Something we hear frequently at Cornerstone Capital Group is that you cannot invest for impact in the public markets. There is a sense that public companies like Apple, General Motors or Coca-Cola are too big, too well-established, too focused on short-term profitability perhaps, to have impact.
In fact, nothing can be further from the truth.
We believe that not only do public equities serve as a core allocation in a diversified, long-term investment portfolio, they are an important part of an impact strategy.
Public companies are some of the most important and powerful actors in the global economy. Their strategic decisions have social and environmental impact, whether they intend them or not.
In fact, companies that do not take impact into account in their strategic decisions risk having negative effects on the environment, the economy and the society in which they operate — as well as their own long-term performance.
That is why impact investors must be active, engaged owners of public companies. As a company shareholder, you have the power to influence company boards and management through both your proxy vote and your right to engage in dialogue with management in environmental, social and governance topics. Thousands of companies over the years have adopted best practices on these issues after dialogue with shareholders.
Cornerstone recently hosted video forum with some leading voices on corporate governance about their role in holding corporate leaders accountable to shareholders and society. Our panel included:
- Catherine Jackson, Founder of Jackson Principled Governance, a firm that brings the investor and sustainability perspectives into the boardroom to help prudent boards identify, understand and manage their ESG risks and opportunities.
- Karina Litvack, a corporate governance and sustainable investment expert with a 25-year career in finance and sustainable business practice; Karina serves on the Board of Directors of Italian energy firm Eni.
- Timothy Smith, Director of ESG Shareowner Engagement for Walden Asset Management, leading their ongoing shareholder engagement program to promote greater corporate leadership on ESG issues.
- John Wilson, Head of Corporate Governance, Engagement and Research for Cornerstone Capital Group
The panel discussed whether board oversight of corporate strategy include climate and other sustainability issues, and how companies and investors are approaching the issue. The conversation then moved to issues of executive compensation, including whether “say on pay” is working, proper performance incentives overall and for sustainability-related achievements in particular. Lastly, they tackled the question of how involvement by large asset managers like State Street and BlackRock might change the corporate governance landscape.
In an interesting twist, during the call the panelists learned that the ISS (Institutional Shareholder Services) had just issued a statement recommending the entire board of Wells Fargo to be voted out. This led to a spirited discussion of holding corporate leaders accountable to shareholders and society. Our participants sometimes disagreed about the tactics, but strongly agreed that shareholders have a right and responsibility to hold companies accountable. Here is that portion of the discussion:
Cornerstone Capital Investment Advisory recommends public equities fund managers who not only have strong track records of financial performance but are also experts in advocating for a long-term, sustainable approach to corporate governance with portfolio companies.
If you are interested in getting more involved, we have published a primer on how to get started voting proxies. Our report, A Voice in the Boardroom, details the process for proxy voting, and explains the key issues and how to think about voting on them.