At Friends Fiduciary we, like others, continue to navigate the challenges to sustainability concerns in the current political climate. Despite this, we are continuing our work engaging the companies we hold to improve their impact on people and planet. During the 2024-25 proxy season we engaged over 50 companies on issues ranging from human rights in company policy and practices, equitable access to medicines, diversity within company workforces, climate financing in the banking sector, best practice in governance through separation of chair and CEO positions, climate lobbying alignment and more. FFC filed a total of 18 resolutions this year, including 10 proposals on which FFC led the engagement with the company.
Diversity, Equity and Inclusion
Board and workforce diversity disclosures continue to be a priority area of engagement. This proxy season we engaged five companies on greater workforce diversity disclosures and an additional company on inclusive board refreshment. This workstream resulted in three withdrawals with two companies agreeing to greater workforce diversity disclosures and a third company agreeing to include language highlighting the inclusion of diverse candidates in its search for board members. We also had a proposal on greater corporate workforce disclosures go to a vote at the insurance company, Arch Capital Group. Our proposal received a 13% vote in support, a solid vote considering the decreasing support for shareholder proposals overall and the current political narrative around diversity, equity and inclusion.
Human Rights
This proxy season we’ve also made progress in our human rights related engagements. We’ve continued to engage Texas Instruments on conducting know-your-customer human rights due diligence to better combat the illicit diversion of their microelectronic chips to Russian weapons systems used in Ukraine. After 3 years of engagement and filing resolutions, we were able to come to an agreement resulting in the company providing greater disclosures on their efforts to combat illicit chip diversion and committing to develop a global human rights policy.
We’ve also continued to engage AbbVie and other pharmaceutical companies on equitable access to medicines, specifically asking that AbbVie conduct a human rights impact assessment to better understand the human rights impacts of their patenting and downstream pricing strategies. We are continuing this engagement with AbbVie as we hope to move the company in the right direction. We similarly co-filed a proposal at Dollar General, asking the company for a human rights impact assessment, specifically focused on worker safety within their stores and concerns around retaliation against workers who speak out on safety concerns.
Climate Crisis
We’ve engaged two banking institutions this proxy season on climate change concerns. Following successful engagements on climate lobbying alignment disclosure, we continued our engagement with Truist focusing more on the bank’s financed emissions. While Truist has set targets related to its own operations, banks are increasingly setting targets to reduce financed emissions associated with financing high-emitting sectors like energy and power generation. Interim financed emissions targets and plans on how to reach them, including engaging with clients in high emitting sectors, are important to add credibility to Truist’s ability to reach its net zero by 2050 target.
We also co-filed a proposal at Bank of Montreal on climate lobbying alignment. Corporations, including banks like BMO, are increasingly indicating that supportive government policy is necessary to meet net zero targets. Banks also rely on their clients’ transition readiness to meet net zero targets as well. While BMO tracks its clients’ policy engagement and trade association membership alignment with the Paris agreement, BMO has not yet disclosed its own lobbying efforts and whether they are aligned with BMO’s climate goals and targets. After dialogue, the proposal ultimately went to a vote on the company’s proxy receiving a strong 20% vote in support. This indicates clear investor support for these disclosures, and we anticipate further engagement with the bank on this issue.
Sound Governance
This proxy season, we also filed a shareholder proposal at State Street Corporation requesting the company adopt a policy requiring the Chair of the board of directors, whenever possible, be an independent member of the board. The separation of Chair and CEO has been widely accepted by investors as best practice for effective board governance and accountability. With State Street under increased scrutiny from European clients for its climate sustainability track record, the separation of the Chair and CEO roles would allow the CEO and management more time to focus on the task of running the company in light of these challenges.
The past few years there has been a significant decrease in US-based large asset manager support of shareholder proposals focusing on sustainability concerns, including drops in support of climate and diversity focused proposals by managers such as State Street, Vanguard, and BlackRock. We and fellow long-term investors have continued to engage these large asset managers as we recognize that environmental and social concerns, including the damaging effects of climate change, present significant material risk to portfolio company operations, particularly in the long-term.
In these uncertain times, Friends Fiduciary remains committed to witnessing to our Quaker values through our engagements with the companies we hold. We will continue to support a fair and equitable society in order to promote long-term shareholder value and a sustainable economy.