Next week on February 8, 2018, The Investment Integration Project (TIIP) and Morningstar will co-host an event that explores the ways in which investors can go beyond daily portfolio management activities like ESG integration and impact measurement and reporting and seek to influence the broader environmental, societal, and financial systems within which they operate.
Carole Laible, CEO of Domini Impact Investments will be speaking about our company’s pioneering work on systems-level issues and stability. Domini is focused on the influence investors can have on systems beyond their portfolio through our Environmental Societal Financial Systems Initiative, working to evaluate and increase Domini’s systems-level impact. The publication of a report on this work in slated for the first quarter of 2018.
The event will take place at Morningstar's headquarters at 22 W Washington St, Chicago, IL 60602, and will begin at 8:30am (registration opens at 8:00am) and will conclude by noon that day. The event will serve to launch their new joint report on the Roadmap to Measuring the Effectiveness of System-Level Investing Approaches, written by William Burckart, Steve Lydenberg, and Jessica Ziegler of TIIP.
In addition to remarks by Carole Laible, confirmed speakers include Craig Pfeiffer, the President & CEO of Money Management Institute, Jon Hale, the Head of Sustainability Research at Morningstar and Anna Snider, the Head of Due Diligence, Global Wealth and Investment Management CIO Office at Bank of America, among others.
As this year’s catastrophic hurricane season has demonstrated, climate change is affecting where and how humans live. Warmer oceans and air are causing more destructive hurricanes like Hurricane Irma, the strongest storm ever recorded in the Atlantic Ocean. Across the US, homes and communities are facing climate threats, from intensified and prolonged wildfires in California to dramatic coastline erosion in New Jersey.
In developing countries, where populations may rely directly on their surroundings, the impact of climate change is particularly direct and dire. Natural disasters can force whole populations to move. We can already see communities pushed out due to more gradual changes, like drought or excessive heat, lack of resources or opportunities and the human conflicts that these pressures cause. The humanitarian crises in Syria and Yemen were exacerbated by drought and an unprecedented tropical cyclone, respectively.
The scale of climate change-induced migration will likely be huge, yet defining who qualifies as a climate migrant and for their movement has barely begun. To help improve the climate migration dialogue Domini hosted an event during NYC Climate Week 2017 that brought together art, science, and our community.
An exhibition of 22 works by the photojournalist and filmmaker Ed Kashi offered glimpses into the human effects and causes of climate change the world over. A member of VII Photo Agency, Kashi is recognized for his complex imagery and compelling rendering of the human condition.
The keynote talk was given by Alex de Sherbinin, associate director for science applications at the Center for International Earth Science Information Network (CIESIN), within the Earth Institute at Columbia University. Dr. de Sherbinin is a geographer with a focus on climate change vulnerability mapping and climate change-induced migration. His full remarks and slides can be found below. The night was an exciting opportunity for our community to connect and consider this complicated problem and the people it affects.
Read more about climate migration: http://climatemigration.org.uk/
Watch the full remarks here:
This month, Domini officially signed a statement of support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). Domini seeks to serve our clients’ financial well-being while preserving and enhancing the environment and society through responsible asset management. We believe investors have an obligation to acknowledge and address the impact of their actions on financial, societal and environmental systems. Climate change is one of the most significant systemic risks we face, and the TCFD framework is a critical tool for assessing how this risk will affect corporate value. Most importantly, we expect that companies that use the TCFD framework to measure and disclose their climate-change readiness will take action to better manage these risks. These disclosures will help to make the business case for strengthening the resilience and integrity of Earth’s climate, a prerequisite for creating long-term value.
The creation of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures was announced in December 2015 by Mark Carney, chair of the organization and governor of the Bank of England. Eighteen months later, the TCFD released their recommendations for voluntary, consistent disclosures to help investors understand the material financial impacts of climate-related risks and opportunities on an organization. The TCFD framework recommends that companies consider four key areas where climate-risks should be analyzed: governance, strategy, targets and metrics, and risk management. The three main areas of risk they identify are physical risk, transition risk, and litigation risk. Because climate risks are particularly difficult to assess, a key recommendation of the Task Force is the use of scenario modelling. The Taskforce recommends that companies begin by reviewing risks under a 2-degree global warming scenario. Steve Lydenberg, a principal at Domini, wrote a paper on the use of scenarios for long-term risk management that was considered “required reading” by the members of the Taskforce as they developed their recommendations. We were also pleased to submit comments to the TCFD earlier this year.
