Fixed-income investments provide an important opportunity to create public goods, address a wide range of economic disparities in our society, and to fill certain capital gaps – funding needs that have often received insufficient attention from investors. We seek to address some of these disparities through the investments of the Domini Social Bond Fund, while simultaneously seeking to achieve competitive returns for our Fund’s investors.
The following provides an overview of the social and environmental objectives of the Fund, particularly those addressing access to healthcare, climate change and affordable housing.
Standard Setting by Asset Class
Stock ownership offers the opportunity to set standards for corporate behavior and to influence management through the exercise of shareholder rights. Fixed income investments offer a different set of opportunities for long-term, lasting impact.
If you think of a bond as a loan, the key questions for responsible lenders should be: To whom am I loaning my money and for what purpose? Despite some of the complex details of the fixed income markets, we believe these are the threshold questions that responsible investors should ask.
Domini’s Global Investment Standards are directed towards two long-term goals: universal human dignity and the preservation and enrichment of the environment. The standards applied to the Domini Social Bond Fund’s portfolio focus on three key themes:
- Increasing access to capital for those historically underserved by the mainstream financial community
- Creating public goods for those most in need
- Filling capital gaps left by current financial practice
These three themes flow from our belief that healthy economies must be built on a strong foundation of fairness and opportunity for all.
We look to diversify our holdings in the Fund across a broad range of social issues, including affordable housing, small business development, education, community revitalization, rural economic development, the environment, and health care.
Below, we provide examples of several types of fixed income investments and the standards we utilize to select the Fund’s holdings.
Governments around the world issue bonds (or “debt”) to finance a wide variety of public goods including education, infrastructure, national defense, the judiciary and social welfare. Although sovereign debt is issued to finance such public goods, debt raised by governments with a history of corruption can be misallocated and misused at the expense of the well-being of the nation and their own citizens.
We therefore use indicators of political freedom and corruption, including Transparency International’s global corruption index, to eliminate from consideration certain countries’ bonds. We use these threshold indicators to help us to identify a country’s ability and willingness to utilize the proceeds of these offerings for proper purposes.
In addition, we will not invest in debt issued by certain “tax haven” jurisdictions -- countries characterized by low or no taxes, financial secrecy laws, and light regulation. Tax havens can help to facilitate criminal activity, including allowing dictators to shelter embezzled funds, and wide scale tax avoidance by corporations and wealthy individuals. Tax havens foster global economic inequality, which is destabilizing to the financial markets and to society.
We do not invest in U.S. Treasuries or Russian government debt, as these instruments partially finance the maintenance of these countries’ nuclear weapons arsenals. The United States and Russia possess over 90% of the world’s nuclear warheads. We believe they carry a special obligation to eliminate this global threat.
We generally consider municipal bonds – debt issued by states, cities or counties or other quasi-public organizations-- to be closely aligned with our investment objectives, particularly when they are issued by jurisdictions with below-average resources. They can help to finance the creation of substantial public goods, such as transportation infrastructure, educational facilities, brownfield redevelopment, technical assistance for small enterprises, and other services needed to close the gap between these localities and the rest of society.
Municipal bonds can also help to ensure broad access to environmentally beneficial technologies to all members of society. We therefore look to invest in municipal bonds that generate environmentally positive impacts for underserved communities. Municipal issuers have a key role to play in terms of climate adaptation, disaster prevention and recovery. We are seeking to purchase these types of bonds as well.
We will seek to avoid purchasing the relatively few government-issued bonds that are explicitly issued to finance the development of projects, such as nuclear power plants or casinos, which are fundamentally misaligned with our investment objectives.
The Domini Social Bond Fund has maintained a long-term commitment to affordable housing, which the Fund supports primarily through the purchase of securities backed by pools of mortgages.
