In July 2010, the United Nations General Assembly explicitly recognized the human right to water and sanitation. This notion has formally been incorporated into United Nations Sustainable Development Goal 6. Protecting and restoring water-related ecosystems and improving water quality by reducing pollution are crucial components of this goal.
Seven years later, however, this basic human right still needs protection at the legislative level here in the United States.
The 1977 Surface Mining Control and Reclamation Act was strengthened under President Obama at the end of 2016 with the Stream Protection Rule, a regulation that essentially restricted coal companies from dumping mining waste into streams and waterways. At the time, the Interior Department stated this rule would protect 6,000 miles of streams and 52,000 acres of forests by keeping coal mining debris away from waterways.
However, on February 2, 2017, the Senate voted to repeal the Stream Protection Rule, and two weeks later, President Trump signed the repeal into law.
March 22 is officially recognized by the United Nations as World Water Day, with a specific focus this year on wastewater. Water pollution is a serious and ongoing threat to the environment and the health of surrounding communities. Since Domini’s inception, coal-mining companies have been excluded from our portfolios by our Impact Investment Standards. The abundance of factors connecting coal mining to water pollution and climate change are just some of the many reasons Domini has never invested in these companies.
Today, on World Water Day, we acknowledge the immense influence humans have on the fragility of the global water system and, as investors, recognize the responsibility that we have to help protect it.
If you sit on the board of a publicly traded company, there is only one time of year when you must face your shareholders. For most companies, that time is at the spring annual meeting. Since the 1960’s, shareholders have raised key issues of concern at these meetings, from napalm production to racial discrimination to climate change. On behalf of our fund shareholders, we have submitted more than 250 shareholder proposals over the past 22 years, ensuring that your voice is heard.
The shareholder proposal is a tool to help us persuade companies to see our point of view. They are conversation starters that get executives’ attention, and hold it long enough for us to make our case and, hopefully, effect change. This year, these conversations led to agreements with Best Buy, First Solar, and Target. We also worked with our colleagues at Clean Yield Asset Management to withdraw our proposal at Whole Foods. You can read more about these agreements, or download our Social Impact Update for the First Quarter.
When we are unable to reach agreement, the process reaches a public stage. Our proposal is published in the corporate proxy statement and then put to a vote at the annual meeting. There, we are provided the opportunity to share our views with shareholders, senior management and the board of directors in a brief speech. This season, seven of our proposals went to a vote.
Domini Proposals that Went to a Vote this Season
|3M||De-link executive compensation incentives from share buybacks||6%|
Indirect political contributions disclosure
|Chipotle Mexican Grill||
Political lobbying disclosure
Indirect political contributions disclosure
|UPS*||Political lobbying disclosure||23%|
*Domini is serving in a supporting role in these engagements.
The Chipotle annual meeting was a lively one, following a nationwide rash of e-coli and norovirus outbreaks that has battered confidence in the brand. Our speech began with a reminder that issues of sustainability, including decent working conditions and healthy ecosystems, are key to the long-term success of this company. After several years, however, the company still fails to provide comprehensive information to help us understand how it is managing its key sustainability risks. Chipotle says they’d rather do the work than tout their successes. Our speech sought to educate the Board about the critical importance of sustainability reporting to risk management:Sustainability reporting is about accountability, not marketing.
We were told that Chipotle will be releasing more information around sustainability and that we will be happy with the results. Our proposal’s strong 43% vote should send a strong signal that our message resonates with the company’s shareholders.
The Domini Social Bond seeks to have a positive impact across multiple key themes, including affordable housing, education and climate mitigation. In the second quarter, securities Domini characterizes as “high impact” represented 14.7% of the Fund’s total portfolio, including the following two examples, which were added to the portfolio during the quarter.
In the second quarter, the Fund purchased a bond issued by the Indiana Finance Authority. Proceeds from this bond will finance construction of a new public mental health care facility, the Neuro-Diagnostic Institute and Advance Treatment Center, for medically underserved populations in the state. Within the last 50 years, Indiana’s supply of inpatient psychiatric beds declined significantly from 6,000 to 800 in 13 state-operated facilities for patients with mental health and developmental disabilities. The new facility will be Indiana’s flagship mental health facility for those with mental illness and addictions.
The Fund holds a general obligation green bond issued by the State of Massachusetts. Proceeds from this bond are used for climate adaptation and mitigation, including storm water management, energy efficiency and conservation in state buildings, open space protection, habitat restoration and preservation, and environmental remediation and river revitalization projects throughout Massachusetts. In 2013, Massachusetts became the first state to issue a green bond. The state has provided increasingly transparent reports each year to allow investors to measure the environmental impact of these issuances.
In August, the New York Times reported that Coca-Cola was funding an organization called the Global Energy Balance Network (GEBN), which promoted scientific research on obesity. The organization was accused of emphasizing the need for exercise, shifting the blame for obesity away from sugary beverages. Coke’s CEO, Muhtar Kent, responded with an op-ed in the Wall Street Journal, pledging to ‘do better.’ In that piece, he noted that in addition to disclosing all of its spending relating to addressing obesity, the company would “engage leading experts to explore future opportunities for our academic research investment and health and well-being initiatives,” led by Sandy Douglas, President of Coca-Cola North America. Coke’s subsequent disclosures led to a series of articles in the Times. Ultimately, GEBN was shut down and Coke’s head scientist took an early retirement.
We have had constructive engagements with Coca-Cola on a wide range of issues, for many years, including human rights, water use and recycling. On the basis of this relationship, we were invited to participate in a one-on-one call with Mr. Douglas, as part of his expert “listening tour.” We discussed what he has learned so far from the public health experts he’s met with, Coke’s historical response to the problem of obesity and some changes they will be making. We look forward to continuing this dialogue.
Investors, companies and the general public have a strong interest in maintaining the integrity of scientific research. We are therefore encouraging companies that fund research to fully disclose these expenditures. In addition to Coca-Cola, we have also opened dialogue with Pepsi to discuss its approach to scientific funding, and to encourage greater transparency.