2020 Engagement Update

At Clean Yield, we believe in the power – and the privilege – of active stock ownership. The power lies in the ability to elevate different perspectives and voices and spark lasting changes that serve long-term shareholders and stakeholders. This privilege carries responsibilities – to understand the companies in which we invest and with which we engage, to practice informed proxy voting, and to uphold the values of respect and professionalism. We believe that helping companies identify and address environmental and social issues is both morally right and in our clients’ best interest.

We do this work in a number of ways – direct letter writing, dialogue, collaborative engagement with other investors or NGO partners, sign-on letters, filing shareholder proposals – and always with the collective voice of Clean Yield clients at our back. We often find that the most productive engagements happen through dialogue over a period of years, though shareholder proposals can also be an effective tool when our attempts at engagement or dialogue have failed.

This past year, Clean Yield focused its engagements in three areas: workplace equity and inclusion, climate change, and healthy democracy. Information about our work in each of these areas is included below, as well as a table at the bottom summarizing the shareholder proposals we filed. In addition to these three engagement areas, we also engaged with individual companies on an ad-hoc basis. For example, in the wake of George Floyd’s murder and the ensuing protests, we joined other investors in writing to companies with sponsorship ties to the Washington Football Team to pressure the team to change its racist name – which it has agreed to do.

Please note that our engagements focus both on companies that are broadly held in client accounts as well as some that are held by only a few clients (often who held the positions when they came to Clean Yield) and would not be appropriate for Clean Yield clients broadly.

Workplace Equity and Inclusion
This year, we continued to press companies on their workplace practices, specifically their employment clauses and workplace harassment and discrimination. Given the long histories of harassment and discrimination at the big banks, their strong commitments to addressing diversity and inclusion, and their interest in leadership on these issues, we decided to focus our efforts on big banks this year. Previous work on pay equity reporting indicated that leadership can have a ripple effect in this group: When one bank elevates a new best practice in an area, the others may follow suit. Wells Fargo (WFC) demonstrated important leadership when, in response to Clean Yield’s proposal, the company announced the end of its use of mandatory arbitration in employee agreements. A similar proposal was filed with JPMorgan Chase & Co. (JPM) but was withdrawn due to technical issues. We look forward to engaging with JPM on this issue in the coming years. We also wrote letters to several other financial institutions about this issue and look forward to continuing to press them on this issue.

Relatedly, we engaged with companies that needed to improve diversity reporting. So many companies claim to be committed to a diverse and inclusive workplace but fail to be transparent in their workforce demographic data. We filed a proposal with Tesla (TSLA) alongside our friends at Domini Impact Investments. The company has plans to report workforce demographic data in the coming months and is interested in continuing engagement. In recognition, we withdrew the proposal and look forward to engaging with Tesla on this important issue going forward. We also held a conversation with Natus Medical (NTUS) about diversity reporting and expect to continue that engagement as well.

Finally in this area, we filed a proposal on reproductive health care at FedEx (FDX). Access to reproductive health care is critical for people of childbearing age to be able to fully participate in the workforce. The proposal was withdrawn due to a technicality, but we look forward to raising this important issue with FedEx again next year. We are also participating in conversations with many other companies about the importance of ensuring access to reproductive health care for employees.

Climate Change
According to the Alliance to Save Energy, buildings use 70% of the country’s electricity and account for more than a third of our country’s greenhouse gas emissions. Mitigating energy waste and increasing building efficiency represent significant opportunities to reduce greenhouse gas emissions – as well as reap cost savings. This year, Clean Yield continued to engage real estate investment trusts (REITs) around energy and greenhouse gas emissions. Mid-America Apartment Communities (MAA) is on track to publish its greenhouse gas emissions later this year and American Campus Communities (ACC) early next year. In addition, we are collaborating with other REIT investors to develop an engagement strategy that focuses on helping REITs achieve net zero.

The role that banks play in financing the fossil fuel industry also came into focus this year. Clean Yield supported letters to a number of big banks asking them to reassess their lending to fossil fuel projects. We also challenged smaller banks, including Lakeland Financial (LKFN), to more explicitly consider climate risk in their underwriting.

Healthy Democracy
In this election year, the role of money in politics is more important than ever. We believe political transparency increases accountability to shareholders (as well as corporate oversight) and is essential to rooting out the impacts of dark money in politics. Management of political activities is also critical in protecting corporate reputation. In a regulatory environment where corporations can (and do) have outsized impact on the political system, we think this type of transparency is key to protecting the health of our democracy, planet, and people.

This year, we continued our efforts to encourage Loews (L) to disclose its direct and indirect political contributions, as well as the policies and oversight structures governing its political involvement. Loews is a holding company with sizeable operations in the heavily regulated pipeline and insurance industries. While we had a good conversation with Loews, the company was not ready to disclose its political contributions, and so the matter went to a vote. This year, the proposal garnered a respectable 30.9% of the vote – up from 27% last year.

As in past years, we partnered with the Unitarian Universalist Association to ask ExxonMobil (XOM) to disclose its political spending. This disclosure is important because it would allow the company’s owners, its investors, to see how corporate funds are being allocated to influence climate policy – an avenue through which Exxon may have significant climate impact. We had an engagement call with the company and could not come to terms. The matter went to a vote, and our request was supported by 30% of Exxon shareholders – an increase from 26% support last year.

Lastly, we co-filed a proposal with Boston Common Asset Management on lobbying transparency at American Water Works (AWK). The proposal was successfully withdrawn after the company agreed to increase its lobbying disclosure.

Shareholder rights
While we continued to engage with companies, the SEC continued its attempts to stymie the rights of shareholders to file proposals. The SEC is currently finalizing new rules that are expected to have big implications for small investors who wish to file proposals – as well as firms like ours who file proposals on clients’ behalf. We don’t yet know what will make it into the final rules, but we expect significantly more hoops for us and our clients to jump through when we file proposals. The rules are expected to be out in September, so watch this space.

Going Forward
We plan to continue to focus our efforts in the areas of diversity and inclusion, climate change, and healthy democracy in the year ahead.

Other Engagement Issues
Clean Yield also engaged on these issues:

• Toxic chemicals in consumer products
• Pesticides in the agricultural apply chain
• Workplace practices in response to COVID-19
• Racial justice
• Drilling in ANWR
• Fossil fuel financing

Clean Yield Shareholder Proposals 2020