By Pat Zarega, Senior Director of Shareholder Advocacy, Mercy Investment Services
 

For almost eight years, the Portfolio Advisory Board (PAB) of the Adrian Dominican Sisters has engaged and supported the work of the Cotton Campaign. It is known that forced labor continues in pockets, but nowhere has it been more organized than in countries where governments force citizens to participate. 

The government in Uzbekistan shut down schools and public offices for months at a time to mobilize and send their country’s youth, teachers, nurses, and civil servants to harvest cotton. The government also dictated prices of seeds and fertilizers, controlled the irrigation, and purchased the crop at a fraction of market price. 

More than a decade ago, fellow investors came together to advocate for the end of government-directed forced labor in Uzbekistan’s cotton industry. They joined with other human rights NGOs, academics, brand associations, and independent trade unions to form the Cotton Campaign. 

In 2010, the Cotton Campaign and the Responsible Sourcing Network launched the Company Pledge Against Forced Labor in the Cotton Sector of Uzbekistan. By signing it, brands and retailers publicly committed to not use Uzbek cotton produced with state-orchestrated forced labor. The PAB used its position as a shareholder to bring the issue of forced labor in the cotton industry to the table at many brands and retailers. In the end, 331 brands and retailers signed the Pledge, including large companies such as Amazon and Walmart.

Over the years, Cotton Campaign members met with the governments of Uzbekistan and the United States to call for addressing the issue. Civil society in the country continued to document the situation and work with the Uzbek-German Forum to provide well-researched reports updating progress. For the 2021 cotton harvest, the Uzbek Forum for Human Rights found no central government-imposed forced labor.

Given the progress made in protecting the workers’ rights and eradicating systemic forced labor, coalition participants traveled to the country to be alongside the Government of Uzbekistan in announcing the lifting of Uzbek Cotton Pledge. The Cotton Campaign has gathered a video history of the work as a beginning to acknowledge the companies who participated in the pledge. 

The PAB is currently represented in this corporate work by Pat Zerega of Mercy Investment Services and Sister Judy Byron, OP, Consultant. At the lifting of the pledge, Pat stated, “Investors’ deep concern and respect for human rights, as detailed in the UN Guiding Principles on Business and Human Rights (UNGPs) and the [Organisation for Economic Cooperation and Development] OECD Due Diligence Guidance for Responsible Business Conduct, calls us to address the forced labor situation in the Cotton Industry. We have worked with the Cotton Campaign and supported the Cotton Pledge to address forced labor in Uzbekistan. The findings of independent civil society monitoring the 2021 cotton harvest shows that Uzbekistan has successfully eliminated state-imposed forced labor in cotton production. We are pleased to acknowledge this breakthrough while at the same time calling for continued due diligence by all companies in the Uzbek textile industry, urging them to establish and maintain strong labor standards and engage with the Cotton Campaign.”
 

After serving as Portfolio Manager for Community Investing for the Portfolio Advisory Board (PAB) for the past four years, Corinne Florek, OP (left), will bring this work to completion at the end of this fiscal year. We thank Sister Corinne for her many contributions to the work of PAB, for building long-lasting relationships with borrowers, and for sharing her expertise and commitment to social impact investing.

The General Council invited Marilín Llanes, OP (right), to succeed Sister Corinne in the role of Portfolio Manager. In informing the PAB of Sister Marilín’s selection, Elise García, OP, General Council Liaison to the PAB, stated:

“The General Council is deeply grateful to Corinne Florek, OP, for her extraordinary decades-long leadership in the field of community investing and for her current service as the PAB’s Portfolio Manager. We are delighted to inform you that Marilín Llanes, OP, has accepted our call to take on the role of Portfolio Manager effective July 1, 2022, and that Associate Dee Joyner has agreed to continue as PAB Director through FY2023.”

Sister Corinne will be working with Sister Marilín during an on-boarding period until the PAB Annual Meeting in September 2022. Sister Marilín, currently serving as the PAB Board Chair, will step down from this role following the March 2022 Board meeting. She will remain a member of the Board until July 1, 2022, when she joins the staff as Portfolio Manager. The PAB will elect new leadership at its March meeting.

By Lydia Kuykendal, Director of Shareholder Advocacy, 
Mercy Investment Services, Inc.

The COVID-19 pandemic has exacerbated the disparities for people of color in areas such as vaccine access and health care. Over the past two years, shareholders have expanded their corporate engagements addressing systemic racism. 

