engagement report - bkc-paderborn.de · vodafone all actions on behalf of sfc. closer coooperation...

ENGAGEMENTREPORTStatements, votes, dialogues

The SfC - Shareholders for Changenetwork’s activities in the AGMSeason 2019

fC - Shareholders for Change, our Europeanshareholder engagement network just celebratedits second anniversary with four new members: the

Swiss Ethos Foundation, the Friends Provident Foundation(UK), the asset management company Forma Futura, fromZurich, and the Swiss ethical bank ABS. Now there are 11 ofus and together we manage assets of around 25 billioneuros. We invest this money according to precise social andenvironmental criteria.

We don’t just strive for good returns, we also want to im-prove the behaviour of companies of which we hold sharesand bonds. That’s why we send them letters with specificquestions, attend annual general meetings and meet withmanagers. In short, we do “shareholder engagement”.

Thanks to SfC, we are now engaging companies at Eu-ropean level, joining efforts to push them towards moresustainable production models, less aggressive tax strate-gies and future-oriented projects. If a company does notinvest in its own future, its returns will decline over time, a result best avoided by even the most avid financial specu- lators.

In order to act as engaged investors, however, we alsoneed to know what questions to ask companies. That’s why,every year, our network is committed to publish new re-search on potential controversies in which some compa-nies or entire sectors may be involved.

We have already published two such researches: one onthe tax strategies and transparency of telecommunicationscompanies and one on ESG issues in the supply chain of

Aurélie BaudhuinPresident of SfC - Shareholders for Change

OVER 70 ENGAGEMENTPROJECTS AT SfC“We are proud to be part of the change we want to see in corporations”

S

Statements, votes, dialogues ENGAGEMENT REPORT 5

rare metals, which are the essential raw materials for thetransition to clean energy sources. On the basis of this re-search, seven engagement initiatives have already beenlaunched and will continue in 2020. In all, thanks to SfC, wehave engaged with 74 companies and two sovereign institu-tions so far, criticising them when we have detected seri-ous issues and praising them if we have observed changesthat, in our opinion, go in the right direction. Because cor-porations are living institutions, in which investors, man-agers, employees, customers and stakeholders challengethe status quo in their own transgressive ways. It is onlythrough this systematic challenge that companies remainlively and continue functioning1. We are proud to be part ofthis challenge.

1 Fleming, P. and A. Spicer (2007), Contesting the corporation. Struggle, powerand resistance in organisations. Cambridge: Cambridge University Press.

SfC has 11 members, with

a total of €25bnAUM. In 2019,

it engaged with74 companies,

mainly in Europe

6 ENGAGEMENT REPORT Statements, votes, dialogues

fC - Shareholders for Change is a network forshareholder engagement dedicated to institutionalinvestors.

It was launched on 6 December 2017.Its 11 members manages assets for a total of €25bn:

Founding members• Bank für Kirche und Caritas eG (BKC, Germany)• Ecofi Investissements, Groupe Crédit Coopératif (France)• Etica Sgr, Gruppo Banca Etica (Italy)• Fair-Finance Vorsorgekasse (Austria)• Fondazione Finanza Etica (FFE, Italy)• Fundación Finanzas Éticas (Spain)• Meeschaert Asset Management (France)

Ordinary members• ABS - Alternative Bank Schweiz (Switzerland)• Ethos Foundation (Switzerland)• Forma Futura Invest (Switzerland)• Friends Provident Foundation (UK)

The Shareholders for Change network is involved in ac-tive ownership through engagement, mainly with Europeancorporations, to enhance a social commons agenda throughthe public capital markets, as bond- and shareholders.

The network’s first goal is to organise collaborative par-ticipation in European companies’ Annual General Meet-ings (AGMs) as well as coordinated voting or submission ofquestions to their boards and managements related to is-sues such as: • workers’ rights and human rights; • fiscal practices and tax justice; • CO2 emissions and climate change.

