24. Investors and regulators shall compel all businesses to comply with the U.N. Global Compact.

I. Move the Nuclear Weapons Money

Rapporteur: Alyn Ware

Over the next 10 years, governments plan to spend a staggering $1 trillion on nuclear weapons globally. That’s $100 billion annually. Meanwhile the core budget of the UN is just $5 billion. Peace, health, education, climate protection and sustainable development are all underfunded while nuclear weapons budgets continue to rise.

Move the Nuclear Weapons Money is an international campaign which aims to reverse this. It brings together national and international organisations, that have been working independently for a number of years, to promote cuts to nuclear weapons budgets, divestment from nuclear weapons and reinvestment in socially responsible and ethical investment.

The campaign addresses one of the most powerful drivers of the nuclear arms race – the corporations that are manufacturing nuclear weapons and their delivery systems. These corporations actively lobby their parliaments and governments to continue allocating the funds to nuclear weapons. And they support think tanks and other public initiatives to promote the ‘need’ for nuclear weapons maintenance, modernization or expansion.

As a result, common sense efforts within the nuclear armed States to cut the federal nuclear weapons budgets have not succeeded. Parliamentarians for Nuclear Non-proliferation and Disarmament (PNND) Co-President Senator Ed Markey, sponsor of the Smarter Approach to Nuclear Expenditure (SANE) Act in the U.S. Senate, for example, is unable to move more than a handful of other senators to support his act due to the lobbying power of the nuclear weapons corporations.

Similarly, PNND Council Member Jeremy Corbyn, who is leader of the UK Labour Party, is unable to convince his own party to reject the renewal of Trident nuclear weapons system, which will cost £200 billion, due primarily to the political power of the nuclear weapons industry which has convinced the unions that cancelling the program will result in the loss of thousands of jobs, a fallacious argument as the release of this money would enable the creations of many times more jobs.

The political power of the nuclear weapons industry in the nuclear armed States is why a secondary tactic of nuclear weapons divestment is needed.

Already four governments (Lichtenstein, New Zealand, Norway and Switzerland) have adopted nuclear weapons divestment policies following initiatives by members of PNND working in cooperation with civil society. The adoption of the Treaty on the Prohibition of Nuclear Weapons could provide impetus for many more countries to follow suit.

The nuclear weapons divestment campaign is building cooperation with the fossil fuel divestment campaign which has achieved considerably more success in moving individual investors, universities, pension funds, cities and state governments to divest from fossil fuels. However, a number of these, especially in Germany and Switzerland, are also divesting from nuclear weapons. Move the Nuclear Weapons Money is holding international events in Switzerland and New York in 2019, bringing together legislators (mayors, city councillors and parliamentarians), financial managers, campaigners and experts in disarmament and climate change to examine successful divestment policies and build cooperation for their expansion and replication.

In order to build public awareness and action to expand the number of countries, cities, universities and financial institutions divesting from nuclear weapons, the campaign will hold a major public event in October 2019 to “Count the Nuclear Weapons Money.” Over 7 days and 7 nights in October, $1 trillion will be counted note-by-note and symbolically reallocated to better purposes. The money will be counted in public locations by volunteers in 1 million mock notes each of $1 million in value, with shorter 1-2 hours in locations around the world, feeding into the main event in New York.

For further information, contact Move the Nuclear Weapons Money, info@nuclearweaponsmoney.org | www.nuclearweaponsmoney.org

Quotes

It is our choice. We can either spend the millions and millions of dollars on nuclear weapons and MAD – Mutually Assured Destruction – or on our future, the planet, kids, education, equality. This is what Count the Nuclear Weapons Money is about.
– Roger Waters, Lead singer/songwriter, Pink Floyd

It is imperative that developed nations take immediate actions in allocating resources and spending to address the critical issues of global hunger, children’s education and health , instead of wasting them on building nuclear stockpiles which continue to threaten the existence of present and future generations.
– Kehkashan Basu, World Future Council Youth Ambassador. Winner of the 2016 International Children’s Peace Prize