This movement began as a result of the murders of George Floyd and other people of color at the hands of police. Many companies have since made pledges to address systemic racism. However, more than one year after these commitments were made, the practical outcomes remain unclear.

This year, shareholders have filed a slate of resolutions calling on multiple companies to conduct third-party racial equity audits. These internal audits evaluate how a company’s policies and practices discriminate against or disparately impact communities of color. 

Shareholders have called on companies to identify and recommend steps to eliminate any business activities that “further systemic racism, threaten civil rights, or present barriers to diversity, equity and inclusion (DEI).” Shareholders also believe workers, customers, community members, and other stakeholders should inform the audit and the report.

Shareholders have also seen racial disparities between hourly and salaried employees in some companies, where salaried employees are predominately white and hourly employees are majority people of color. This disparity signals that people of color may not have the same opportunity for advancement to better paying, senior-level jobs. 

In 2020, partners at the Interfaith Center on Corporate Responsibility (ICCR) filed 12 resolutions calling for racial equity audits. Resolutions were withdrawn at BlackRock, CoreCivic, Morgan Stanley and Amgen based on their commitments to conduct internal audits. The Adrian Dominican Sisters’ Portfolio Advisory Board (PAB) is looking forward to reviewing the audits as they’re completed. 

This year, the PAB filed a resolution at Tyson Foods. It was recently withdrawn after the company agreed to conduct an independent third-party audit that will include stakeholder interviews and investor feedback. Shareholders filed the resolution at Tyson due to the significant impacts of COVID-19 on its workers of color. 

The racial disparities often extend to company boards of directors. For 10 years, the Thirty Percent Coalition has advocated for diversity on corporate boards and company leadership that reflects the gender, racial and ethnic diversity of the United States. We believe that diverse leadership and boards lead to better experiences for employees and shareholders and improved company performance.  

To combat systemic racism, corporations should recognize and remedy industry and company-specific barriers to everyone’s full inclusion in societal and economic participation. The recent Racial Equity Audit proposals, as well as ongoing dialogues that elevate awareness of business models that perpetuate systemic racism, will further the longtime work of the Adrian Dominican Sisters and other investors to create an anti-racist society. 
 

Sister Patricia Daly, OP, a Caldwell Dominican Sister and member of the Adrian Dominican Sisters’ Portfolio Advisory Board (PAB), recommended that congregations of women religious use their investment portfolios to further their charism, or spirit. During the annual conference of the Resource Center for Religious Institutes, she further suggested that communities use their investments to bring healing to Earth in the face of global climate change. Read the entire article by Dan Stockman in The National Catholic Reporter’s Global Sisters Report published November 18, 2021.

 

By Mary Minette, Director of Shareholder Advocacy, Mercy Investment Services

The banking sector is the world’s largest source of finance, with a critical role to play in ensuring that resources are available to provide climate solutions and reducing lending to climate-damaging fossil fuel projects. Investors are working to engage the largest global banks to urge the adoption of policies and procedures that address these environmental risks and to ensure that the global finance system is part of the solution to climate change.

In the 2020 and 2021 proxy seasons, investors escalated efforts to push the largest banks to assess, disclose, and reduce the climate risk and climate impact of their lending and investments. In 2020 proposals filed with several of the largest U.S. banks including Bank of America, JP Morgan Chase, and Wells Fargo requested reports on how the banks are managing climate risk in their lending portfolios. Proposals were withdrawn at Wells Fargo and Bank of America after the banks agreed to analyze various methods to measure financed emissions and consider adopting targets. The proposal with JP Morgan Chase received a near-majority vote of 49 percent at the bank’s annual meeting.  

Following this successful season, Citi, Morgan Stanley, and Bank of America announced that they would work to measure the climate impact of their financial practices and agreed to strive for net zero financed emissions by 2050. JP Morgan Chase announced plans to reduce their financed emissions in line with the goals of the Paris Agreement. However, despite these announcements, a series of reports by a coalition of groups including Rainforest Action Network and BankTrack have found that many of these banks have increased their support for oil and gas production in recent years. 

The International Energy Agency reported in 2021 that new oil and gas exploration and production will need to cease almost immediately for global temperatures to stay within the 1.5 degrees Celsius limit. This year, investors plan to file proposals with several of the banks, including JP Morgan Chase, the largest funder of oil and gas production globally, asking them to adopt policies to ensure that financing does not contribute to new fossil fuel supplies.   