Fannie Mae and Freddie Mac, two U.S. government-sponsored entities, play a particularly prominent role in increasing access to affordable housing and sustaining the housing recovery in this country. Among the range of debt instruments they offer, those targeted to low income neighborhoods, low-income borrowers, multi-family housing or specific community revitalization projects have a particularly direct social impact. Also, these institutions have specific programs to help homeowners stay in their homes or otherwise avoid foreclosure. These efforts have helped to stabilize neighborhoods, home prices, and the housing market.
Green Bonds are designed to finance projects and activities that address climate change or serve other environmentally beneficial purposes. These environmentally themed bonds are rapidly growing as a new asset class, with issuers including supranational banks, governments, and corporate entities. The market for green bonds more than tripled in 2014, rising from only $3-5 billion per year between 2007 and 2012 to $39 billion in 2014.
Today, we are cautiously optimistic about the development of this new asset class. The stakes are high, however, as this market develops. We are concerned, for example, that an overly aggressive use of the word “green” could conceal environmentally harmful impacts, threatening the credibility of this important avenue for financing critical unmet environmental needs. We therefore established our own guidelines to identify appropriate green bonds for the Fund, considering the social and environmental record of the issuer as well as the specific purpose of the bond.
Our Approach to Green Bonds
The following are some of the key questions Domini asks when evaluating green bonds:
- Who benefits from the proceeds of the bond? We favor investments that generate positive impacts for people and communities in need, with a special focus on vulnerable groups, including low-income populations, minorities, and immigrants.
- Can the proceeds from the bond contribute to innovations that address serious sustainability challenges? We favor investments such as those mitigating the impacts of fossil fuels in energy-intensive industries, promoting energy efficiency, or otherwise addressing environmental and social justice issues.
- What is the quality of the issuer’s relations with communities, customers, employees, suppliers and the environment? Does the issuer maintain credible due diligence processes to address environmental and social risks?
We will seek to avoid the following:
- Bonds that finance projects with substantial sustainability concerns such as first-generation biofuels, waste-to-energy plants using toxic substances, or projects that prolong fossil fuel dependence such as carbon capture sequestration or refurbishment of coal power plants.
- Bonds issued to finance nuclear power, activities related to the mining of coal or uranium, or the production of weapons, tobacco, alcohol or gambling.
Significant capital will be needed to finance the transition to a low carbon economy and adapt to the physical impacts of climate change. For example, while current investments in clean energy alone are approximately $250 billion per year, the International Energy Agency has estimated that limiting the increase in global temperature to two degrees Celsius above preindustrial levels requires average additional investments in clean energy of at least $1 trillion per year between now and 2050.
We believe that the real estate industry is in a unique position to reduce greenhouse gas emissions through energy efficiency improvements that are low cost and that create value within the underlying asset. We have therefore purchased several bonds designed to finance green buildings. In particular, we are looking for the U.S. Green Building Council’s LEED (Leadership in Energy and Environmental Design) certification, a comprehensive green building certification program that recognizes best-in-class building strategies and practices.
For many years, Domini has incorporated concerns about the environmental risks of companies owning and producing fossil fuels into our investment standards. Over time, we have gradually eliminated an increasing number of these firms from our holdings as our concerns about a variety of environmental and safety issues, including climate change, have increased.
We have never held coal-mining companies, and have historically approved very few major integrated oil companies. In recent years, we have excluded the few integrated oil companies that we had previously approved, and eliminated an increasing number of the smaller oil and gas companies from our list of eligible investments, due to concerns over safety or the environment.
We had historically favored companies focused on the production of natural gas because it burns more cleanly than oil. But as innovation took hold and hydraulic fracturing became widely used, we began to differentiate between the records of these natural gas companies. Due to increasing concerns about methane emissions, safety and community health issues, we gradually reduced the number of natural gas companies approved, until we divested from this segment of the energy industry entirely.
Companies that are owners and producers of oil, natural gas or coal reserves are now ineligible for investment by our funds.