The utter obscenity of having spent trillions, and planning to spend trillions more, on omnicidal weapons while children go hungry, people die of totally preventable and treatable diseases, homeless people curl up on the concrete, sickens me. I hope the physical act of counting enormous bills of fake money for a WEEK can help people understand how massively wrong nukes are and that we must abolish them.
– Ellen Barfield, Vice President, Veterans for Peace

The massive amounts of money spent on grotesque nuclear weapons that should never be used can be put to good use across the world in so many ways. Let’s make it happen.
– Peter Garrett, lead singer for Midnight Oil, environmentalist, activist and former Australian Minister for the Environment

II. Corporate Responsibility and the Connection to Existential Threats

Rapporteur: Robin Collins

There are many debates around the kind of economy the globe needs to best service a growing population of seven billion people in over 190 countries, with a wide range of talents, cultures, laws and levels of democracy. This plank is not intended to solve the problem of economic systems. Rather it collects some of the levers at hand (international and national investors and regulators) and points to some of the institutional and legal mechanisms they can draw upon to compel businesses to meet necessary human rights and climate standards. Many will, as they must, reference international Conventions and the SDG framework, because these are the agreeable tools the international community has agreed to. This short piece is not intended to be a comprehensive outline of measures or mechanisms, but it offers some examples of progress and required attention in the areas of the UN Global Compact, the International Labour Organization, Fair Trade, and Shareholder/Investor Activism and Ethical Investment practices.

The United Nations Global Compact

The UN Global Compact was created in 2006 to “mobilize a global movement of sustainable companies and stakeholders to create the world we want”. It is funded by The Foundation for the Global Compact, a U.S.-based non-profit organization, incorporated in New York State, that was established to financially support the GC through fundraising (from the global business community and broader private sector) and promotion of its Ten Principles (see below). The philosophy of the UNGC is that public-private collaboration will resolve “pressing global problems”. The achievement of this mission the GC, which is now made up of […], promotes doing business responsibly “by aligning strategies and operations with Ten Principles on human rights, labour, environment and anti-corruption; and taking strategic actions to advance broader societal goals, such as the UN Sustainable Development Goals, with an emphasis on collaboration and innovation.
All ten of the Ten Principles are sourced from existing international agreements, including the Universal Declaration of Human Rights, the ILO’s labour rights principles, the Rio Declaration and the UN Convention Against Corruption.

Human Rights

1. Businesses should support and respect the protection of internationally proclaimed human rights;

2. Make sure that they are not complicit in human rights abuses.

Labour

3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

4. Elimination of all forms of forced and compulsory labour;

5. Effective abolition of child labour;

6. Elimination of discrimination in respect of employment and occupation.

Environment

7. Businesses should support a precautionary approach to environmental challenges;

8. Undertake initiatives to promote greater environmental responsibility;

9. Encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

10. Businesses should work against corruption in all its forms, including extortion and bribery.

International Labour Organization

The ILO was established in 1919 after the First World War to pursue universal lasting peace through social justice. It became a specialized agency of the United Nations in 1946. Its goals are to promote rights at work, decent employment opportunities, and work-related protection. It was established along a tripartite framework (government, employers, workers) and there are 187 member states supporting the organization. Seven states are not members: Andorra, Bhutan, Liechtenstein, Micronesia, Monaco, Nauru, and North Korea (DPRK). While the ILO develops and promotes international labour standards, and most countries align by membership to the ILO and its principles, implementation of codes and standards are fundamentally dependent on the willingness of nation states to comply.

The modern ILO, like all United Nations affiliated organizations, sees its mission interwoven with the Sustainable Development Goals (SDG). It has projected the future of work to be therefore integrated through this framework, and has established the DW4SD Platform, a guiding context for the provision of “decent work” standards. The ten DW policy outcomes related to the SDG are: Better Jobs, International Labour Standards, Social Protection Floors, Sustainable Enterprises, Rural Economy, Informal Economy, Labour Inspection, Unacceptable Forms of Work, Labour Migration, Employer and Worker Organizations. All these planks have broad implications, but for the purposes of this short outline, we will focus on just two of the ten.

