End of Week Notes
Good news from Patagonia
JUST Capital’s annual survey, and Federated Hermes tries to rectify a mistake
I’ll begin with the good news that came this week from Patagonia, a privately held firm that’s always been a leader in its commitment to sustainability. Founder Yvon Chouinard announced this week that he and his family are transferring their voting stock to a trust that will ensure the company maintains its focus on sustainability in perpetuity. The rest of the company will be donated to a nonprofit that will receive all of the company’s profits (around $100 million a year) and use them to fight climate change.
Patagonia’s sustainability commitment is not only about climate change and the environment, it’s about employees as well. Its employee handbook is titled, “Let My People Go Surfing”, reflecting its commitment to attract, hire and retain mission-driven employees.
Here are five things that Patagonia does to attract, hire, and retain the mission-driven employees they’re looking for:
“Every time we’ve elected to do the right thing, it’s turned out to be more profitable.”
— Yvon Chouinard, Patagonia founder.
JUST Capital: Americans want companies to prioritize workers and other stakeholders
On a related note, JUST Capital has just released its annual Issues Report, based on a U.S. opinion survey that it conducts every year. Key takeaway: Americans overwhelmingly want companies to prioritize workers.
The survey results were ranked in terms of stakeholder prioritization. “Workers” and “Communities” ranked 1–2 overall. Notably Republicans and Democrats AGREE on this priority, as do “active investors” in the survey.
Respondents overall wanted companies to prioritize “Environment” on an equal basis with “Shareholders”. Support for “Environment” was strongest among Democrats, women, and those under 30.
Support for shareholder prioritization was highest among those 65 or older. Those under 30 ranked “Shareholders” last among stakeholders business should prioritize.
All in all, a pretty strong case for the movement toward stakeholder capitalism and away from shareholder primacy. Maybe it will lead more corporate CEOs to take a closer look at how the Patagonias of the world are working.
Federated Hermes will no longer sponsor anti-ESG Republican state treasurers association. What about Invesco, Fidelity, and JPMorgan?
It’s being reported today that Federated Hermes will not be renewing its sponsorship of the State Financial Officers Foundation (SFOF), a group that supports Republican state treasurers and auditors and is pushing anti-ESG, anti-climate initiatives. The group has ties to the American Legislative Exchange Council, which provides ready-made and often extremist bills for Republican legislators to introduce in their states, and to the right-wing Heritage Foundation. All of these groups are spearheading the anti-ESG activities we’re currently seeing on the Right.
The moves comes after the firm faced criticism from Dutch pension funds, among others.
What in the world was Federated Hermes doing sponsoring this group in the first place? The firm has positioned itself as committed to responsible investing and is a signatory to the Principles for Responsible Investment.
The longtime paradigm has been that if companies want to have influence over policymakers and/or want to do business with them, they need “access” to them. One way to do that is by funneling money to them via dark-money groups like SFOF, which made the mistake of listing their main sponsors on their website. (A mistake that has now been rectified, by the way. There is no longer any mention of the group’s main sponsors on the website.)
If faced with criticism, the corporate playbook generally has been “we’re just interested in dialogue” and “we don’t necessarily endorse their views.”
Indeed, here is Federated Hermes’ original statement on the matter, as reported by ESG Clarity:
“We work with a range of clients who hold different views on ESG. We engage with all, listening to their views and putting forward our capabilities to meet needs consistent with their convictions. Meeting fiduciary standards is enhanced by not removing ourselves from this process and the forums where issues are discussed,” the firm stated.
“Responsible investing is not about promoting a specific political agenda.”
The company added that it participates in hundreds of events around the world with different organizations for which it does not set the agenda, noting that “our participation does not serve as an endorsement of any organization’s particular perspective on any issue.
“Listening to different points of view is critical to the engagement process. Diversity of thought and respect for the views of others, no matter how they differ from our own, is critical to long-term consensus building and the betterment of our world.”
This is gaslighting. It may be what Federated Hermes convinced itself it was doing, and it follows the standard playbook, but the reality is that the firm has been funneling money to an organization that is diametrically opposed to what Federated Hermes says is central to its investment approach. Not only opposed, but actively using its considerable influence and authority to limit the practice of ESG- and climate-aware investing.
In announcing that it would no longer sponsor SFOF, the firm didn’t walk back the statement. But at least it said something and did the right thing.
That’s better than can be said for other key SFOF sponsors Invesco, Fidelity, and JPMorgan, from whom we’ve heard nothing.
I don’t use the term “greenwashing” very often, because it often comes down to perceptions, but in this case, these firms’ sponsorships of SFOF certainly leaves doubt in my mind about their commitment to sustainable investing.
The old paradigm is changing. We live in an era of greater transparency and higher expectations for company behavior. When companies make commitments to sustainable investment, they should make sure their memberships in trade associations or sponsorships of political groups are consistent with those commitments.
The more you know: the Right’s Anti-ESG in a single graphic
Heritage Action, the activist, dark-money offshoot of the Heritage Foundation, has put out this graphic summarizing what they claim ESG is all about:
A CEO Responds
Accenture CEO Julie Sweet was recently asked whether she was one of those “woke” CEOs:
“I’m a CEO who understands what brings value. You cannot look at Accenture and our success since 2013 without understanding that when we made a commitment to double down on diversity and have a 50–50 gender split by 2025, and our commitment to DEI…that is completely intertwined with our success as a company…Sustainability matters to our employees from a recruiting standpoint, it matters to our clients, it’s part of our regulatory landscape, it matters to consumers. That’s not changing because of what politicians want to call it.”
My overview of Clean Energy ETFs
My Sustainability Matters column this week is an overview of the largest clean energy ETFs:
Getting Started with ESG
I’ll be in New York on Tuesday, September 21, participating in the Investopedia/ Morningstar Investor Connection Summit. You can attend live or virtually. Our session “How to Get Started with ESG” starts at 3:30 ET.
Register here:
Follow me on Twitter @Jon_F_Hale
