Marcela I. Pinilla
Director of Sustainable Investing

Download our Q4 2022 Impact Update.

“[Corporate] boards are like subatomic particles — they behave differently when they are being observed, and knowing they are being observed will make a difference [going forward].” —Nell Minnow

This quarter we joined fellow shareholder advocates in filing shareholder proposals, the culmination of corporate engagements from the months prior. We also took stock of our efforts and accomplishments to build sustainability in our portfolio companies beyond ESG risk analyses. In reflecting on our progress, we are reminded of our responsibility to harness our investor voice to make a difference.

Recognizing the need to create meaningful and lasting social change, we know that achieving impact often requires repeated and sustained engagement. Looking back to our collective work from the previous year, we must continue to raise local impacts and push for global climate action in the year ahead. We plan to continue to listen to the concerns of those most impacted and integrate these voices into our pursuit of corporate accountability and transparency.

NOTABLE RESOLUTIONS FILED

1. AbbVie and Lobbying

   Our six-year engagement with AbbVie, the biopharmaceutical company known for the rheumatoid arthritis drug Humira, is one example of persistence winning the day. Over the years, Zevin Asset Management has filed resolutions with AbbVie seeking more disclosure of its lobbying expenditures and has challenged the company’s membership to influential trade associations, such as the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Business Roundtable, which are comprised of chief executives of the largest U.S. corporations.

   After we refiled a lobbying disclosure proposal earlier this year, AbbVie announced it would not renew its membership to these organizations as well as the Biotechnology Innovation Organization. While we celebrate this outcome, we remain vigilant on how AbbVie and other companies behave when it comes to drug price negotiations, which Medicare has been granted license to do following the passage of the Inflation Reduction Act. AbbVie remains a member of the Chamber of Commerce, the largest lobbying organization in the U.S., which has so far hindered more than helped advance policy-making on a number of areas including climate policy. The Chamber of Commerce opposed the For the People Act, the largest effort in comprehensive democracy reform in a generation. Clearly, our work in pushing for equity in the healthcare space is not yet finished.

2. Alphabet’s Exposure to Anti-climate Lobbying Activities

   We believe regular examination of the alignment of lobbying activities (direct and indirect) with corporate public commitments and policies is an increasingly important requirement of strong corporate governance. Concerned about the misalignment between Alphabet’s climate commitments and its direct and indirect lobbying activities, we refiled a resolution asking the company for information on how it evaluates its memberships in trade associations that have lobbied heavily to forestall progress on addressing climate change. Last year, this proposal earned 55.6% in support from outside shareholders.

   Alphabet was the first major company to become carbon neutral in 2007 and was the first major company to match its energy use with 100% renewable energy in 2017. Alphabet is also the world’s largest corporate purchaser of renewable energy. Despite these achievements, Alphabet does not disclose whether its actions via powerful lobbying groups align with the Paris Agreement’s aims and its own carbon-free energy targets, and what it does in cases of identified misalignments.

3. UPS’s Climate Goals and its Executive Compensation

We believe that alignment of a corporate climate transition strategy with executive compensation metrics and incentives can increase the likelihood of UPS achieving a timely climate transition.

It is now abundantly clear that haste has never been more important on the path toward containing irreversible and catastrophic impacts from climate change. We believe that companies that are positioned to adapt their business to the risks and opportunities of changing regulations and new innovations will fare better because they will be prepared to respond swiftly.

We have for years engaged portfolio companies, including UPS, to adopt a climate transition timeline. UPS has since made progress, announcing a carbon neutrality goal by 2050. However, a review of UPS’s compensation structure for senior executives did not identify meaningful linkages between reducing GHG emissions and executive compensation. While compensation structures, especially for equity grants, are understandably linked primarily to shareholder returns, these returns are impacted by corporate success in achieving its emissions targets and goals. We believe that aligning GHG emissions reductions with executive compensation would enable UPS to take more substantive steps toward a swift climate transition.

As the Intergovernmental Panel on Climate Change (IPCC) has once again outlined in its latest report, limiting global warming to 1.5°C is now “almost entirely out of reach unless sudden and dramatic changes are implemented to limit fossil fuel use, re-envision energy and transport systems, and re-think land use.” Society now has a mere 6 to 10% chance of meeting this 1.5°C scenario, notes Interfaith Center on Corporate Responsibility (ICCR) in its recent publication Leading Lobbying Practices to Drive 1.5° Policy, citing the highly regarded scientific journal Nature.

THE NEED TO KEEP PUSHING FOR PROGRESS

We are closely watching merger discussions between Albertsons and Kroger unfold. If combined, these two grocers would rival Walmart in their market share and would employ approximately 710,000 employees. This news concerns us given past results of such mergers, which include store closures, layoffs, and persistently low wages, especially when mergers were managed by private equity firms. Consumers and employees have been shortchanged when mergers result in a greater market share corralling.

In early 2022, the Economic Roundtable published a survey analysis of 37,000 Kroger employees which found that about 1 in 5 employees reported struggling to make ends meet and recently experiencing housing insecurity and/or dependency on food stamps. This finding stood in stark contrast to Kroger’s generous executive compensation, leading us last year to file a proposal with the company asking it to bring more accountability and incentives to promote people of color at every level of the company as their wages tend to be the lowest on average. This season we will continue to monitor how Kroger walks the talk on sustainability, especially on workers’ right to a dignified, quality job. We will keep pressure on the company to report on its progress and will seek to ensure its executive pay packages are designed with workers and dignified wages in mind.

As we monitor and push for corporate progress, we remain vigilant and attentive to change. Like celebrated writer and thinker Nell Minnow said, “[Corporate] boards are like subatomic particles — they behave differently when they are being observed, and knowing they are being observed will make a difference [going forward].”

We view our impact beyond the number of resolutions filed. We know that persistence and perseverance, whether short- or long-term, can create fundamental shifts in the bigger picture. For example, we decided to divest from and cease further investment in direct Chinese and Hong Kong holdings for the foreseeable future for both financial and ESG-related reasons.

In the year ahead, we will keep calling on our investor peers to also walk the walk of sustainable investing. Understanding that change doesn’t happen in a vacuum, we will continue helping build capacity in and lending our investor voice to other organizations seeking to create positive social change.

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.

Disclosures: Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen or experience. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements. All statements other than statements of historical fact are opinions and/or forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the beliefs and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such beliefs and expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Zevin Asset Management’s clients may or may not hold the securities discussed in their portfolios. Zevin Asset Management makes no representations that any of the securities discussed have been or will be profitable. Certified B Corp status is, at least in part, based on responses provided to B Lab by Zevin Asset Management. Zevin Asset Management pays annual membership dues to B Lab, which is a requirement for eligibility in B Lab results. Certified B Corp status requires an assessment of companies’ positive impact on workers, community, customers, and environment (Criteria: https://bcorporation.net/certification/meet-the-requirements).