SfC is a networkfor shareholderengagementdedicated to institutionalinvestors

WHAT IS SfC - SHAREHOLDERS FOR CHANGE?

S


Besides the participation in AGMs, the dialogue withcompanies and policymakers through the submission ofletters or the coordination of meetings and calls, is also ofutmost importance.

The SfC network publishes a newsletter, Action!, whichupdates all members and interested parties about its activi-ties. Anyone can subscribe to the newsletter on SfC website:https://www.shareholdersforchange.eu/newsletter/

WHAT WE MEAN WHEN WE TALK ABOUT“ENGAGEMENT”?

We mean active ownership through engagement asbond- and shareholders. Owning shares or bonds in a com-pany enables investors to raise environmental, social andcorporate governance issues with corporate management.SfC - Shareholders for Change does this by voting and mak-ing statements at companies’ AGMs, co-filing shareholdersproposals (also called resolutions), sending letters to com-panies and organising meetings with their management.

SfC members adopt two different styles of engagement:• Shareholder activism: engagement with companies that,

normally, are already part of an investing universe se-lected according to ESG criteria;

• Critical shareholding: engagement with companies thatare targeted by NGOs’ campaigns or are allegedly in-volved in serious environmental or social controversiesand are normally not part of an investing universe. Thisapproach is often implemented in cooperation withNGOs.

OVERVIEW OF SfC - SHAREHOLDERS FOR CHANGEENGAGEMENT IN 2019

Companies andinstitutions are

engaged throughAGM statements,letters, meetingsand shareholder

proposals


Lead member** Companies/Institutions Cooperation Actions

Bank für Kirche undCaritas (Germany)

DZ Bank Rheinmetall* Deutsche Telekom Plenum InvestmentEuropean Commission

All actions on behalf ofSfC; Closer cooperationwith single SfC memberson some projects(Fondazione FinanzaEtica, Etica Sgr).

Letters,statement at AGM,Conference calls,meetings.



Ecofi Investissements(France)

DaimlerTotalRoyal Bank of CanadaRenaultOrangeTelecom Italia

All actions on behalf ofSfC; Closer cooperationwith single SfC memberson some projects(Fondazione FinanzaEtica, Etica Sgr, Bank fürKirche und Caritas, EthosFoundation, FriendsProvident Foundation,Forma Futura Invest, ABS).

Letters.

Etica Sgr (Italy)

CarrefourSnam A2ABremboBuzzi UnicemDavide CampariDiaSorinErg Hera ItalgasPrysmianSOLTernaVestas

All actions on behalf ofSfC; Closer coooperationwith single SfC memberson some projects (EcofiInvestissements).

Statements at AGMs,letters and meetings.

Fair-Finance (Austria)

Veolia EnvironnementRCI Banque Marine Harvest Sony Tesla3i GroupBeiersdorfPSARenaultDanone

All actions on behalf of SfC. Letters.

Fondazione FinanzaEtica (Italy)

GeneraliH&MEniEnelRheinmetall*Acea*

All actions on behalf ofSfC. Closer coooperationwith single SfC memberson some projects(Meeschaert AssetManagement, Bank fürKirche und Caritas, EcofiInvestissements, FriendsProvident Foundation,Fundación FinanzasÉticas, Forma FuturaInvest).

Statements at AGM,submission of questionsbefore the AGM,submission ofshareholder proposal,conference calls.



Fundación FinanzasÉticas (Spain)

InditexEndesa*Indra*Iberdrola

All actions on behalf ofSfC. Closer coooperationwith single SfC memberson some projects (EcofiInvestissements,Fondazione Finanza Etica).

Statements at AGM,conference calls, letter, meeting withmanagement.

Meeschaert AssetManagement(France)

EngieOrangeH&M

All actions on behalf of SfC. Closercoooperation with singleSfC members on someprojects (FondazioneFinanza Etica).

Submission of questionsbefore the AGM,statement at AGM, letters,submission ofshareholder proposal.