#2 Ratification and application of international labour standards

Progress in the area of agreed global labour standards can only occur when there takes place a wider level of their ratification. The UN Charter does include an encouragement to respect human rights and fundamental freedoms (Article 76) through the international trusteeship system (Chapter XII) and the Economic and Social Council (Chapter X), International Economic and Social Co-operation (Chapter IX), recommendations of the General Assembly (Article 13), the primary Article 1 (through international cooperation), and within the Charter’s preamble “We the peoples of the United Nations Determined to reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small…”

The ILO sees action on this front being contingent on

“Enhanced action by tripartite constituents [government, employer and workers] and other actors at country level for the application of international labour standards, supported through national and multilateral planning frameworks such as DWCPs [Decent Work Country Programs] and United Nations Development Assistance Frameworks (UNDAFs) or equivalent planning frameworks”

The standards are well known and cover many subject areas, such as child labour, freedom of association (unionization), gender equality, health and safety, working conditions, etc. Rights at work are articulated through binding Conventions and non-binding recommendation, Codes of Practice and guidelines. Since its formation, the ILO has adopted 189 Conventions, 6 Protocols and 204 Recommendations. The ILO governing body determined that 71 conventions are still valid and should be actively promoted, and others require revision or withdrawal. In 2016, the ILO decided to review 235 international labour standards.

While these standards are “adopted” when 2/3 of the ILO constituents agree (2/3 of 187 states) they are also written in such a way to be flexible for differing country cultural, legal, development contexts. Some standards have flexibility clauses that allow states to “lay down temporary standards that are less stringent than those normally prescribed, to exclude certain categories of workers from the application of the Convention or to apply only certain parts of the instrument.”1)

The standards are used as models for national labour law. As with other treaties and agreements, while some countries do not ratify, they may enact legislation consistent with the principles and expectations. National courts are able to use international standards to determine case law, such as in the area of forced labour or discrimination. They are also seen as “cross-cutting policy drivers” because ILO labour standards relate to issues of gender equality and non-discrimination.

#10 Strong and representative employers’ and workers’ organizations

Because the ILO is a tripartite-themed organization, governments are expected to implement rules and regulations that apply both to employers and employees. Employers and business membership organizations (BMO) are established to enhance financial sustainability, to improve management in order to be adaptable to changing conditions, to extend evidence-based policy advocacy, and to enhance leadership skills for economic, social and environmental issues.

Workers organizational capacity is strengthened in order to

  • organize new members and develop well-functioning organizations that respond to needs;
  • influence policy agendas on workers’ rights and working conditions; and
  • promote and use international labour standards at all levels to uphold workers’ rights and promote decent work as a key driver of sustainable development

Forced Labour

The ILO relies on two primary Conventions to prohibit force labour and to respond to and eliminate contemporary forms of slavery (Forced Labour Convention, 1930 and the Abolition of Forced Labour Convention, 1957) as well as the 2014 Protocol to the Forced Labour Convention.

Climate Change

The International Labour Organization sees climate change as both a challenge and an opportunity. Global warming threatens existing jobs and livelihoods (coastlines, damage to farmland, drying up of water sources, flooding, distortions in the market, shifts away from certain types of employment), and as a provider of new jobs in new industries that will appear in response to climate change.

“[Measures] to mitigate greenhouse gas (GHG) emissions offer opportunities to create new jobs, while securing existing ones. A transition to a low-carbon, greener economy will imply the creation of new jobs in environmentally friendly production processes and outputs, whereas other jobs will be at risk, in particular in those sectors with fewer options for a transition towards a more sustainable ways of production.”2)

Forced large scale and long-term migrations are predicted as a result of job loss and reduction in habitable land. The victims of change will be unevenly distributed. Some areas of the globe are better able to cope (i.e. the global North), whereas the Least Developed Countries (LDC) and Small Island Developing States (SIDS) are believed to have reduced capacity for adaption. Those regions dependent on natural resource extraction industry and food production, or tourism will bear a greater burden.

However, there are significant advantages to transitioning to a new low-carbon economy. Jobs will appear in emerging green sectors (renewable energy generation is already witnessing tremendous and accelerating growth). Other jobs will disappear. Industrial transformation is happening whether or not the political mechanics have been prepared in advance, because “the majority of existing jobs will be transformed and redefined in terms of their profile requirements and working methods”.