We have made each of these decisions in light of the financial, environmental and moral concerns associated with fossil fuels and in recognition that an increasing portion of the responsible investment community has found divestment a productive avenue to further debate on climate change, one of the most important and difficult issues of our time.
In addition to using social, environmental and governance standards to select our investments, each year the Domini Social Equity Fund submits shareholder proposals to corporations in its portfolio, addressing a broad range of social and environmental issues. Since 1994, the Fund has submitted more than 250 proposals to more than 95 major corporations.
Frequently, companies will reach out to us to see what steps they could take to convince us to withdraw our proposal and avoid a shareholder vote on the issue. A high vote on a proposal is nice, but we always prefer to withdraw our proposal in exchange for an agreement. Over the years, often in partnership with other investors or NGOs, we have convinced numerous companies to adopt new policies to protect factory workers and the environment, and to enhance public transparency.
In the first quarter of 2015, we withdrew four proposals in exchange for the following commitments:
Lowe’s, the world’s second largest home improvement retailer, agreed to eliminate neonicotinoid pesticides — a leading contributor to global bee declines — from its stores by 2019. The company will also redouble its pesticide management efforts with its plant suppliers, and will begin a variety of consumer education initiatives focused on pollinator health. Lowe’s has also informed us that it now offers a full range of natural or organic alternatives to its synthetic pesticide offerings. Read more about this important announcement.
Avon agreed to review and revise its palm oil purchasing policies to address impacts on deforestation and human rights. Avon utilizes palm oil derivatives (products derived from palm oil) in a wide variety of products. About 60% of the palm oil consumed globally is in the form of derivatives. Read more about this important announcement.
Southwestern Energy committed to publishing annual methane emission reduction targets and to include these targets in determining bonuses for management and staff. Methane is a relatively short-lived, but potent, greenhouse gas. The company is leading a group of companies called the ONE Future Coalition, a collaborative effort to reduce methane leakage below 1%, from the well-head to your kitchen burner. Southwestern, however, has not set its own targets yet. This is the first time the company has publicly committed to do so.
MeadWestvaco agreed to full disclosure of its political contributions. Thanks to concerted efforts by investors, including Domini, more than 140 large corporations now disclose their political spending so that they may be held accountable by their investors and consumers.
Friends of the Earth, Domini Social Investments and Trillium Asset Management praised Lowe’s (NYSE: LOW) for making a commitment to eliminate neonicotinoid pesticides — a leading contributor to global bee declines — from its stores.
After input from suppliers, NGOs, investors and other key stakeholders, the company announced it will phase out neonicotinoids (“neonics”) as suitable alternatives become available, redouble existing integrated pest management practices for suppliers and provide additional material educating customers about pollinator health.
“We commend Lowe’s for taking a leadership position on this critical issue,” said Adam Kanzer, Managing Director and Director of Corporate Engagement at Domini Social Investments. “Sales of neonic-containing products may be exacerbating a critical systemic risk – alarming declines in honeybees and wild pollinators that support our food systems. As investors and as human beings, we all depend upon pollinators. We believe Lowe’s actions will help protect an irreplaceable resource.”
“We are pleased Lowe’s is listening to consumer concerns and to the growing body of science telling us we need to move away from bee-toxic pesticides by taking steps to be part of the solution to the bee crisis,” said Lisa Archer, Food & Technology Program Director at Friends of the Earth. “Bees are canaries in the coalmine for our food system and everyone, including the business community, must act fast to protect them.”
“Lowe’s public commitment will better position the company to meet the demands of an increasingly environmentally-conscious consumer base. And, it sends an important market signal that restricting the use of bee-harming pesticides is essential to tackling bee declines,” said Susan Baker, Vice President, Trillium Asset Management. “We applaud the company’s positive steps on this issue.”