Ethos Foundation(Switzerland)

Swiss policy makersAlphabet (Google)AmazonAppleFacebookMcDonald’sStarbucks

All actions on behalf ofSfC. Letters.

Forma Futura Invest(Switzerland)

ABBCognizantHPENikePSASanofiToyota MotorsInfosysProcter & GambleUPM-KymmeneUmicoreStora EnsoRed ElectricaAmgenOracleDanoneKfWSuez

All actions on behalf ofSfC. Closer coooperationwith single SfC memberson some projects (Fair-Finance, EcofiInvestissements, FriendsProvident Foundation,ABS, Etica Sgr, Bank fürKirche und Caritas).

Letters, conference calls.

Friends ProvidentFoundation (UK)

DraxEDFCentricaRWEE.OnScottish Power/IberdrolaSSEVodafone

All actions on behalf ofSfC. Closer coooperationwith single SfC memberson some projects (EcofiInvestissements, EthosFoundation).

Letters, meetings.

* Critical shareholding was adopted only with Acea, Rheinmetall, Endesa and Indra. All othercompanies have been engaged through shareholder activism.** The lead member of an engagement process is the one that launches the idea of the engagementand is responsible for its implementation and follow-up. In some cases, such as Rheinmetall and H&M in 2019, there may be more than one lead.

1. ENGAGEMENT ACTIVITIES IN 2019. BREAKDOWNBY SINGLE LEAD SfC MEMBER

Lead: Bank für Kirche und Caritas, Paderborn, Germany


Company Lead Actions Issue Result Status

DZ BANK AG(banks,Germany)

BKC (Bankfür KircheundCaritas)

LetterCooperativeengagementwith SfCmembers andother churchbanks.

There is no evidenceof a comprehensiveclimate strategy forthe DZ Bank Group.Additionally, thecompany shouldimplement andpublish clearguidelines toexclude all loans andinvestment activitieswith companies thatare involved in theproduction ofnuclear weapons.

Despite DZ BANKtook the first stepsto decline furtherproject financing ofcarbon powerplants, acomprehensiveclimate strategy isnot published.Enhanced sectorguidelines for loansand investments arenot available yet.

First resultshave beenachieved, butthe engagementprocess is stillongoing.

EuropeanCommission(sovereign/institution)

BKC

Lettercooperativeengagementtogether withSfC membersand otherplayers in thesustainableinvestmentsector.

The action plan onthe financing ofsustainable growthis very welcomedbut there is stillroom forimprovement. Bytackling eightidentifyied pointsof action the EUcould improve theaction plan.

Since the proposedlegislation hasn’tbeen approved yet,the result of theengagement is stillnot clear.

We will continueengaging thelegislator on anational andEuropean levelto fostersustainableinvestments.

Rheinmetall AG(industrialconglomerates -defence,Germany)

BKC/FondazioneFinanzaEtica (co-lead)

Statement atAGM on28.05.2019

Through thesubsidiary RWMItalia, Rheinmetallis producing andexporting bombs toSaudi Arabia. SaudiArabia uses thesebombs in theYemen war, whichis fought withoutany kind ofinternationallegitimation, in which thousandsof civilians alreadydied.

Rheinmetall is notopen to dialogue. InJuly 2019, followingthe pressure fromcivil societyorganisations andsustainableinvestors, theItalian governmentsuspended theallowances toexport weapons toSaudi Arabia for 18months. In reactionto that decision,Rheinmetallsuspended itsproduction ofbombs at RWMItalia.

The expectedresult has beenachieved,thoughindirectly(through theintervention of the Italiangovernment).Theengagementprocess hasbeensuccessfullycompleted.

Lead: Ecofi Investissements, Paris, France



DeutscheTelekom AG(telecommu-nication,Germany)

BKC (incooperationwith SfCmembersEtica SgrandFondazioneFinanzaEtica).

LetterConferencecall.