At the recent climate summit in Glasgow, more than 450 financial firms from 45 countries announced they were forming the Glasgow Financial Alliance for Net Zero (GFANZ) to help shift the world’s economy toward net-zero emissions by 2050. The group includes Citi, Bank of America, and JP Morgan Chase. While this is a welcome announcement, the details of how banks will achieve their goals are not known. A spokesman for the Rainforest Action Network noted that “39 banks that are part of [GFANZ] provided around $575 billion in lending and writing to fossil energy companies in 2020 alone.” 

With the work with banks shifting from long-term targets to Net Zero goals – and particularly how they will begin to move financing away from oil and gas companies – the Portfolio Advisory Board is focusing on engagements with Bank of America, JP Morgan Chase, PNC, and Wells Fargo for the coming shareholder season.

 

By Associate Dee Ann Joyner
Director, Portfolio Advisory Board

October 12, 2021, Adrian, Michigan – The Portfolio Advisory Board (PAB) gathered via Zoom September 23-24, 2021, for its annual meeting. They welcomed new Board members, Carmen Mora and Joe Barker, who were both introduced on the PAB website last month. Elise García, OP, General Council liaison to the PAB, also attended her first meeting as a voting member following an amendment to the by-laws approved by the General Council in June.  

The PAB also recommended to the General Council the appointment of Carla Mannings to an open position of the Board. The PAB recommended a change to the social impact environment policy to limit investments in any company receiving more than 3% of their revenues producing thermal coal or oil sands. The General Council approved both recommendations.

On Day 1 of the meeting, Judy Byron, OP, consultant on shareholder advocacy, facilitated a panel discussing pesticides and their impact on the environment. Margie Weber, a former PAB staff member and member of the Board, discussed the history of the Adrian Dominican Sisters’ advocacy activities on pesticides and genetically modified organisms (GMOs). She emphasized the long, slow process of changing corporate practices, yet the process does result in important changes.  

Caroline Boden, with Mercy Investment Services, discussed the work she has been doing with the Interfaith Coalition for Corporate Responsibility (ICCR) with both food and beverage manufacturers and retailers. For example, the ICCR has gotten corporations to commit publicly to reduce their use of pesticides or at least to switch to less toxic treatments. She stressed the leverage these companies have on their supply chain and discussed success in dialogue with Campbell’s Soups and General Mills in reducing pesticide use on the ingredients in their products.

Corinne Sanders, OP, Director of the Congregation’s Office of Sustainability, discussed her office’s work on reducing pesticide use on the Motherhouse Campus. Her office ceased to use chemical-based pesticides that destroy the health of the soil and has transitioned to using neem oil to enhance fruit, berry, and nut tree growth. Neem oil only affects harmful insects, not pollinators.

In conclusion, the panel agreed on the need for a multifaceted approach to advocate consistently and continuously with companies to ensure their policies and practices reduce the use of harmful pesticides and to practice reducing our own personal use whenever and wherever possible.

Sister Judy and Pat Zerega, board consultant on shareholder advocacy from Mercy Investment Services, updated the Board on 2020-21 advocacy activities. On behalf of the Adrian Dominican Sisters, they engaged 43 companies on 65 engagement topics.  The Adrian Dominican Sisters filed 17 shareholder resolutions and participated in 55 sign-on letters covering diverse topics. For example, a letter was sent to 21 food and beverage companies on issues of racial justice and food equity.

Pat and Sister Judy also presented the 2021-2022 advocacy plan which the PAB unanimously approved. The plan outlines strategies for PAB’s engagements with companies on issues such as the systemic inequities evident during COVID-19 and the quest for racial justice, as well as advocacy for policies that promote the rights of workers, food justice, and health equity. Investor statements and sign-on letters are often part of the advocacy process in these priority areas.

Day 2 focused on Community Investing. Corinne Florek, OP, Portfolio Manager for PAB, opened the meeting with a reflection excerpted from the social impact finance criteria developed by Richard Rohr’s Center for Contemplation and Action.

Sister Corinne provided historical background on the creation of the Religious Congregations Impact Fund (RCIF), for which she served as Founding Director until her retirement in 2020. Her successor, Sarah Geisler, provided an update on RCIF and its plans for future growth. The Adrian Dominican Sisters joined RCIF as a sponsor in 2017 and moved $1million from the PAB community investing portfolio to RCIF. RCIF and PAB often invest in the same non-profit organizations and collaborate in their approach to impact investing.