The “green economy” will inevitably expand employment but the process of transition is contingent on demand and investment, the availability of labour and job training, and the flexibility of trading arrangements.
According to the ILO, early transitional jobs will be generated in areas such as these:

  • Relocation of exposed settlements and industry
  • Establishment of coastal defences
  • Reinforcement of buildings and infrastructure;
  • Construction of new climate resistant infrastructure
  • Transfer of new climate friendly technology

Fair Trade

The World Fair Trade Organization sees fair trade as a “partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South. Fair Trade organisations have a clear commitment to Fair Trade as the principal core of their mission. They, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade.“

Fair Trade is a shift in focus towards justice, changing conventional trade systems by putting people (not profits) first, and is believed to be a significant potential “contribution to the fight against poverty, climate change and economic crisis.”

Buying fairly traded products is largely a consumer decision and it is mostly based on the optional buying choices and power of countries in the global North buying from countries in the global South. While the World Bank counts 31 countries as being “low income”, more than half of them (18) had 135 fair trade certified producers.

In 2015-16, about US$187 Million was paid to producers through fair trade transactions. That compares to a total of US$16 Trillion in total world merchandise exports (a miniscule proportion). The ratio of agricultural products to total exports has also been steadily falling. Not only that, but the least developed countries (LDCs) have become major net importers of agricultural products.

The Fair Trade movement is closely linked to the UN’s Sustainable Development Goals (SDG), including particularly: Ending poverty (goal 1), Ending hunger and achieving food security, better nutrition and sustainable agriculture (goal 2), Achieving gender equality and empowerment of women and girls (goal 5), Promoting sustainable economic growth and decent employment (goal 8), Ensuring sustainable consumption and production patterns (goal 12), Combating climate change (goal 13), Promoting peaceful and inclusive just societies (goal 16), and Strengthening global partnerships (goal 17).

It is estimated that about 1.66 million farmers and workers are involved in fair trade certified producer organizations.

  • Almost half of fair-trade farmers produce coffee.
  • There are about 1,400 producer organizations within 73 countries.
  • About a quarter of fair-trade workers and farmers are women.

The 2016 summary report of Fair Trade International found:

“The number of certified Fairtrade producer organizations in Africa and the Middle East, and in the Asia and Pacific region, grew by 18 percent. In Latin America it grew by just nine percent. However, growth in the number of organizations did not affect the number of farmers and workers in the same way. While overall, the number of farmers increased by one percent, the number of workers in Fairtrade plantations actually fell by five percent. The overall change in the numbers of Fairtrade farmers and workers in all three regions also varied across most major products.”

About a quarter of Fair-Trade farmers and workers are in low-income countries, whereas 80% are in low or lower-middle income countries. While almost half of fair-trade farmers produce coffee, 82% of all producers in this project are small farmer organizations. However, as the report also notes: “Not all of the volumes produced by Fairtrade certified organizations are sold on Fairtrade terms.”

Fair Trade producer organizations come in two main flavours: Small Producers (farming in particular) and Hired Labour (including, for instance, “artisanal” mines and small-scale mining.) After coffee growing (38%), the largest producer groups were Cocoa (13%), bananas (10%), tea (8%) and sugar (7%).

By region, the countries with the bulk of producers are in Latin America and the Caribbean (just over half), while Africa and the Middle East had 29 countries involved, and the Asia and Pacific with 20 countries.

In 2015, countries within the World Trade Organization (WTO) agreed to end subsidies for farming exports. It is believed that this will help farmers in poor countries in their competition with wealthier countries. At the time, the European Commission declared this should be good for fairer trade. The Doha Development Agenda (i.e. the WTO negotiations) goals include “increased duty-free access for developing countries; lower tariffs on agricultural products, textiles and clothing; and the reduction of trade-distorting subsidies from developed countries.”3)

III. How Investors can compel Businesses to comply with the U.N. Global Compact

Rapporteur: Peter Meincke

This may seem to be a useless exercise to those who believe Chris Hedges’ latest grim assessment that there is no future for our grandchildren “unless we…overthrow corporate power. Otherwise, it’s very clear these people will kill us.” 4)

Others are trying to use shareholder activism to compel businesses to be environmentally and socially responsible. According to the US SIF Foundation’s 2018 Report on US Sustainable, Responsible and Impact Investing Trends, as of year-end 2017, more than one out of every four dollars under professional management in the United States—

$12.0 trillion or more

—was invested complying with environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact. 5)

Owning shares in a company gives investors a channel through which to raise environmental, social and corporate governance issues of concern. By filing or co-filing advisory shareholder resolutions at US companies, which may proceed to a vote by all shareholders in the company, active shareholders bring important issues to the attention of company management, often winning media attention and educating the public. Moreover, resolutions need not come to a vote to be effective. The process of filing often prompts productive discussion and agreements between the filers and management that enable the filers to withdraw their resolutions.