The SfC report“Bad Connection”evidencedshortcomings ofDeutsche Telekomon tax transprency.

Deutsche Telekomwas very open todialogue. Theyexplained thatsubsidiaries injurisdictionsgranting taxadvantages are notused for aggressivetax avoidancepurposes. Even ifDeutsche Telekomhas taken measuresto avoid the risk oftax avoidance, thecompany is not yetwilling to doextensive countryby countryreporting (cbcr).

Theengagementtargets havebeen partlyachieved. Cbcrwill remain asan engagementissue, which willbe pursued bySfC in thetelecommunication sector.

PlenumInvestment AG(investmentfund, Germany)

BKC LettersMeetings.

Altoughcatastrophe (CAT)bonds could be avehicle to tackle theeffects of climatechange relatedweathercatastophes, thereis very littletransparencyconcerninginsurances onclimate protectionin the CAT bondcontract.

Plenum is veryopen to dialogueand set up asustainability auditas well as anengagementprocess with themain CAT bondsponsors, i.e.reinsurancecompanies.

The expectedresults havebeen achieved.Theengagementprocess will,however,continue tostrenghten theengagementwith the CATbond sponsors.


Daimler(automotive,Germany)

Ecofi Investisse-ments.

Letter to thecompany.

Respect of humanrights in the cobaltsupply chain.Pollution (diesel).Allegeddiscrimination and coercion inBrazilian factory.Transition to cleantechnology.

Ecofi has receivedsatisfactoryanswers on allissues in 2018.

Theengagementprocess hasbeensuccessfullycompleted.



Total (Oil&gas,France)

Ecofi Investis-sements (incollabora-tion withSfC mem-bers EthosFoundationand FriendsProvidentFoundation).

Meeting withthemanagement.Letter to thecompany.

Negative impact on biodiversity.Allegedcontroversies in relations withlocal communities.Poor climatestrategy.Remunerationpolicy.

Ecofi receivedpartial answersabout the mainissues and willcontinue to engageTotal on its climatestrategy andalleged involvementin controversies(local communities,biodiversity).

Theengagement isstill ongoing.

Royal Bank of Canada(financial,Canada)

Ecofi Investis-sements (incollabora-tion withBank fürKirche undCaritas).

Meeting withthemanagement.Letter to thecompany.

Financing ofcontroversialweapons andextreme fossilsfuels (e.g. oil sands).Controversialproject financing.Fiscalresponsibility.

The company isopen to dialogue. Acall with thecompany will beheld by the end of2020.


Renault(automotive,France)

EcofiInvestis-sements (incollabora-tion withSfC mem-bers Bankfür Kircheund Caritasand FormaFutura).


Respect of humanrights in the cobaltsupply chain.Recycling ofbatteries (electriccars).Governancepractices.

The company isopen to dialogue. Acall with thecompany will beheld by the end of2020.


Orange(telecommuni-cation, France)

EcofiInvestis-sements (incollabora-tion withSfC mem-bers ABSand EticaSgr).


Alleged anti-competitivepractices. Allegedcontroversies in therelation withcustomers in Africaand Poland.Anomalous numberof suicides in therestructuringprocess, back in2008.

Ecofi receivedpartial answersabout the mainissues.


Telecom Italia(telecommuni-cation, Italy)

EcofiInvestis-sements.


The SfC report“Bad Connection”evidencedshortcomings ofTelecom Italia ontax transprency.

The company isopen to dialogueand answered toEcofi. The answerswill be evaluated incooperation with anexpert ofinternationaltaxation and newquestions will besent to the company.

Ongoing.

Lead: Etica Sgr, Milan, Italy



Carrefour (food retail anddistribution,France)

Etica Sgr Meetings withcompany

Emissionsmanagememt(mitigation);Workers rights;Human rights inthe supply chain;Tax policy.

The company isopen to dialogueand active on theissues, sometimeswith examples ofactions undertaken.

Ongoing.