PAB then reviewed three loans presented by Sister Corinne. They approved the renewal of loans to Inclusiv, which provides capital to member credit unions serving low-income communities, and Fonkoze USA, a loan fund investing in small businesses in Haiti. 

The Board also reviewed a new loan request from the Real People’s Fund, a collaboration among six non-profits serving the East Bay, California area. The purpose of the new Fund is to provide community capital funding to historically divested communities in the East Bay. The minimum loan term is seven years, which is longer that the Congregation’s policy of making loans for terms of one to five years. Because of its enthusiasm about the Real People’s Fund and its possible impact, the Board requested that the General Council amend the policy on the terms of loans so that they can consider approving a loan to the Real People’s Fund at a future meeting.

The last item on the agenda was a review of the community investing social impact criteria with a racial equity lens and discussion on possible changes. The Board postponed this discussion to the next meeting, giving them more time for an in-depth discussion of this important matter.

The next meeting of the PAB is scheduled for March 24-25, 2022. 
 

October 5, 2021, New York, New York – Fifteen members of the Interfaith Center on Corporate Responsibility (ICCR) drew support from 43.9% of the shareholders of Smith & Wesson for a proposal that the gun manufacturer adopt a comprehensive human rights policy in light of rising gun violence in the United States.

The Adrian Dominican Sisters, represented by Sister Judy Byron, OP, were the primary filers of the proposal. Fourteen faith-based organizations from ICCR co-filed.

In a press release, ICCR noted that this amount of support from shareholders – compared to 39% support for a similar proposal in 2019 – “demonstrates shareholders’ mounting concern with the company’s lack of attention to the growing risks of gun violence.” The proposal calls on Smith & Wesson to include in the policy “a description of the processes the company will use to identify, assess, prevent, and mitigate adverse human rights impacts.”  

“Undisputedly, something must be done about the misuse of guns in our country,” Sister Judy said in her September 27, 2021, Shareholder Statement. “As a leading firearms manufacturer we genuinely believe Smith & Wesson has the knowledge and the expertise to engineer the solutions we need to reduce gun violence and save lives.” 

A consultant to the Adrian Dominican Sisters’ Portfolio Advisory Board, Sister Judy went on to note that the intention of the proposal is not to put Smith & Wesson out of business or to abolish the Second Amendment. “We seek to make the business, the products, and the consumers who buy them, safer,” she said. “We seek – as everyone here must surely do – to save lives.” 

July 2, 2021, Caldwell, New Jersey – Sister Patricia Daly, OP, a Caldwell, New Jersey, Dominican and a member of the Adrian Dominican Sisters’ Portfolio Advisory Board (PAB), was quoted in an article citing the recent victories of faith-based shareholder advocates in their work with three fossil fuel companies. 

In shareholder advocacy, peace and justice advocates purchase stock in corporations and thus have a voice in the corporation’s policies affecting the environment or other matters of social justice. The shareholder advocates won the day in shareholder meetings of ExxonMobil, Chevron Corporation, and Royal Dutch Shell. “It’s like the Earth has moved. Corporate America has shifted,” Sister Pat was quoted as saying in an Earthbeat article by Brian Roewe. 

Read the entire article, Bad Day for Big Oil is big climate win for religious shareholder advocates. 

The Portfolio Advisory Board is pleased to welcome two new members for three-year terms beginning July, 1, 2021.

Joseph Barker II was recently appointed Executive Director of the Sr. Thea Bowman Black Catholic Educational Foundation. Prior to assuming this position, Joe held various teaching and administrative positions with Cristo Rey schools in Atlanta, GA and Charleston, SC. He has also worked in private industry and holds a Bachelor’s Degree in engineering from Florida A & M University.

Joe has a strong commitment to helping African-American youth succeed and volunteers his time with community organizations such as The Black Man Lab, Unbound International Outreach, and West Atlanta Charter School. He currently serves as chair of the board formation committee for Aquinas Center for Theology at Emory University. In nominating Joe for PAB, Mary Priniski, OP, commented “Joe is very energized by the work of PAB and shares a deep commitment to inclusion and racial justice. He is a dynamic leader and not afraid to state his commitments.”

