Marcela I. Pinilla
Director of Sustainable Investing

This quarter, we published our fourth impact report, a collection of our firm’s advocacy activities, results, and reflections on the past two years. As we look to this past quarter and wrap up the proxy season, we also carry forward the progress we have made in several areas, while doubling down on corporate workforce issues. As ever, our analysis of corporate environmental, social and governance-related risks is informed by stakeholders on the frontlines of the impacts.

Shortchanged: Noncompetes Are Obstacles to a Living Wage

Research by the Economic Policy Institute reveals that while numerous trends drive persistent wage inequality, the rise of non-compete agreements across the workforce is a stark indicator of the decline in job mobility and wage growth, particularly for low-wage workers. Noncompetes are employment provisions that prohibit employees from pursuing employment opportunities with competitors. Noncompetes do not just affect highly paid workers with access to trade secrets but also impact hourly employees in food services, retail, customer service, and healthcare, among other professions, who make up the frontline workforce — about 95 million people in the United States.

Empirical research demonstrates that noncompetes have increased racial/ethnic and gender wage gaps by systematically suppressing the wages of non-male, non-white workers. Because switching jobs can drive wage bargaining, hindering workers from accepting a job offer from a competitor can keep them locked in the role, sometimes barring them from going to a competitor for up to two years and/or within a 100-mile radius after they leave the position. Present in some noncompetes, the artificial fencing off of employment opportunities within up to a 100-mile radius serves as an additional barrier to job mobility.

In April of 2023, the Federal Trade Commission (FTC) proposed a ban on noncompetes. Zevin Asset Management, joined by members of the Interfaith Center on Corporate Responsibility (ICCR), submitted a comment letter backed by investors representing $436B in assets to the FTC in support of the economic case for banning noncompetes. In April of 2024, the FTC effectively banned the use of noncompetes across nearly all professional levels, including the frontline workforce.

The noncompete ban marks a major win for millions of frontline and contracted workers, who experience some of the worst wage disparities. And despite this being a final ruling, the U.S. Chamber of Commerce immediately filed a lawsuit against the FTC, not with a counter-economic case — there is none — but on technical grounds. We continue to follow how the case unfolds and are ready to shine a light on the continued battle.

Good Jobs Start with Livable Wages

With The Shareholder Commons, an independent nonprofit organization, Zevin Asset Management submitted a proposal asking Kroger’s Board of Directors to set a company compensation policy on paying a living wage. As the sixth largest employer among U.S. public companies, Kroger’s policies have tremendous influence on the entire market. The proposal requests that the company pay a living wage with the aim of protecting diversified portfolios from negative effects on the economy caused by inadequate wages and expanding income inequality.

As of June 27th, 2024, the date of Kroger’s Annual General Meeting, the proposal received a preliminary vote of 17% in favor. While this is not nearly a majority vote, our proposal highlights the deficit in cost of living that numerous Kroger employees face, especially at a time when employee surveys have shown that Native American, African American and Latinx workers at Kroger are more likely to experience challenges such as housing insecurity.

Amid merger negotiations between Kroger and Albertsons, we continue to advocate for quality jobs at the front lines, which start with living wages.

End of Season Results

Zevin Asset Management filed/co-filed ten proposals this proxy season. While some setbacks call on us to reevaluate our asks, our corporate engagements help us to keep the pressure on companies to continue moving progress forward. For more details, check out our summary of shareholder proposal results.

The Integrity of Just Transitions and Technology Booms

We cannot solve the complex challenge of inclusive and equitable adaptation to climate change without diverse voices at the table. Just as we need the weight of scientific evidence to chart a concerted path to climate mitigation, lived experience and knowledge from the ground up are essential to building solid foundations and long-lasting outcomes. Otherwise, we are doomed to make mistakes that could have been clearly anticipated by those who already experience the impact of rising water levels, have ancestral knowledge of agricultural resilience and plant medicine, or care for their fragile habitats as a matter of survival.

Carbon markets and trading systems allow polluters to buy carbon credits which claim to protect land from development or exploitation. But often these projects fail to show the co-benefits to communities. Voluntary carbon markets tend to lack credibility not least because of a lack of established trust and dialogue with indigenous people, local farmers, and communities. Corporate commitments and climate transition planning to a low-carbon future are verified by the Science Based Target initiative (SBTi) organization. However, recently the SBTi seemed to suggest that expanding the use of carbon credits for Scope 3 emissions mitigation would be allowable. We contend that the SBTi will be missing the mark by entertaining that a just climate adaptation can include carbon offsets.

Given the continued uncertainty surrounding the effectiveness and validity of carbon offsets, Zevin Asset Management joined a letter led by the Interfaith Center on Corporate Responsibility asking the SBTi to remain steadfast in its commitment to unbiased, evidence-based decision making.

Taking into account perspectives from the ground up would also go a long way to help prevent glaring failures in the promise of AI and build a more robust infrastructure. In the same way tech founders believe AI is a turnkey solution for solving for the future, a top-down approach mentality has shown its flaws time and time again across social and environmental problems. For example, a failure to ensure community license to operate where a company is building a water-guzzling data center can result in failed or expensive operational interruptions, especially as water stress becomes the norm in many regions of the world.

Securing a license to operate in the virtual world is equally important. We have learned by now that much of the information we consume from AI-generated queries and content likely reflects some of our worst qualities as humans — our bias and ignorance. Google’s Gemini, for example, was found to amplify racial and gender stereotypes. Just as AI-generated reality is warped, the novelty of Amazon’s Just Walk Out self-checkout store quickly faded to disillusionment. Amazon presented something that on the face of it seems wondrous and harmless but the truth behind the curtain was that there were underpaid laborers in India watching people shop and reviewing purchases. This is not an isolated problem that is unique to Amazon — many companies hire contracted workers as content moderators to manually test AI models.

The environmental and social costs of powering AI — from the emissions resulting from searching another cat video to not heeding the concerns raised by employees of bias in the models — are steep. In favor of a just tech transition, we are ever watchful of how AI is impacting industries and staying engaged in its unfolding by elevating the concerns and priorities of those impacted.

Thank you for reading and sharing. For more on this work and our broader advocacy, visit our website, and join us on LinkedIn and Twitter. And please don’t hesitate to contact Marcela Pinilla, Zevin Asset Management’s director of sustainable investing, at marcela@zevin.com with your questions, thoughts, and suggestions.

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