Snam (natural gasinfrastructure,Italy)

Etica Sgr(incooperationwith SfCmemberEcofiInvestis-sements)

Meeting withcompany AGMStatement2.04.2019

Emissionsmanagememt(mitigation);Workers rights;Human rights inthe supply chain;Tax policy.

The company isopen to dialogueand active on theissues, withexamples of actionsundertaken.

Ongoing.

A2A (utility,Italy) Etica Sgr

AGMstatement13.05.2019

Emissionsmanagement(mitigation).


Ongoing.

Brembo(automotive,Italy)

Etica Sgr AGMstatement18.04.2019

Emissionsmanagement(mitigation), TaxPolicy, Taxgovernance andrisk management.


Ongoing.

Buzzi Unicem(constructionmaterials, Italy)

Etica SgrAGMStatement09.05.2019


The company isopen to dialogueand it is developingpolicies on some ofthe issues.

Ongoing.

DavideCampari(Distilleriesand Wineries,Italy)

Etica Sgr AGMStatement16.04.2019


Etica is waiting forcompany feedbackon the issues.

Ongoing.

DiaSorin(biotechnolo-gies, Italy)


Emissionsmanagement(mitigation),Workers rights,Human rights inthe supply chain.


Ongoing.

Erg (renewableenergies, Italy)



The company isopen to dialogueand it has policieson some of theissues.

Ongoing.

Lead: Fair-Finance, Vienna, Austria



HERA (utility,Italy) Etica Sgr

AGMStatement30.04.2019



Ongoing.

Italgas (gasdistribution,Italy)


Emissionsmanagement(mitigation),Workers rights.


Ongoing.

Prysmian(cables, Italy) Etica Sgr




Ongoing.

SOL(industrialgases, Italy)




Ongoing.

Terna(energy gridoperator, Italy)



The company isopen to dialogueand active on theissues, withexamples of actionsundertaken.

Ongoing.

Vestas (wind turbines,Denmark)

Etica Sgr Letter to thecompany.

The SfC report“Rare metals supplychains” evidencedpossible risks in thesourcing of raremetals.

The company hasanswered to theletter in December2019.

Ongoing.


VeoliaEnvironnementSA (utility,France)

Fair-Finance


Alleged humanrights violations.

No evidence couldbe found.

Theengagement hasbeen completed.

RCI Banque SA(finance,France)

Fair-Finance


Alleged humanrights violations. No answer yet. Ongoing.

Lead: Fondazione Finanza Etica, Florence, Italy



Marine HarvestASA (todayMOWI, food,Norway)

Fair-Finance



Sony Corp.(electronics,Japan)

Fair-Finance



Tesla Inc.(automotive,USA)

Fair-Finance



3i Group plc(holding, UK)

Fair-Finance



Beiersdorf(personal-careproducts,Germany)

Fair-Finance



Controversialadvertising has beenwithdrawn.

Theengagementhas beencompleted.

PSA(automotive,France)

Fair-Finance



Renault(automotive,France)

Fair-Finance



Danone (food, France)

Fair-Finance



The company hasrecognised theproblem andremediated thesituation.

Theengagement has beencompleted.


Generali(insurance,Italy)

FondazioneFinanza Etica (incooperation withSfC memberMeeschaert AssetManagement.Joint vote on someAGM items)

AGMstatement7.05.2019Letter to thecompany

Questions onGeneralaccount’sinvestments infossil fuels andcontroversialweapons and onremunerationpolicy.

Generali wasopen to dialogueand answered allquestions onGeneralaccount’sinvestments. Thedialogue onremunerationneeds to becontinued.

Ongoing.



H&M (clothing,Sweden)

FondazioneFinanzaEtica/MeeschaertAsset Management(co-lead).Cooperation withSfC memberForma FuturaInvest.

AGMStatement7.05.2019Submission ofshareholderproposalCall with thecompany’smanagement.

Lack oftransparencyregarding thesustainabilitytargets forvariableremuneration ofseniorexecutives.