Friends of the Earth Campaign
This announcement follows a two-year campaign led by Friends of the Earth and allies* to urge Lowe’s and other garden retailers to stop selling plants treated with neonicotinoids and remove neonic pesticides from their shelves. More than one million people signed petitions and thousands of activists delivered letters directly to Lowe’s stores in cities across the U.S. and Canada asking for this change.
A study released by Friends of the Earth and Pesticide Research Institute, Gardeners Beware 2014, showed that 51 percent of garden plants purchased at Lowe’s, Home Depot (NYSE: HD), and Walmart (NYSE: WMT) in 18 cities in the United States and Canada contained neonicotinoid pesticides at levels that could harm or even kill bees. In the past year, more than twenty nurseries, landscaping companies and retailers—including Home Depot, Whole Foods (NASDAQ: WFM) and BJ’s Wholesale Club have taken steps to eliminate bee-killing pesticides from their stores. The UK’s top garden retailers including Homebase, B&Q and Wickes, have also stopped selling neonicotinoids.
Investor Engagement on Pollinator Declines
Investors, in collaboration with the Investor Environmental Health Network, began engaging home improvement retailers and food companies in their portfolios about the environmental risks of neonics in 2013, the year Domini and Trillium opened conversations with Lowe’s about the topic.
While Domini and Trillium had constructive dialogue with Lowe’s, the investors chose to submit a shareholder proposal in November to stress the urgency of the issue. The proposal, submitted by the Domini Social Equity Fund (Ticker: DSEFX) and by Trillium Asset Management, on behalf of Ellen Webster, asked the company’s Board of Directors to conduct a risk assessment of its environmental protection policies and practices to determine whether continued sales of neonicotinoid-containing products are in the best interests of Lowe’s, its consumers and its shareholders.
The investors withdrew the shareholder proposal in response to new commitments which will help the company provide its customers with products that promote healthy gardens and reduce risks to pollinators and other beneficial organisms.
- A time-bound phase out of neonicotinoid (“neonics”) containing products in shelf products and plants, to be completed by the Spring of 2019, as suitable alternatives become available. For nurseries, Lowe’s will phase-out neonics for bee-attractive plants, and plants where regulatory requirements do not require the application of neonics (certain states require the application of neonics on certain plants and nursery material). Lowe’s plans to implement this phase-out as soon as is practicable.
- Redoubling pesticide management efforts and the addition of an application reduction plan with plant suppliers, including the collection and sharing of growers’ best practices around use of biological controls and integrated pest management (“IPM”) practices, and research into best alternatives. Nurseries will be required to disclose to Lowe’s the amount of pesticides used per acre, or a similar metric.
- Increased focus on consumer education initiatives including in-store distribution of EPA and Pollinator Partnership pesticide brochures and product tags which will highlight the health of bees and other pollinators.
- Funding of pollinator gardens through the company’s philanthropic and volunteer programs.
- Disclosure of these efforts in its 2014 Corporate Social Responsibility Report.
- Continued dialogue with Domini, Trillium and Friends of the Earth focused on implementation and public reporting of these commitments.
“Along with our allies, we will continue to work with Lowe’s and other retailers to move neonicotinoid pesticides off their shelves and out of garden plants as soon as possible to ensure bees can find save havens in our backyards and communities,” said Archer. “With a new spring planting season upon us, it’s important for gardeners to be aware that many plants in stores today still contain neonicotinoids. We look forward to the day shoppers can buy home garden plants without worrying about harming pollinators.”
Lowe’s announcement comes eight months after a meta-analysis of 1,121 peer-reviewed studies by the Task Force on Systemic Pesticides concluded neonicotinoids are a leading factor of bee declines and are harming birds, earthworms, butterflies and other wildlife. The Task Force called for immediate regulatory action.
In October, 2014, the Council on Environmental Quality issued guidance for federal facilities and federal lands which included acquiring seeds and plants from nurseries that do not treat these items with systemic insecticides.
