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.
It is estimated that deforestation is responsible for 15 percent of global greenhouse gas emissions. Indonesia, despite its small size, has become the world’s third largest greenhouse gas emitter due to extensive ongoing deforestation, much of it illegal. In addition, deforestation has devastating impacts on biodiversity and indigenous and other communities that depend upon forests for their livelihoods. Before we can begin to address this problem, we need quality information.
Lowe's adopted a sustainable forestry policy in 2000, addressing its purchases of wood for sale in its home improvement stores. From 2006-2008, we filed shareholder proposals asking the company to report on these efforts. Ultimately, the company did publish a report, but then chose to remove it from its website. Without regular reporting, it is impossible for investors and other stakeholders to determine whether Lowe’s is living up to its stated commitments to protect forests. In 2012, we successfully convinced the company to work with us on a public report providing quantitative metrics and discussing its progress in implementing its wood-purchasing policy. In exchange, we were happy to withdraw our shareholder proposal. We commend the company for its commitment to transparency and for its continuing work to reduce its impact on threatened forests.
RR Donnelley is a leading financial printing firm with a strong commitment to providing its clients with a full range of sustainable paper choices. We applaud the company for these efforts, but continue to encourage them to publish more detailed information on the sustainability characteristics of the paper it purchases for its clients. In response to our 2012 shareholder proposal, which received a strong 26.7 percent vote, the company amended its public reporting regarding their purchases of sustainably sourced paper. In addition to a range of recycled papers, RR Donnelley offers its clients a range of “sustainable” paper, certified to one of three independent forestry certification schemes. Although we support these efforts, we believe that additional information would provide investors with a better understanding of the company’s actual impact on forests. We would like to understand what percentage of their paper purchases meet acceptable sustainable forestry standards, and how these trends change over time. We are also questioning whether it is possible for all of the company’s paper purchases – certified and uncertified – to meet certain baseline environmental standards.
After the company took several steps to address its exposure to illegal deforestation during 2012, we chose not to resubmit our shareholder proposal in 2013. Nonetheless, we look forward to continuing our dialogue with the company to build upon this important foundation.
We also continue to engage with Mondelēz International, formerly Kraft Foods, about its efforts to reduce the environmental footprint of its global purchases.