The shareholderproposal hasbeen rejected.The company isstill notdisclosingsustainabilitytargets forremuneration.

Ongoing.A further callhas beenscheduled.

Eni (oil & gas,Italy)

FondazioneFinanza Etica (incooperation withSfC membersMeeschaert AssetManagementand EcofiInvestissements.Joint vote on someAGM items)


Questions on thecompany’sinvestments inrenewableenergies andreforestationprojects inAfrica.Questions onremunerationpolicy.

The company’sanswers werenot satisfactory.Details onreforestationprojects aremissing. Thedialogue onremunerationneeds to becontinued.

Ongoing.

Enel (energy,Italy)

FondazioneFinanza Etica (incooperation withSfC members EcofiInvestissementsand FundaciónFinanzas Éticas.Joint vote - with EcofiInvestissements -on some AGMissues).Questions on justtransitionsubmitted beforethe AGM incooperation withSfC memberFriends ProvidentFoundation.


Question aboutthe 5.8 mllioneuros fineimposed onEndesaGeneracion(controlled byEnel) in Spain forallegedly offeringelectricity atunjustifiably highprices. Question aboutremunerationplan.

The companywas open todialogue andanswered allquestions. Thedecision on thefine will beappealed. Thedialogue onremunerationand justtransistion willbe continued.

Ongoing.

Rheinmetall(defence,Germany)

FondazioneFinanzaEtica/Bank fürKirche undCaritas (co-lead)


See above (BKC).

See above (BKC).

See above(BKC).

Acea (utility,Italy)

FondazioneFinanzaEtica.Questionson just transitionsubmitted beforethe AGM incooperation withSfC memberFriends ProvidentFoundation.


Transitionpolicies towardsa low-carboneconomy;relations withsubsidiaries inthe water sector;litigations in thewater sector;level of leverage.

The company’sanswers werenot satisfactory.The engagementwill continue, in particularregarding thewater division.

Ongoing.

Lead: Fundación Finanzas Éticas, Barcelona, Spain



Inditex(clothing, Spain)

FundaciónFinanzas Éticas(in cooperationwith SfC memberEcofiInvestissements)

Meeting withthemanagement

Tax policy(alleged taxavoidancestrategies);Agreement withINDUSTRIALLunion; Allegedpollution atviscose factoriesin Asia.

The company isopen to dialogueand hasanswered toFundacion’squestions.Furtherquestions will besent by the endof the year.

Ongoing.

Endesa (energy, Spain)

FundaciónFinanzas Éticas


Fundacion askedto accelerate:- the closing

down ofSpanish coal-fired powerstations;

- the closing ofnuclear powerplants in Spain.

A further, crucialissue was energypoverty, i.e. thelack of access to modern energyservices for somepart of thepopulation, bothin developing anddevelopedcountries, due totheir increasingcosts.

The company’sanswers to mostquestions wereunsatisfactory.The engagementwill continue.

Ongoing.

Indra (defence,Spain)



Indra is allegedlyproducing andexportingweaponsemployed in theYemen war (seeBKC, above).

The companywas not open todialogue and itsanswers wereunsatisfactory.

Ongoing.

Iberdrola(energy, Spain)



The SfC report“Rare metalssupply chains”evidencedpossible risks inthe sourcing ofrare metals.

FundaciónFinanzas Éticasis waiting for ananswer to theletter.

Ongoing.

Lead: Meeschaert Asset Management, Paris, France



Engie (utility,France)

MeeschaertAssetManagement

Writtenquestionssubmitted atcompany AGMin May 2018.

Tax policy(controversy ontax practices inLuxembourg). Atax dealing withthe Luxembourggovernment mayhave given Engiean unfairadvantage overother companies,in breach of EUstate aid rules.

The companyanswered that no tax fraud hadbeen committedby the companysince the dealhad beenpreviouslyvalidated by the taxadministration of Luxemburg.

