Why Social(k)? Why use ESG screened options?

This is a repost of Julie Gorte's article from her blog at LinkedIn. Julie is the Senior Vice President for Sustainable Investing at Pax World

Sustainability: Investors Really Can Make a Difference

Sometimes it can be difficult to recognize positive progress, particularly when current events seem to be dramatically negative. Chinese market woes, terrorism, severe weather, and the hyperbolic rhetoric that always accompanies presidential election campaigns dominate the news in ways that long-term progress toward a more sustainable planet probably never will.So, it is useful to count the ways in which Pax World’s day-to-day work does make a difference.

Being an investor gives us a voice, as an owner of a company or other security issuer, or as a creditor of such enterprises. We use that voice to let corporations know what we think will make them both better investments and more sustainable. We focus our advocacy on the things we see as the most pressing problems, and right now that means gender equality and climate change. Both are issues that, if left unaddressed, would continue to impair economic growth and financial performance, and both are issues that investors have tools to address constructively.

The fact is, companies that treat women as second-class workers are leaving money on the table. To address that, companies must work to assure that women’s talents are used as effectively as possible, and that means not discriminating on the basis of gender in recruitment, hiring, development, promotion, and pay. With the exception of identifying senior leadership, what companies do in all these areas is largely off the record. Most companies don’t report to investors, or anyone else, about their gender programs or results.

Pax World votes against every all-male slate of directors at company annual meetings and against slates that included only one woman. We also urge companies to assure gender balance in their boardrooms.

Have we solved that problem? No. But have we helped to make progress? Yes.

When we started working on board diversity, most of our press calls started with a variant of, “So prove to me that women will make better board members than men.” Nowadays, this never comes up. The world understands that boards shouldn’t be 85% male, and the trend is upward, even if it’s not as fast as we would like.

This year, we have expanded our gender advocacy and engagement by adding pay equity to the mix. We have filed three shareholder proposals, at Apple, eBay and Amazon, asking companies to disclose pay ratios by gender and report on programs aimed at eliminating gender pay gaps. And in February, Pax Ellevate submitted a letter to the SEC urging the agency to either require companies to disclose pay equity data, or to issue guidance for the voluntary disclosure of such information. While it is too soon to say how these will turn out, be assured that we’re in for the long haul.

Climate change is another area of focus. 2015 was a banner year for this issue, as 195 nations met in Paris at COP21 in December to forge a new agreement to reduce greenhouse gas emissions. Some analysts regard this as feeble, because the commitments made in Paris are not binding. Binding would be better, but this is nonetheless a major achievement, and these commitments are important. Without the work of companies and investors telling the negotiators that the world needs a carbon price, and that emissions reduction is not only possible but essential, would that agreement have been reached? Probably not.

No single initiative, by itself, will be sufficient to turn the world’s emissions around overnight, but it is noteworthy that in 2014, for the first time, the world’s carbon emissions went flat while the economy grew. It’s progress.

Sometimes it seems like the world revolves around instant gratification. As long-term investors, we don’t regard that as our orbit. Sustainability is an issue that will be with us forever – there will never be a moment when we can say “okay, it’s done.” The battle is not won on climate or on gender equality, but we will stay in the game as long as we need to.