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July 02, 2013

Ceres, ICCR Offer Guidance for Sustainable Investing
    by Robert Kropp

The Interfaith Center on Corporate Responsibility provides insights for investors on climate change, and Ceres issues a blueprint for investors seeking to incorporate sustainability into their decision making. First of two parts. -- President Obama recently made a major speech on climate change and the effect seems to be that the issue has finally moved squarely to the center of public attention. In addition to the reductions in the nation's emissions that the regulatory actions outlined promise, the speech may well help the sustainable investment agenda gain even more widespread adoption.

If mainstream investors are casting about for a place to start, they could do far worse than look to two of the sustainable investment organizations that have done as much as any to make the case for sustainability. Both Ceres and the Interfaith Center on Corporate Responsibility (ICCR) have recently published texts to help investors incorporate sustainability into their decision making.

The four pages of insights published by ICCR provide some background on the issue of climate change, and states plainly, “the primary responsibility for controlling greenhouse gas emissions clearly lies with global policymakers.” Which is not to say that investors in their roles as activist investors do not have leverage. “As early as 1992 ICCR members began to use their leverage as shareholders to forcefully engage the fossil fuel industry and other GHG-heavy sectors in an effort to curb emissions and forge new paths towards a green economy,” the paper states.

ICCR points out that despite the decades of shareowner action companies in the fossil fuel industries fail to account for climate change in their business plans and oppose government action that introduce a carbon tax or mandate reductions in GHG emissions. It is such intransigence in the face of scientific consensus that has helped the fossil fuel divestment campaign begun by last year to capture the attention of so many.

But according to ICCR, shareowner engagement is the most effective way to influence corporate behavior. “To divest is to relinquish those shares to another owner who may not be practicing active ownership,” the paper states. “This approach, in effect, serves to strengthen management control. ICCR members advocate for amplifying our collective voice by bringing more shareholder advocates to the table – that is, we support engagement.”

“However,” ICCR acknowledges, “Divestment may be appropriate when a company with egregious practices has failed to respond to a long-term engagement or when an organization has exhausted its available resources to continue to engage a company effectively.”

“If investors determine to divest as a last resort, we urge them to raise the public visibility of their decision and the reasons for it.”

The paper documents the various engagement strategies and significant accomplishments of ICCR members and other sustainable investors—familiar to readers of, but the inclusion of which is necessary for raising awareness among mainstream investors—as well as developing strategies addressing such issues as stranded assets and the human rights impacts of climate change.

“The majority of the energy sector remains mired in its old model and demonstrates through its actions that it is in apparent denial of the terrible price future generations will pay for its resistance to reform and/or to conform to measures that can produce change,” ICCR concludes. “In the absence of a more stringent GHG policy to enforce reductions, it is our responsibility as concerned investors to use our leverage to intervene wherever and whenever we can. There is no doubt that bolder, more creative strategies are required.”

For many of the faith-based members of ICCR, “Where there is disagreement, we must be in discussion to hope for resolution. For that reason, as shareholders, we remain engaged with the companies we hope to change.”

Next: Ceres offers a blueprint for sustainable investment.

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