The controversyhas been settledin June 2018,when theEuropeanCommissiondefined the taxrulings as illegal.Luxembourg wasthen asked torecover about€120 million inunpaid tax fromEngie. Theengagementprocess has beencompleted due tothe EU ruling.

Orange(telecommuni-cation, France)

MeeschaertAssetManagement

Letters to thecompany.

The SfC report“BadConnection”evidencedshortcomings ofOrange on taxtransprency.

The companyhasn’t answeredto the letters anddoes not seem tobe open todialogue.The engagementwill continue.

Ongoing.

H&M (clothing,Sweden)

MeeschaertAssetManagement/FondazioneFinanza Etica(co-lead)Cooperationwith SfCmember FormaFutura Invest.

AGMStatement7.05.2019Submission ofshareholderproposal. Callwith thecompany’smanagement

See above(FondazioneFinanza Etica).



Lead: Ethos Foundation, Geneva, Switzerland



Swiss policymakers(sovereign/institution)

EthosFoundation

9/6/2019:letters to members of the lowerhouse

22/9/2019:letters to members of the upperhouse

Switzerland’s policymakers arecurrently debatingwhether or not toput forward acounter proposal forthe responsiblebusiness initiativeand to introducemandatory humanrights due diligence.Ethos launched aninvestor statementto give investors theopportunity to voicetheir support for alegal framework toprotect humanrights and to signalthis investorsupport to Swisspolicy makers.

The statement to thelower house gathered23 signatories(including all SfCmembers) with atotal of CHF 395billion assets undermanagement. The investorstatement has beenquoted many timesduring the debate inthe parliament andthe lower housevoted in favour ofintroducingmandatory humanrights due diligencein Switzerland. Thestatement to theupper housegathered 27signatories with atotal of CHF 808billion assets. Thedebate in the upperhouse, scheduled forSeptember 26, hasbeen postponed.

The expectedresult has partlybeen achieved.As the upperhouse has not yetdebated thelegislation theengagementremains ongoing.

Alphabet-Google (IT,USA), Amazon(e-commerce,USA), Apple(IT, USA),Facebook (IT,USA),McDonalds(fast food,USA) andStarbucks(specialtycoffeeretailer, USA)

EthosFoundation

11/11/2019: 6 kick offletters weresent to thechairmen ofthe boardsof targetedcompanies

As companies withrelatively fewphysical assets onone hand butconsiderableintangible assets,such as intellectualproperty or brandson the other hand,these sixcorporations areparticularly exposedto risks related toaggressive taxpractices. The sixcompanies wereselected based on amedia analysisthrough RepRisklinking them tosignificant andrecurring negativenews flow aroundthe topic of taxes.

In order tooperationalise theconcept ofresponsible taxpractices, fivepriorities have beendefined:1. Responsibility forthe tax policy restswith the board ofdirectors;2. The principles oftax responsibilityare incorporated ina dedicated, publiclyavailable policy;3. The company paysits taxes whereeconomic value iscreated;4. Intra-grouptransactions arecarried out undermarket conditions;5. The companypublishes theamount of taxespaid, country-by-country.

The engagementprogram has justbeen launchedand is expectedto take severalyears to becompleted.

Lead: Forma Futura Invest, Zurich, Switzerland


ABB (capitalgoods, CH)

FormaFutura InvestAG


Retirement planoverchargedemployees andretirees for record-keeping fees.

Additionalinformation wasprovided (ABB wasordered by law totake measures andimplementedadditional measuresto improveadministration).

The engagementprocess has beensuccessfullyclosed.

Cognizant(Software &Services,USA)

FormaFutura InvestAG(cooperationwith Fair-FinanceVorsorgekasse AG)


Cognizant agrees tosettle briberycharges involvingtwo formerexecutives for USD25 million and Uber,Cognizant, andothers face scrutinyin the US overalleged corruptpractices linked tooperations in India.

Additionalinformation wasprovided (theinvestigation wasstarted voluntarily,furtherenhancements tothe complianceprocesses have beenimplemented).