From 2016 through the first half of 2018, more than 200 institutional investors and money managers collectively controlling a total of at least $1.76 trillion in assets filed or co-filed shareholder resolutions on ESG issues. Investors filed more than 700 resolutions relating to environmental, social and key governance issues for the 2018 proxy season. The leading issue raised in shareholder proposals, based on the number of proposals filed, from 2016 through 2018, was “proxy access.” Investors filed 353 proposals at US companies during this period to facilitate shareholders’ ability to nominate directors to corporate boards. Disclosure and management of corporate political spending and lobbying is also a top concern. Recent social and environmental resolutions have addressed climate change, fair labor and pay standards, human rights and sustainability reporting.

In addition to filing or co-filing shareholder resolutions, investors can also actively vote their proxies, engage in dialogue with corporate management or join shareholder coalitions as a means to encourage companies to improve their environmental, social and corporate governance practices. In addition, investors can participate in public policy initiatives, working with government regulatory agencies, and testify and report on ESG investment issues to Congress.

A few of the many examples of how shareholder resolutions make a difference can be found here: https://www.ussif.org/resolutions. To learn more about the impact that sustainable and responsible investors have had on companies, the investment industry and public policy, see The Impact of Sustainable and Responsible Investment.6)

The number of investors exercising their rights as shareholders to encourage environmentally and socially responsible behaviour by corporations is growing rapidly.

This overview will examine a number of examples of shareholder activism, the responses from the corporations and a number of ways to strengthen the impact.

An article by Trevor Nace in Forbes describes a statement by global group of 415 investors managing $32 trillion in assets urging governments to accelerate their actions to mitigate climate change. 7)

“The 2018 Global Investor Statement to Governments on Climate Change reiterated their support of the ongoing Paris Agreement discussions taking place during COP24 in Katowice, Poland.8)

The group of global investors manages the funds of millions of beneficiaries around the world and urges governments to support and quickly adopt measures outlined in the Paris Agreement.
The group warns that ignoring action against climate change could cause permanent economic damage up to four times the size of the 2008 financial crisis. To mitigate these economic damages, the group of investors calls on global leaders to commit to three priorities.

  • Quickly adopt and achieve the measures outlined within the Paris Agreement
  • Increase the rate of investment in renewable energies and speed up the transition to low-carbon economies. This would include adopting a price for carbon emissions.
  • Improve financial reporting on the impacts of climate change on businesses.

In order to limit global warming below 2°C compared to preindustrial levels, global economies must significantly and quickly curtail their emissions. Schroders, a member of the global investor’s group, warns that a temperature rise of 4°C could cause $23 trillion in global economic losses over the remainder of the century. 9)

The full text of the resolutions and responses of the TD Bank and the Laurentian bank are not included even though much can be learned from the wording especially in comparing the responses of the two banks to the same resolutions from MEDAC.

Example 1.

(See THE TORONTO-DOMINION BANK PROXY CIRCULAR)10)

In response to a proposal by Mr. John Philip Chubb of North Vancouver BC to the Annual Meeting of the Toronto-Dominion Bank held on April 4, 2019 that the TD Bank take greater care in its energy investments, the Bank’s key argument in the TD Bank’s response was the need to “balance environmental, social and economic considerations, and does not agree that immediately stopping or starting projects in environmentally-sensitive sectors is in the best interests of the bank or the communities in which the bank operates. ” and to take” a balanced approach to support the transition to a low-carbon economy” The TD Bank then gives a comprehensive list of the actions they are taking at the recognition it has received for its efforts.

The “balanced approach”, common not only in corporations but also governments, is most frustrating to those who want immediate action. Rather than demanding immediate cessation of projects in environmentally sensitive areas, more might be accomplished by asking for a plan for adjusting the balance.