The TCFD’s recommendations were presented to the G20 summit in Hamburg in July. The Task Force’s mandate has been extended through September 2018 to support and monitor adoption of disclosure guidelines by companies.
[New York, NY] - Domini is proud to announce that we have signed the Stockholm Declaration, re-affirming our support for the United Nations Sustainable Development Goals (UN SDGs). The Stockholm Declaration was organized by the GRI and UN Global Compact in May 2017. The pact allows the global investment community to announce their commitment to using the UN SDGs as a framework for investing. The declaration also serves as a call for a reporting framework that will allow investors to record progress towards the common goals. The full declaration can be read here.
The UN SDGS are a collection of 17 targets that form a framework for creating and maintaining sustainable development by 2030. They were approved by the UN General Assembly in 2015, and set an ambitious agenda to reduce inequality and fight poverty, protect resources and health, and combat climate change. Explore the SDGs here: http://www.un.org/sustainabledevelopment/
Domini’s core goals of universal human dignity and ecological sustainability are fully aligned with the UN SDGs, and our impact investing standards map to the goals. Reaching the SDG targets will create strong and resilient environmental and social, as well as financial, systems. However, according to the UNCTAD, achieving them will require an estimated investment of $5-7 trillion globally. This level of investment is possible, as each of the 17 goals present myriad business and investment opportunities, but it remains important for investors to work together to disclose and promote investment to meet the goals.
Even though there are serious environmental and social impacts of our appetite for electronics, it is hard to resist the lure of the latest and greatest devices. This season—with sales and wish lists and new model releases—is by far the hardest. So what can someone who cares about their impact do in the face of a culture of shop, shop, shop?
The most obvious choice is looking for alternatives to electronics. Research suggests that experiences make us happier than objects and our attachment to personal electronics has reached the level of addiction.
But there is a gift option which combines gadgetry with experience: give your kids a broken phone.
Hear me out. As planned obsolescence fuels device manufacturers’ profits, our first reaction to a cracked screen or a battery that won’t hold its charge is to get a new phone or tablet. Insurance may even cover the cost. How many broken-yet-not-so-old phones and tablets do you have lying around? Surely at least one.
Many manufacturers have made it increasingly hard to do something so seemingly simple as changing a battery, but both batteries and screens can be fixed! By you and your offspring! This can be a fun and educational activity that results in a useable device. The key is wrapping your electronic hand-me-down together with a repair kit from iFixit. This site sells not just the replacement parts but also the proprietary tools needed to open your gadgets. It also provides community-sourced written and video instructions to guide you along the adventure.
And I can tell you from personal experience, an adventure it is. I managed to replace a battery on my 4th generation MP3 player. My wife and I also managed to replace the battery on her smartphone. The adhesive used to keep us from replacing these batteries is no joke, but it can be conquered. These repairs aren’t fool-proof but each one is a unique learning opportunity. A sense of humor helps, but you will genuinely enjoy the next level of ownership you feel after having invested sweat and tears into your devices. It’s like making your own pie crust instead of buying one – sure, you could grab one from the freezer, but where’s the fun in that?
So this holiday season, when considering what to get your budding engineers and designers, don’t overlook your discarded electronic drawer: the source of the perfect gift.
Your voice can be heard. International leaders and policy makers are at the UN climate summit, currently underway in Bonn, Germany. It was at this summit in 2015, then in Paris, when nearly 200 countries submitted proposals for cutting their greenhouse gas emissions. With Syria joining the Paris agreement on climate change this month, we are optimistic about progress, but at the same time saddened by the lack of support by our country.
History has shown that when government action is lacking, private enterprises and citizens fill the gap. We are pleased to report that a delegation of US businesses, cities and states led by California Governor Jerry Brown and former New York Mayor Michael Bloomberg carry our message globally - America is still in.
