people who put their funds into the
market to be able to have access to companies where they are
shareholders, not place obstacles in their path .

The recent announcement and stories about State Street drew my
attention and i wanted to use it as an example as  I  urge you to
rethink the SEC’s  limits on shareholder resolutions. I ask you to
study this is detail and assess how the new Rules would provide an
impediment to State Street and other managers and investors as they
seek information to make informed decisions.

As you will see in the stories below , State Street has announced it
will press companies on ESG including climate change which will also
affect their votes on Board members . They have created something they
call a “ responsibility factor” , which lets them evaluate and score
companies on their ESG record . This is turn informs and affects their
engagements with companies and even decisions on how they will vote on
selected Board members.

 But essential to their work is information and information on a
company’s ESG record. And we all know the level of meaningful
disclosure varies greatly among companies . Thus it is important to
have an open process to be able to address companies and encourage
them to provide full information especially on financially material

This is where the shareholder resolution comes in . As we look back on
50 years of ESG resolutions we see that a significant number of them
asked companies to report on diversity metrics, or environmental
programs, or political and lobbying expenditures, or human rights in
the supply chain . As State Street’s announcement reinforces, these
are not fringe issues that can be dismissed as “ political “ or
unrelated to the bottom line.  They are relevant and important in
assessing risk a company faces for example.

Yet the SEC proposals make it more difficult for a small investor like
myself, or a foundation, religious investor or pension fund to file a
resolution seeking such information with a recalcitrant company. In
that sense, the SEC’s proposed rules serve to block the ability of
State Street which votes on such resolutions to use an important tool
to expand their information base. And it certainly limits the ability
of average investors from joining resolutions seeking such information

In that sense the SEC is not helping investors of any size in their
desire to be effective stewards of their investment portfolios. I
would urge you to vote to delay this proposed rule until more study
can be done.


Robert Andrew Davis
Edith Parkman Homans


State Street announces it will press companies on ESG including
climate change which will affect their votes on Board members .
Building on BlackRock’s announcements on their climate expectations of

State Street vows to turn up the heat on ESG standards

Fund manager will vote against boards of companies that lag behind peers

Robin Wigglesworth in Oslo, January 28, 2020 12:30 pm

State Street’s $3.1tn investment arm is planning to start voting
against the boards of big companies that lag behind on environmental,
social and governance standards, a threat that is likely to
reverberate in many corporate boardrooms.

State Street Global Advisors, one of the biggest shareholders in many
blue-chip companies thanks to its position as one of the world’s
largest index fund providers, last year introduced what it calls a
“responsibility factor” — a scoring system that measures how well
companies do on various ESG metrics.

Starting this coming proxy season, SSGA will “take appropriate voting
action” against board members at big US, UK, Australian, Japanese,
German and French companies that are laggards based on this measure
and “cannot articulate how they plan to improve their score”,
according to a letter being sent out to boards this week.

Initially SSGA will focus on a smaller cohort of companies that are
performing particularly poorly, but beginning in 2022 it will also
start voting against the board members of all companies that have
consistently underperformed their peers.

“Ultimately, we have a fiduciary responsibility to our clients to
maximise the probability of attractive long-term returns — and will
never hesitate to use our voice and vote to deliver better performance
for them,” said Cyrus Taraporevala, SSGA chief executive, in the
letter. “This is why we are so focused on financially material ESG

Diversity, sustainability and climate change have moved towards the
top of corporate agendas in recent years, with many investors
demanding that companies do better on a wide variety of matters that
fall under the ESG umbrella.

European investment groups have led the charge by targeting
individuals over apparent ESG failings. Legal & General Investment
Management voted against the election of 3,864 directors globally in
2018, citing climate change, diversity or other governance factors.
UBS Asset Management and Allianz Global Investors have also increased
their votes against directors over ESG-related concerns.

US fund managers have generally been more reluctant to take similar
actions, but State Street said a related diversity push since 2017 has
managed to get 583 companies to add or commit to adding women to their
boards. Meanwhile BlackRock’s founder Larry Fink sent a letter this
month to corporate executives arguing that “in the near future . . .
there will be a significant reallocation of capital” because of the
threat of climate change, in particular.

“Awareness is rapidly changing, and I believe we are on the edge of a
fundamental reshaping of finance,” Mr Fink wrote, saying that the
$7tn-in-assets investment group would incorporate ESG fully into its
investment framework and insist on companies disclosing
sustainability-related metrics.

SSGA’s “R-factor” is based on a system constructed by the
Sustainability Accounting Standards Board, a San Francisco-based
non-profit. In 2018 SASB rolled out an ESG disclosure framework
designed specifically for investors, which has now been adopted by
money managers with more than $30tn of assets.

State Street sees the SASB’s framework as a minimum set of standards
that companies should reach, and uses it together with other data
inputs to rank companies both against local and industry peers.
Companies can ask SSGA for their scores.

Tying the R-factor to how it will vote may help State Street shape the
disparate ESG ratings industry. “We believe a company’s ESG score will
soon effectively be as important as its credit rating,” Mr
Taraporevala wrote.

Some investment group executives have been concerned that embracing
ESG too zealously might alienate some clients, or stir up concerns
that the asset-management industry’s biggest players have too much
sway in corporate boardrooms.

Wary of being accused of over-reach, investment groups stress that
improving ESG standards, especially with respect to climate change and
diversity, is vital because of the real financial consequences for

“We believe that addressing material ESG issues is good business
practice and essential to a company’s long-term financial performance
— a matter of value, not values,” Mr Taraporevala said in his letter.

Additional reporting by Attracta Mooney



In its annual letter to boards sent yesterday, State Street Global
Advisors, the $3 trillion-plus investment arm of State Street,
redefined what it considers “shareholder value.”

The letter is signed by Cyrus Taraporevala, CEO and president of the
Boston-based investing giant. With it, he includes a suggested
environmental, social and governance (ESG) oversight framework
designed for company directors who are still trying to get their heads
wrapped around ESG and what it means.

As if Milton Friedman hasn’t been rolling around in his grave enough
already, Taraporevala goes on to argue that shareholder value is
increasingly driven by challenges such as climate change, labor
practices and consumer product safety.

Responding to these challenges is "a matter of value, not values," he
contends, adding: "We believe that addressing material ESG issues is
good business practice and essential to a company's long-term
financial performance."

State Street Global Advisors first called on boards to consider
sustainability across the ESG spectrum back in 2017 and has since
engaged with a number of companies around ESG issues. The world's
third largest asset manager also made its mark on the financial sector
with efforts like the Fearless Girl campaign, which sought to increase
the number of women on corporate boards.

Still, there’s plenty of work to be done. Less than 25 percent of the
companies evaluated by the firm have genuinely "identified,
incorporated and disclosed" material ESG issues within their overall

But the asset manager isn’t only wagging its finger and scolding —
Taraporevala says it's willing to work with clients on these
challenges. To that end, it launched what it calls the R-Factor tool,
a risk scoring system that measures how companies are performing based
on financially material as well as industry-specific ESG issues. The
tool generates ESG scores for more than 6,000 listed companies
globally, which State Street Global Advisors uses to help clients
understand their portfolio risk exposure. Beginning this year, the
asset manager will also use its proxy voting power to take action
against companies with low ESG scores.

“Ultimately, we have a fiduciary responsibility to our clients to
maximize the probability of attractive long-term returns — and will
never hesitate to use our voice and vote to deliver better performance
for them,” Taraporevala asserted. “This is why we are so focused on
financially material ESG issues.”

Leon Kaye
Managing Editor, TriplePundit
News Editor, 3BL Forum
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