Example 2

MEDAC (Mouvement d’éducation et de défense des actionnaires (MÉDAC) whose offices are located at 82 Sherbrooke Street West, Montreal, Quebec, H2X 1×3.) submitted two additional proposals that it withdrew after discussions with the TD bank. These proposals were submitted in French and translated into English by the bank. MEDAC requested that the bank include the text of these two proposals and the bank’s responses to them in the circular. (See THE TORONTO-DOMINION BANK PROXY CIRCULAR at for the complete proposal and response.)11)

MEDAC submitted the same proposals to the Laurentian Bank. See LAURENTIAN BANK 2019 MANAGEMENT PROXY CIRCULAR (This document can be downloaded from https://www.laurentianbank.ca/en/about_lbc/my_investment/proxy_circulars.html)

The first proposal was:

1. Integration of environmental, social and governance criteria into executive compensation

Be it resolved that the compensation committee report, in the minutes of its annual activities, on the importance it attaches to the integration of environmental, social and governance criteria in assessing the performance of senior executives and setting their incentive compensation.

The TD bank’s response included “the objective of the bank’s executive compensation program is to reward executives for successfully executing the bank’s strategy and delivering long-term value to shareholders, which requires successful execution of contributing sub-strategies dealing with a range of matters, including ESG. An executive’s compensation can be impacted where such objectives are not achieved. The bank’s ESG scorecard (which is disclosed in the Corporate Responsibility Report) sets out the bank’s ESG related objectives and goals across a number of key categories, including Customers, Colleagues, Community, Environment and Governance. Customer Experience is also one of the key metrics used to evaluate business performance under the Executive Compensation Plan.”

Laurentian Bank response included “The Bank takes the environmental, social and governance (ESG) matters and related best practices very seriously and the commitment to ESG engagement is shared and advanced at all levels of the Bank’s corporate structure. While the Bank is of the view that it is difficult to use the promotion of ESG issues as a quantifiable evaluation criterion in assessing the performance of its executives, ESG factors, through our broader corporate social responsibility efforts, are already indirectly embedded in the executive compensation structure, since these influence our governance and compliance practices and support the Bank’s profitability and development. ”

It is interesting to compare these responses to the positive actions by Royal Dutch Shell which has announced that ten percent of bonus payments to Shell executives will be linked to greenhouse gas management.12)

The second MEDAC proposal was:

2. Climate change and measures taken to support the transition to a low-carbon economy

Be it resolved that the Board of Directors disclose the available information required by the Task Force on Climate-related Financial Disclosures (TCFD) with respect to governance, strategy, risk management and other parameters and objectives in its next annual report.

The TD BANK’S Response to This Proposal:

In June 2017, the Financial Stability Board published the Task Force on Climate-related Financial Disclosure (‘‘TCFD’’) report outlining 11 recommendations for companies to assess and disclose management of climate-related risks and opportunities. Although these recommendations are voluntary, the bank took early action and developed a strategy to demonstrate proactive management of climate-related risks, which resulted in the bank being among the leading financial institutions globally in addressing TCFD recommendations. In addition to voluntarily complying with the recommended disclosure, the bank also decided to participate in three pilot working groups convened by the United Nations Environment Programme Finance Initiative (UNEP-FI). Through its membership in those pilots, the bank is helping to develop harmonized industry-wide approaches for climate-related scenario analysis in bank lending, investments and insurance portfolios. TD is the only bank worldwide that is participating in three TCFD pilot studies, and we are proud to be considered a leader in this area. Since 2017, the bank has reported on climate-related risks in its Corporate Responsibility Report (‘‘CRR’’), including its alignment with the recommendations of the TCFD and in December 2018, we issued a standalone report (titled ‘‘Managing Climate-Related Risks and Opportunities — TD’s TCFD Report’’) summarizing our business and operational climate performance and our efforts toward implementing the TCFD recommendations. In addition to the bank’s TCFD disclosure, the CRR provides substantial disclosure on the bank’s environmental strategy, including with respect to climate change, the bank’s environmental policy and governance structure. To date, the bank’s CRR has included disclosure in response to 10 of the 11 recommendations put forth by the TCFD. The one outstanding TCFD recommendation requests disclosure about the resilience of the bank’s strategy, taking into consideration different climate-related scenarios, to the extent such information is material. The results of the three TCFD pilot studies will help inform methodologies for assessing the materiality of climate-related risks. Only one of the three pilot studies is complete, and the other two are still underway. The materiality assessment that is required for the bank to accurately respond to the impact of different climate-related scenarios on its strategy is, accordingly, still in development. Once that assessment is complete, the bank will be able to appropriately determine whether climate change risks are material to the bank which would inform appropriate disclosure for its annual report or its CRR. Until that time, the bank considers the CRR to be the appropriate document by which to disclose its alignment with the recommendations of the TCFD. The bank’s 2018 CRR is scheduled to be issued in April 2019. In addition, the bank provided a high-level summary of its participation in the TCFD project on page 103 of the bank’s 2018 annual report.

