Shareholder advocacy refers to the efforts of shareholders to influence a company’s practices and policies, particularly regarding environmental, social, and governance (ESG) issues. In the realm of sustainable investing, this advocacy can take various forms, from engaging directly with management to filing shareholder resolutions. Here are three practical examples that illustrate how shareholders can effectively promote sustainability within corporate frameworks.
In recent years, numerous investors have increasingly recognized the importance of addressing climate change through their investment strategies. An example of this is the Institutional Investors Group on Climate Change (IIGCC), a coalition of European investors advocating for policies that will help transition to a low-carbon economy.
The IIGCC actively engages with companies to assess their climate-related risks and opportunities. By leveraging their collective influence, they encourage corporations to adopt science-based targets for reducing greenhouse gas emissions. In 2021, the IIGCC collaborated with 20 major companies in the oil and gas sector, pushing them to commit to net-zero emissions by 2050.
This example illustrates how shareholder advocacy can drive significant changes in corporate behavior, particularly in sectors with a substantial environmental impact. Moreover, it showcases the power of collaboration among institutional investors, amplifying the voice of those committed to climate action.
Another compelling case of shareholder advocacy is the Shareholder Advocacy Network (SAN), which has focused on human rights and labor standards across various industries. SAN works with socially responsible investors to pressure companies to adhere to ethical labor practices and respect human rights throughout their supply chains.
In 2020, SAN led a shareholder resolution at a major apparel company, demanding that the company conduct an independent audit of its supply chain practices, particularly in regions known for labor violations. The resolution gained significant support from other shareholders, resulting in the company agreeing to enhance transparency and improve labor conditions within its supply chains.
This example highlights how shareholder advocacy can foster accountability and ethical practices, driving companies to prioritize human rights and labor standards in their operations.
Water scarcity is a pressing global issue, and shareholders are increasingly advocating for better water management practices among corporations. The Investor Water Hub is an initiative that equips investors with the tools to engage with companies on water-related risks and opportunities.
In 2022, a coalition of investors, including major pension funds, filed a shareholder proposal requesting a water management strategy from a leading beverage company. The proposal emphasized the need for sustainable sourcing and responsible water usage, particularly in water-stressed regions. The engagement led to the company committing to publish a comprehensive water stewardship plan that includes measurable goals for water conservation.
This example underscores the role of shareholder advocacy in addressing critical environmental issues, such as water scarcity, and demonstrates how investors can influence corporate policies to ensure sustainable resource management.
These examples of shareholder advocacy in sustainable investing illustrate the diverse ways in which investors can engage with corporations to promote sustainable practices. By leveraging their collective influence, shareholders can drive meaningful change across various sectors, ensuring that companies prioritize environmental, social, and governance concerns in their operations.