Domini has signed the “We Are Still In” pledge alongside 1,219 state and local officials, businesses, investors and universities, signaling our continued commitment to the emissions reduction goals of the Paris Agreement and the preservation of our planet. Climate change is one of the most pressing challenges we face today. Domini supports the global transition to a low carbon future. We consider the impact of climate change and its risks across all our mutual funds through implementation of our Impact Investment Standards and engagement with corporations and public policy makers.
We encourage you to get involved, spread the word using the tag #StillIn and consider the effect that you have on our planet.
In July 2010, the United Nations General Assembly explicitly recognized the human right to water and sanitation. This notion has formally been incorporated into United Nations Sustainable Development Goal 6. Protecting and restoring water-related ecosystems and improving water quality by reducing pollution are crucial components of this goal.
Seven years later, however, this basic human right still needs protection at the legislative level here in the United States.
The 1977 Surface Mining Control and Reclamation Act was strengthened under President Obama at the end of 2016 with the Stream Protection Rule, a regulation that essentially restricted coal companies from dumping mining waste into streams and waterways. At the time, the Interior Department stated this rule would protect 6,000 miles of streams and 52,000 acres of forests by keeping coal mining debris away from waterways.
However, on February 2, 2017, the Senate voted to repeal the Stream Protection Rule, and two weeks later, President Trump signed the repeal into law.
March 22 is officially recognized by the United Nations as World Water Day, with a specific focus this year on wastewater. Water pollution is a serious and ongoing threat to the environment and the health of surrounding communities. Since Domini’s inception, coal-mining companies have been excluded from our portfolios by our Impact Investment Standards. The abundance of factors connecting coal mining to water pollution and climate change are just some of the many reasons Domini has never invested in these companies.
Today, on World Water Day, we acknowledge the immense influence humans have on the fragility of the global water system and, as investors, recognize the responsibility that we have to help protect it.
If you sit on the board of a publicly traded company, there is only one time of year when you must face your shareholders. For most companies, that time is at the spring annual meeting. Since the 1960’s, shareholders have raised key issues of concern at these meetings, from napalm production to racial discrimination to climate change. On behalf of our fund shareholders, we have submitted more than 250 shareholder proposals over the past 22 years, ensuring that your voice is heard.
The shareholder proposal is a tool to help us persuade companies to see our point of view. They are conversation starters that get executives’ attention, and hold it long enough for us to make our case and, hopefully, effect change. This year, these conversations led to agreements with Best Buy, First Solar, and Target. We also worked with our colleagues at Clean Yield Asset Management to withdraw our proposal at Whole Foods. You can read more about these agreements, or download our Social Impact Update for the First Quarter.
When we are unable to reach agreement, the process reaches a public stage. Our proposal is published in the corporate proxy statement and then put to a vote at the annual meeting. There, we are provided the opportunity to share our views with shareholders, senior management and the board of directors in a brief speech. This season, seven of our proposals went to a vote.
Domini Proposals that Went to a Vote this Season
|3M||De-link executive compensation incentives from share buybacks||6%|
Indirect political contributions disclosure
|Chipotle Mexican Grill||
Political lobbying disclosure
Indirect political contributions disclosure
|UPS*||Political lobbying disclosure||23%|
*Domini is serving in a supporting role in these engagements.
The Chipotle annual meeting was a lively one, following a nationwide rash of e-coli and norovirus outbreaks that has battered confidence in the brand. Our speech began with a reminder that issues of sustainability, including decent working conditions and healthy ecosystems, are key to the long-term success of this company. After several years, however, the company still fails to provide comprehensive information to help us understand how it is managing its key sustainability risks. Chipotle says they’d rather do the work than tout their successes. Our speech sought to educate the Board about the critical importance of sustainability reporting to risk management:Sustainability reporting is about accountability, not marketing.
We were told that Chipotle will be releasing more information around sustainability and that we will be happy with the results. Our proposal’s strong 43% vote should send a strong signal that our message resonates with the company’s shareholders.
The Domini Social Bond seeks to have a positive impact across multiple key themes, including affordable housing, education and climate mitigation. In the second quarter, securities Domini characterizes as “high impact” represented 14.7% of the Fund’s total portfolio, including the following two examples, which were added to the portfolio during the quarter.