On April 2, the EPA announced a moratorium on new or expanded uses of neonicotinoids while it evaluates the risks posed to pollinators. Last month, more than four million Americans signed petitions calling on the Obama administration to put forth strong protections for bees and other pollinators. The Pollinator Health Task Force, established by the White House this past June, is charged with improving pollinator health, and assessing the impacts of pesticides, including neonicotinoids, on pollinators.
The complexity of our food production systems is astounding, as are its staggering impacts on climate change and human rights. Any given meal or afternoon snack can touch on issues as far-ranging as the survival of the orangutan or a land rights dispute in Africa. Climate change, water scarcity, nutritional content, marketing to children, animal welfare and labor rights are all on the table.
Behind each familiar brand lies a complex set of relationships stretching across the globe. We view these relationships as opportunities for positive impact. As investors, we can create the incentives for companies to simultaneously be more transparent and to dig deeper to ensure their businesses are operating responsibly. Through your investment in the Domini Funds, your money is working to help catalyze this process of transformation.
For example, deforestation is an important driver of climate change, accounting for an estimated 10 percent of greenhouse gas emissions. The Consumer Goods Forum, an industry association, has acknowledged that “the consumer goods industry, through its growing use of soya, palm oil, beef, paper and board, creates many of the economic incentives which drive deforestation.” All 400 members of the Forum, representing all the world’s major consumer goods manufacturers, retailers and service providers, have committed to zero net deforestation by 2020.
Who will hold these companies accountable for these commitments? What do they mean in practice?
The shareholder proposal is an effective tool for encouraging corporate management to come to the table to discuss our concerns. We developed a proposal that we have submitted to several of the largest food companies, asking for public reports assessing each company’s impact on deforestation and its plans to mitigate these risks. We’ve asked these companies to report on their impact by commodity, as each carries its own set of risks and possible solutions. Among these commodities, palm oil has received the most attention because its production is responsible for large-scale forest conversion in the tropics and extensive carbon emissions.
At Domini Social Investments, the research we conduct to understand the dynamics of our food systems is core to the investment process. Whether it is expressed in the avoidance of many manufacturers of agricultural chemicals, in the search for systems that provide safer food for all, or in the proxy votes we cast or the hard questions we ask of corporate managers, we view our social and environmental standards as key to the process of helping both the public and corporations understand what is at stake.
Download our new Annual Report (PDF) to learn more about the ways the Domini Funds are helping to promote better food production around the globe, including our approach to local and organic sourcing, genetically modified organisms, pesticide use and deforestation.
About 50 years ago, The New Yorker published a cartoon that tickled my father’s funny bone, so he got the artist to give him the original. It featured two men looking at a large flip chart on which was drawn a five-story urban type of building, such as you might see in any city. One man was explaining to the other, “It is designed to use modern energy-efficient technology, with windows that open to let cool breezes in.” Because of that cartoon, I know that people have been talking about the lost art of energy savings for 50 years or more.
When you start looking at the many ways to preserve energy that the typical Victorian knew but that we have forgotten, it gets a bit disheartening.
My neighbor used to have those outdoor awnings covering each of her windows. When you walked into her house on a hot summer’s day, the temperature dropped fifteen degrees. That’s because the glass in the window magnifies heat from the sun. If you don’t let the sun hit the window, you get a much cooler house. Then she’d open the windows at night to let the cooler air in, closing them again the next morning.
I’ll admit, I just don’t like air-conditioning. Somehow it just feels wrong. So I began this article with cooling ideas, but there are other energy savers that have fallen from use. Refrigerators keep getting bigger and bigger, and really, they use energy that our forebears didn’t have so didn’t waste.