LAURENTIAN BANK 2019 MANAGEMENT PROXY CIRCULAR (This document can be downloaded from https://www.laurentianbank.ca/en/about_lbc/my_investment/proxy_circulars.html)

The Laurentian Bank’s Response

In accordance with its commitment to take into consideration the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the Bank has been following the evolution of the TCFD project over the past few years and will continue to do so in order to potentially become an official supporter of the initiative and to implement the recommended disclosure practices. While the Bank recognizes the quality of the general framework for climate-related financial disclosures put forth by the TCFD project, it has been acknowledged in the TCFD’s first status report of September 2018 that climate-related disclosures are still in early stages and further work is needed for disclosures to contain more decision-useful climate-related information.
The Bank is of the view that not only is it useful to see how companies translate the recommendations into practice, but the TCFD may also further refine and provide details on its recommendations in order to provide useful and practical guidance for companies wishing to undertake a comprehensive review of their climate-related analyses in order to align these with the TCFD project.
In the meantime, the Bank continues to focus its efforts on reducing its environmental footprint by pursuing concrete decarbonisation initiatives. Further details on our continuous environment-related efforts can be found in our social responsibility reports published annually and available on our website.

Consequently, the Board of Directors considers that it is neither advisable nor desirable to adopt this proposal, and recommends voting AGAINST the proposal.

Comment

It is useful to compare the responses to the MEDAC proposals from the TD Bank and the Laurentian Bank especially the actions taken regarding the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The Laurentian bank is “following the evolution of the TCFD project” and may become a supporter while the TD Bank “ took early action and developed a strategy to demonstrate proactive management of climate-related risks, which resulted in the bank being among the leading financial institutions globally in addressing TCFD recommendations.” This is an example of how activist shareholders could use positive actions by one corporation to encourage another less proactive corporation.

The Loblaws Corporate Social Responsibility Report states:

13)

“Reducing our carbon footprint We recognize the growing environmental impacts of greenhouse gas (GHG) emissions, and are committed to being part of the solution. We believe carbon reduction goals can be achieved without sacrificing economic growth. In 2016, we committed to reduce our carbon footprint by 20% by 2020 and by 30% by 2030 relative to our 2011 baseline. We are pleased to have achieved our 2020 reduction target in 2017, and are now focused on our 2030 objectives through improved energy management, refrigerant and waste reduction and transportation efficiency.

In 2018: • We achieved a reduction of 26.1% in absolute carbon emissions relative to our 2011 baseline, and are set to deliver reductions in line with Canada’s national targets. • We piloted the conversion of refrigeration systems in our stores to lower global warming potential (GWP) hydroflouoroolefin (HFO) blends for refrigeration; these stores were previously using high GWP hydroflurocarbon (HFC) refrigerants. • We maintained our refrigerant leak-checking program across our network. • We converted fluorescent lighting to LED lighting in 166 stores and 473 Shoppers Drug Mart locations. • We added doors to open-air refrigeration units in 30 stores. • We diverted waste by 66.6% from our corporate stores and by 90% from our distribution centres.

Managing climate change-related risk As we continue to make good progress against our carbon reduction goals, we are increasingly being asked by our customers, investors and colleagues about how we are managing the impacts of climate change. To that end, we will undertake a climate risk scenario analysis in 2019. This assessment will help us better understand the expected impacts of climate change, and how these impacts will affect day-to-day operations across our business. ”

Another positive example which activist shareholders could use to encourage more action by less progressive corporations.