In the second quarter, the Fund purchased a bond issued by the Indiana Finance Authority. Proceeds from this bond will finance construction of a new public mental health care facility, the Neuro-Diagnostic Institute and Advance Treatment Center, for medically underserved populations in the state. Within the last 50 years, Indiana’s supply of inpatient psychiatric beds declined significantly from 6,000 to 800 in 13 state-operated facilities for patients with mental health and developmental disabilities. The new facility will be Indiana’s flagship mental health facility for those with mental illness and addictions.
The Fund holds a general obligation green bond issued by the State of Massachusetts. Proceeds from this bond are used for climate adaptation and mitigation, including storm water management, energy efficiency and conservation in state buildings, open space protection, habitat restoration and preservation, and environmental remediation and river revitalization projects throughout Massachusetts. In 2013, Massachusetts became the first state to issue a green bond. The state has provided increasingly transparent reports each year to allow investors to measure the environmental impact of these issuances.
In a post-Paris Agreement world, one would expect to have a clearer idea of what bonuses and drawbacks the major sources of renewable energy might have for the environment, but that is not necessarily the case. Every few weeks I see an article proclaiming “Denmark leads charge in renewable energy” or “Costa Rica powered by 100 percent renewable energy for over 75 days.” At first glance, this sounds great. Global societies are reaching feasible models of large scale, renewable energy production. However, phrases like “renewable energy” have been coopted by popular culture to represent the best alternative to fossil fuels. It is important to consider the fact that not all means of harnessing renewables are beneficial for the ecosystems in which they are implemented.
In 2014 I spent six weeks on Barro Colorado Island in Panama as a research assistant at the Smithsonian Tropical Research Institute. Depending on the week, there were typically between 20-50 scientists and assistants staying on the island. During meals, many scientists would sit around and, being scientists, talk science. They came from a broad number of specialized fields, so the topics of discussion were far ranging. Not being a scientist, I often found myself in the position of explaining that “I’m not a scientist, but I play one on TV,” and participating as best I could. At the time, there was a news story being passed around that touted Costa Rica’s 80%+ use of renewable energy sources, so I brought it up, and was surprised to find out that many of the scientists were not happy about the achievement.
In Costa Rica, the majority of their energy comes from conventional, large-scale hydroelectric power plants. Hydroelectric power generation has various environmental and social impacts depending on the size and method of production. In some cases, micro or small-scale hydropower production has the potential to provide clean energy with a small ecological and social footprint. However, in other cases, conventional large-scale hydropower production can devastate local ecosystems and can be as bad or worse for the environment than coal plants. One such method is to create artificial reservoirs from which water is released through a dam. This method allows more control over energy production, but is often highly destructive. The flood plains become filled with dead and rotting plant matter which release large amounts of methane into the atmosphere, the migratory patterns of fish are disrupted, and buildups of silt can choke the oxygen out of the stream, causing dead zones.*
A number of the scientists at the Smithsonian Tropical Research Institute had worked in Costa Rica and explained that the production of “renewable” energy had disrupted local ecosystems and wreaked havoc on plant and animal populations that they had previously studied. That was the first time I realized that when it comes to energy, going green does not necessarily equate to going clean.
Despite our varied concerns with large scale hydroelectric power production, Domini recognizes the need and immense value that electricity creates for society at large. When reviewing utilities that focus on hydroelectric power production, we evaluate the size, scale and location of the production, potential or ongoing controversies with the displacement of communities or indigenous peoples, ecosystem damage, uncertainties with the production of carbon and methane emissions, and other concerns among the wide array of environmental and societal risks that are associated with large-scale hydropower.
My intent in writing this piece was to remind readers to always look beyond the headlines. When I went to find the article that I had brought up in the cafeteria in Panama, this post’s origin story if you will, I found that there were plenty of articles out there in 2014 that talked about the ecological consequences of damming rivers, but I had just never seen them. Just because a headline is using the word “renewable” does not mean a project is without controversy. Ironically, I couldn’t find the original story. I guess good headlines go viral then die, while good articles are often left for dead but live forever. As we move towards greater and greater adoption of renewables, it is important to stay informed and understand which sources can bring us to a more sustainable future.