A friend of mine grew up in a house built in 1699, with a cellar, not a finished basement; it had a dirt floor. The family had one room down there with floor-to-ceiling shelves. Fresh eggs were stored there for a month or more. Potatoes, carrots, beets, winter squashes, along with apples and pears and grapes, sat in baskets on the shelves. Jars of jam could be left happily for several years with wax poured over the top. The melted wax adhered to the top of the jelly. Since nothing could get in, not even air, there was no mold, so no germs. Even with the door closed, it got enough heat from the kitchen so that nothing froze, but much could be stored there that today would have to be refrigerated.
I’m not trying to make a case that the world should return to dirt floors in the basement. We are creatures of the generation we grew up in. But it is important to remember that we’re not taking the simple steps we could be taking to do our own part in the fight to save the planet from extinction. Climate change is too big a price to pay for personal convenience. So let’s get serious about the steps we can take.
First, let’s change our lightbulbs. Electric lighting accounts for roughly 25 percent of the energy the average home uses. Yes, the newer, more efficient bulbs cost more up front, but estimates say they save you $20 over the lifetime of the bulb. I don’t argue that lower cost is a reason to swap; I only use it to point out how much extra energy the old bulbs are wasting.
Next, let’s think efficiency when we consider the purchase of a car. My city has cars you can rent by the hour, and I’ve found that these work fine for most every need I have. But I do live in a city. If you need a vehicle, at least check the fuel efficiency and factor that into your calculation of the real price of the car. The new electric cars get the miles-per-gallon equivalent of roughly 60 to 120. In other words, they cost you less to fuel (a lot less), and they don’t pollute as you drive.
My last thought will surprise some. Let’s buy more secondhand. As a society, we create an awful lot of new stuff, and making new stuff uses energy. So does shipping new stuff, packaging new stuff, and lighting the stores that sell new stuff. Buying secondhand is fun and an adventure. It supports local owners and nonprofits. But importantly, it saves energy.
That cartoon on the wall is 50 years old and is as amusing today as it was when it was drawn. We giggle at the thought of claiming that opening windows is the height of new technology. But there is an important message there.
Sometimes simple steps are important.
Domini was honored to be invited to participate in an event on board Greenpeace’s flagship, the Rainbow Warrior III, to celebrate progress in the protection of the canyons of the Bering Sea. We were asked to say a few words about our engagement with companies on sustainable seafood, and our interest as investors in preservation of these important undersea canyons. The small audience included Greenpeace staff and the ship’s crew, as well as a government scientist and members of the fishing industry (Read Greenpeace's blog post on the event).
Greenpeace has been diligently working to protect the Bering Sea canyons, a delicate ecosystem that is threatened by the lucrative Alaska pollock fishery. The area is a breeding ground for pollock and other species, and its exploitation threatens the entire fishery. Over the past year, we have raised these concerns with McDonald’s and Costco, two major seafood buyers.
On the eve of a critical meeting of the North Pacific Fishery Management Council in Juneau, Alaska, Greenpeace’s Oceans Campaign Director John Hocevar reached out with an urgent appeal. Despite serious scientific studies supporting the need for conservation, the Pollock fishermen were standing in the way of the development of a plan. We contacted both companies to ask them to intervene and were pleased to learn that our email to McDonald’s was circulating at the meeting. According to Hocevar:
“I do not know the details of what McDonald’s did, but it definitely got people’s attention in a very constructive way and was greatly appreciated by all of us in Juneau trying to move this issue forward.”
Greenpeace is cautiously optimistic that they now have a plan in place that they can work with. When shareholders express their concerns, it can make a big difference. We were pleased to play a small role in moving this issue forward on behalf of our Fund shareholders, and thank McDonald’s for their efforts.
A 2013 Time Magazine cover story envisioned "A World Without Bees." One third of U.S. honeybee colonies died or disappeared last winter, a 42% increase over the year before and well above the normal 10-15% losses. This alarming trend has been dubbed “Colony Collapse Disorder” (CCD), a global syndrome that is killing off honeybees in alarming numbers.
