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New Initiative Tracks Impact of Shareholder Engagement

Investors and Stakeholders Present New Reporting Framework for Impact of Equity Engagement

November 2014: The multi-stakeholder Impact of Equity Engagement (IE2) initiative released a new report revealing the positive outcomes of investor engagement on the environmental, social, and corporate governance practices of publicly traded companies. Investors often engage in the proxy process, dialogue, public policy advocacy, and assertive action with public companies.

However, the report found that no standard method exists to date for demonstrating the impact of these activities. The report, which proposes a new reporting framework to track the impact of shareholder engagement, is available for download from:

http://croataninstitute.org/total-portfolio/publication/impact-of-equity-engagement

Eleven investors have already committed to alpha-testing IE2’s reporting framework by using it to track their engagements during the 2015 proxy season: As You Sow, Boston Common Asset Management, Calvert Investments, Clean Yield Asset Management, Green Century Funds, Investor Voice, Newground Social Investment, NorthStar Asset Management, Pax World Management, Trillium Asset Management, and Walden Asset Management.

“We’re excited to test and help further develop this new framework,” said Shelley Alpern, Director of Social Research and Advocacy at Clean Yield Asset Management. “Practitioners of sustainable and responsible investing have known for decades that our engagements with companies have produced hundreds of positive outcomes, but much of it has gone unrecorded. This project will begin to capture the scale and depth of this activity so it is no longer lost to history or inadequately conveyed through mere anecdotes.”

Early findings of the IE2 initiative were presented at the SRI Conference in Colorado Springs by Joshua Humphreys, President and Senior Fellow of Croatan Institute. Humphreys spoke on a panel entitled “Understanding the Impact of Engagement”.

“Investors are increasingly interested in generating social and environmental impact in addition to financial returns, but many simply don’t think you can have much impact by investing in publicly traded companies,” said Humphreys. “Our analysis highlights the multiple ways that investors can make a difference by engaging with corporations, and the new reporting framework that the IE2 initiative has developed will provide an important foundation for documenting this impact.”

“Whether it is getting more women and minorities on corporate boards, securing commitments from companies to slash greenhouse gas emissions, or helping to establish human rights and labor standards for entire sectors, we know that our shareholder engagement has an impact,” said Bennett Freeman, Senior Vice President for Sustainability Research and Policy at Calvert Investments.

IE2 builds on an important 2012 study on “Total Portfolio Activation,” which explored how impact can be maximized across all asset classes in an investor’s portfolio.

“We see the importance of understanding and articulating the impact of shareholder advocacy in public equities,” said Matthew Patsky, CEO of Trillium Asset Management. “Public equities is often the largest part of an investment allocation. We need to provide greater clarity in explaining how the impact from this asset class can be so significant.”

Investors using this reporting framework will be able to track and demonstrate the positive social, environmental, and governance impact of their own shareholder activities. By aggregating anonymized data from multiple investors, the reporting framework can also identify what factors lead to successful shareholder engagements.

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Impact of Equity Engagement (IE2) is a multi-stakeholder initiative launched at a convening in Boston in December 2013. IE2has developed a framework that can inform how the impact of public equity engagement activities are tracked and reported. Initial sponsorship comes from lead sponsors Calvert Investments, Croatan Institute, Tides Foundation, and Trillium Asset Management; and supporting sponsors Boston Common Asset Management, Green Century Capital Management, NorthStar Asset Management, PAX World Investments, and Walden Asset Management. The initiative is coordinated by Croatan Institute. For more information, see http://croataninstitute.org/ie2.

Croatan Institute, based in Durham, North Carolina, is an independent institute for advanced social and environmental research and engagement. With initial funding from foundations, sustainable investment groups, civil society, and community development organizations, the Institute’s activities address some of the most complex sustainability challenges of our time, often in close partnership with practitioners in the field and movements for social and environmental change.

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