One area which needs much more action is the use of plastic packaging for fruits, vegetables, meats etc.

A CBC report on activist shareholders, including the endowment fund of the Church of England, attempts to set targets for reducing carbon emissions. 14)

“A representative of the Church of England’s endowment fund said Wednesday that Exxon has moved more slowly than other major oil companies to disclose information about emissions.
Chairman and CEO Darren Woods defended the company, saying it’s doing its part by providing energy that people need while also reducing emissions from its own operations.
Exxon successfully petitioned the Securities and Exchange Commission to block a shareholder vote on setting targets for reducing carbon emissions from burning oil and gas.
Exxon, which is based in Irving, Texas, continues to project that demand for oil will grow nearly 1 per cent a year, propelled by its use in transportation and chemicals, and Woods repeated a goal of doubling 2017 earnings by 2025.

Activists, however, find Exxon’s forecast of oil demand wildly optimistic in a lower-carbon energy world:

“If we reach a point of secular decline in demand for oil, the competition to meet that dwindling level of demand would become much more intense, with a potential knock-on effect on prices and financial returns from the sale of oil,” said Robert Schuwerk, North America director for Carbon Tracker, a U.K.-based group that studies the effects of climate change on financial markets.
Edward Mason, representing the Church of England’s fund, told shareholders that Exxon and investors “have been in open conflict about climate strategy and disclosure.”
Mason contrasted that with rivals including BP PLC, which last week supported a successful shareholder resolution to increase disclosures about its emissions and how its business strategy fits with the Paris agreement to limit the increase in global temperatures.”

For Canadian regulations for shareholders:

15)

“Shareholders in a publicly traded company are entitled to introduce shareholder resolutions, or proposals, to the company management to be voted on in the next annual meeting. These resolutions may pertain to company policies and procedures, corporate governance or issues of social or environmental concern. Shareholder resolutions are a meaningful way for shareholders to encourage corporate responsibility and discourage company practices that are unsustainable or unethical. Often, a shareholder resolution will fail to win a majority of the shares voted, but still succeed in persuading management to adopt some or all of the requested changes because the resolution was favored by a significant number of shareholders.

A surge in shareholder proposals on climate change began in 2014 as investors wrestled with the prospects of “stranded” carbon assets, US and global efforts to curb greenhouse gas emissions and the calls by 350.org and other groups for divestment from fossil fuel companies. That surge has shown no signs of diminishing.”

Conclusions and Recommendations

  • Shareholder activism can encourage corporations to be more environmentally and socially responsible.
  • Activist shareholders can either submit a resolution as a group or vote for a resolution proposed by one shareholder or organization.
  • It is essential to increase the number of activist shareholders and coordinate their activism.
  • It is not necessary for each activist shareholder to own shares in all of the companies or own more than a few shares in a company.
  • There should be enough shareholders or votes to encourage the corporation to take the issue seriously.
  • Although it may appear to be contradictory it will be useful to buy shares in fossil fuel corporations to introduce shareholder resolutions at their Annual Meetings.
  • It is important to be aware of the positive actions corporations are taking and what else needs to be done.

It is recommended that:

  • NGOs encourage their members to become activist shareholders.
  • NGOs work together to establish an organization to coordinate the shareholder activism.
  • Rather than demanding immediate actions such as withdrawing investments in or financing fossil fuels this year, activist shareholders recommend a staged withdrawal or ask for a timetable which allows a transition which balances social, environmental and economic considerations.
  • Activist shareholders should give positive reinforcement to positive actions by corporations and use good examples from one organization to encourage other organizations to follow its example.
  • Awards should be given to the corporations in various categories such as banks to recognize special achievements.

Author: Alyn Ware; Robin Collins

2 thoughts on “24. Investors and regulators shall compel all businesses to comply with the U.N. Global Compact.

  1. Secretary General Kofi Annan had his own way of dealing with corporate giants. He allocated a portion of his office to setting up a Global Compact, which would supposedly tame the bad actors. He never said whether he felt he had achieved his goal.

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