Why should investors worry about honeybees? Honeybees are the most economically important pollinators globally, and bee die-offs attributed to CCD pose serious threats to our food supply. According to the US Department of Agriculture, “Bee pollination is responsible for more than $15 billion in increased crop value each year” and “[a]bout one mouthful in three in our diet directly or indirectly benefits from honeybee pollination.” The USDA warns that if losses continue at current levels, “it could threaten the economic viability of the bee pollination industry. Honeybees would not disappear entirely, but the cost of honeybee pollination services would rise, and those increased costs would ultimately be passed on to consumers through higher food costs.” Crops dependent upon honeybees include almonds, blueberries, apples, lemons, zucchini – the list goes on. Honeybees provide an invaluable service that has no substitute. As Time Magazine warned, “eliminate the honeybee and agriculture would be permanently diminished.” Other pollinators, including bumblebees, are also at risk.
Although the causes of this ongoing crisis remain unknown, recent studies show that even low doses of exposure to the class of pesticides called neonicotinoids (or “neonics”) undermine bee immunity against pathogens and impair critical brain functions, and may be a contributing factor to CCD. The European Union has taken steps to ban certain neonics, and the EPA has issued warning labels.
As diversified investors, the Domini Funds hold shares in companies dependent on pollinators at several points in their supply chains. Working with other concerned investors, we sent letters to food producers, retailers and home improvement retailers who sell pesticides, including Mondelez International and Lowe’s, where we are taking a lead role. Lowe’s sells neonicotinoid-based pesticides and has been targeted by a Friends of the Earth campaign on this issue. We also spoke with Campbell’s about their approach to pesticide use in their supply chain. We will be encouraging companies to review the science and the risks of neonicotinoids and other pesticides to pollinators, and to act accordingly.
Home Depot to Phase Out Bee-Killing Pesticides (Links to third-party website.)
At the request of Ceres, during the second quarter we contacted AT&T, Google, American Express, Lowe's and Apple to seek their assistance in defeating a rollback of renewable energy portfolio standards (“REPS”) in North Carolina that was orchestrated by the American Legislative Exchange Council (ALEC). REPS are critically important in encouraging electric utilities to increase production from renewable energy sources. In the end, ALEC’s effort was temporarily defeated in the State legislature.
During the quarter, we also signed two Ceres-authored documents—a declaration by businesses supporting strong climate legislation, which was referenced in President Obama’s historic June speech on climate change, and a letter to the EPA expressing our strong support for proposed Motor Vehicle Emission and Fuel Standards, designed to reduce harmful emissions of carbon monoxide, nitrogen oxide, and volatile organic compounds.
Domini does not invest in coal companies, but we may be able to have an influence on that industry through its bankers. PNC Financial Services has been a long-term holding in the Domini Social Equity Fund. As a Pennsylvania-based bank, PNC has a number of large coal-mining clients and has, in the past, directly financed mountaintop coal removal, a destructive practice that adds to the already unacceptable environmental damage done by the coal industry. In 2010, in response to public pressure, PNC adopted a mountaintop removal (MTR) policy prohibiting direct financing of the practice. The bank, however, like many other mainstream banks, continues to service coal-mining clients.
Although we have monitored developments for some time, in 2012 we received an email from a concerned Domini shareholder that pushed us to dig a bit deeper. Although our primary source did not report any new coal financing, we contacted the Rainforest Action Network and learned that, although PNC does not appear to be directly financing MTR, the bank had in fact engaged in a number of recent financial transactions with several coal companies that are the largest MTR practitioners.
We were pleased to join Boston Common Asset Management in filing an important proposal with PNC to address the climate impact of the bank’s financial services, including its lending to coal companies. At PNC’s annual shareholder meeting on April 23, our proposal received a vote of 22.8%, an extremely strong vote for a first-time resolution. We look forward to continuing our dialogue with PNC, where we have been stressing our serious concerns about greenhouse gas emissions produced by the burning of coal, as well as the damaging effects of mountaintop removal coal mining.