Carmen Mora is Executive Director of Saginaw-Shiawassee Habitat for Humanity where she has worked since 2008. She has also held pastoral ministry roles with various parishes in the Saginaw diocese. She received a Bachelor’s Degree from Barry University in 1995 and a Master’s Degree from Loyola University in New Orleans in 2000.

Carmen’s life focus is to serve those at a disadvantage and give them a hand up. Her volunteer activities are consistent with her work life. She serves as a scholarship grant reviewer for Saginaw Community Foundation; has been president of the Mustard Seed Homeless Shelter; and served as a missionary to the Dominican Republic through Amor en Acción.  In nominating Carmen for PAB, Marilín Llanes, OP, stated, “Carmen is a Cuban-American woman steeped in her Latinx roots growing up in Miami, Florida. She is committed to inclusion, equity, and racial justice and wants to be able to contribute her gifts to the work of the PAB.”

As Board members welcomed these two new members to PAB, they also shared their gratitude to Leslie Watson who has completed her term. Chair of PAB Marilín Llanes, OP, expressed the sincere appreciation of the entire Board for Leslie’s commitment to the work of PAB. “We are so grateful for Leslie’s willingness to share her knowledge and experience in community investing with the Board during the past three years. Her active participation has enriched our work and we value her many contributions.”
 

The Adrian Dominican Sisters’ Portfolio Advisory Board works to invest Congregation funds into businesses and programs that align with their Vision and Enactments, which include an emphasis on sustainability. Because of this, they educate themselves and others on measures to assess how well companies are helping to reduce global CO2 emissions in order to reduce global warming.

You may have noticed that numerous companies have announced pledges to reach “net-zero” greenhouse gas (GHG) emissions by mid-century. Companies in a variety of industries, ranging from Delta Airlines to Duke Energy and from Shell Oil to Coca-Cola, have made pledges in the past year. So, what does net-zero emissions mean, and why is this important?

A 2018 report from the Intergovernmental Panel on Climate Change noted that for temperatures to stay “well below” 2 degrees with the possibility of staying within 1.5 degrees of warming, global emissions would need to reach “net zero” by mid-century. “Net zero” means that most human-caused emissions are zero and that any remaining emissions are offset by carbon removal through carbon capture and storage or “natural climate solutions” that absorb carbon, such as restoring forests.

With existing technologies, or even those in development, some industries can’t reach zero by 2050. One example is air travel. Until a non-emitting jet fuel or batteries light enough to operate a plane for long distances are available, planes will need to use fossil-based fuel to some degree.

Additionally, for most industries to reach zero, or net zero, by 2050, other industries will need to get to zero more quickly. Many industries will decarbonize by “going electric” (for instance, cars and trucks) and to make that possible, the electric utility sector MUST decarbonize very quickly.

As the result of efforts from investors around the globe, including the Climate Action 100+ initiative, companies in industries including oil and gas, utilities, transportation, banking, and food and beverages have pledged to reach net-zero emissions by 2050.  

More than half of the Climate Action target companies have made a net-zero pledge that covers their scope 1(direct) and scope 2 (purchased electricity) emissions. A quarter of the Climate Action companies have made pledges that also include scope 3 emissions, which are the emissions in their supply chains and the emissions from use of their products.  

Not all company plans are fully developed. Some are just a target. Others include short- and medium-term goals and plans for how they plan to reach them. But this represents a huge step toward ensuring that 1.5 degrees of warming is attainable.

Investors must continue to ask companies for more details and to show action and not just words. The number of pledges will need to continue to grow, and the companies will need to have solid plans, good government policy, and perhaps most importantly, money behind them. Companies and government will also need to support a just transition that helps workers and communities move from fossil fuel jobs and tax revenues to new jobs and industries.

One important note: the energy transition will only happen if the materials to build it are available. Metals including lithium, nickel and cobalt are used in batteries; lightweight steel is needed for electric cars; plant biofuels are one option for replacing some of the jet fuel used in aviation. Investors need to make sure these supply chains, are environmentally sustainable and just. Net Zero is a great start, and progress that we can celebrate, but there’s still a lot to be done!

 

Mary Minette has served as Director of Shareholder Advocacy for Mercy Investment Services since 2016, focusing on climate change and environmental issues. Previously, she was Director of Environmental Education and Advocacy for the Evangelical Lutheran Church in America.