HPE(TechnologyHardware,USA)



Hewlett PackardEnterprise faceclass action suitover alleged genderpay discriminationin the US.

No answer yet.*

The engagementprocess has beenunsuccessfullyclosed.

Nike (Textiles& Apparel,USA)



EuropeanCommission fineover cross-bordermarket restrictions.

Additionalinformation wasprovided (They sentthe final report ofthe hearing officer).


PSA(Automobiles,France)

Forma Futura Invest AG(cooperationwith EcofiInvestisse-ments)

Letter andconferencecall with thecompany.

BMW, Daimler andothers expected tobe fined EURmillions for failureto meet EuropeanCO2 emissiontargets by 2021.

Additionalinformation wasprovided via aconference callwhere the companyexplained itsposition.


Sanofi(Pharmaceuticals, France)

Forma FuturaInvest AG(cooperationwith EcofiInvestissements and Fair-FinanceVorsorgekasse AG)


Sanofi Pasteur’sDengvaxia drugremovedpermanently fromPhilippine marketfollowingrevocation byPhilippine FDA.

Additionalinformation wasprovided (Mostlyexplaining why theyare not at fault).


ToyotaMotors(Automobiles,Japan)

Forma FuturaInvest AG(cooperationwith FriendsProvidentFoundationand EcofiInvestisse-ments)


BMW, Daimler andothers expected tobe fined EURmillions for failureto meet EuropeanCO2 emissiontargets by 2021.

No answer yet.*




Infosys(Software &Services,India)

Forma FuturaInvest AG(cooperationwith ABS)


Alleged humanrights violations inMyanmar.

No answer yet.*


Procter &Gamble(HouseholdProducts, USA)



Deforestation,Plastic and productsafety.

No answer yet.*


UPM-Kymmene Oyj (Paper &Forestry,Finland)


Letter to thecompany. Contractor fatality.

The Company sentthe official statementon the accident.Showing theirinitiative to avoidsuch accidents in thefuture.


Umicore(Chemicals,Belgium)

Forma FuturaInvest AG (incooperationwith EcofiInvestisse-ments, EticaSgr, FriendsProvidentFoundationand ABS)


Illegal wastedumping.

The Companyexplained thesituation withoutgoing int details.


Umicore(Chemicals,Belgium)



The SfC report“Rare metals supplychains” evidencedpossible risks in thesourcing of raremetals.

Forma Futura InvestAG is waiting for ananswer to the letter.

The engagementis ongoing.

Stora Enso(Paper &Forestry,Finland/Sweden)

FormaFutura InvestAG (incooperationwith EcofiInvestisse-ments)


EnvironmentalAccident: Skoghallfacility leaks crudeoil into the Vänernlake.

The Companyexplained how theyhandled thesituation as well ashow they intend toavoid such accidentsin the future.


Red Electrica(Utilities,Spain)

Forma FuturaInvest AG (incooperationwith EcofiInvestisse-ments,Fair-FinanceVorsorgekasse and ABS)

Letter andconferencecall with thecompany.

EnvironmentalAccident: Spanishenvironmentalgroups criticise RedElectrica Espanolafor coolant leak intoUNESCO protectedsite.

Additionalinformation wasprovided viaconference call.


Amgen(Pharmaceu-ticals, USA)



Donations tocharities to boostthe sales ofcompany drugs.

No answer yet.*

The email hasbeen sent asecond time onthe 12.11.2019.

Oracle(Software &Services,USA)



Underpayingminority workers in US.

Oracle does notwant to provideinformation sincethe investigation is still ongoing.

The engagementprocess has beenclosed.


* If Forma Futura doesn’t get an answer within a certain period oftime, it usually sends its emails a second time. If there is still noanswer, it closes the case unsuccessfully.

Lead: Friends Provident Foundation, London, UK



Danone (FoodProducts,France)



Slave-like laborabuses in theirsupply chain.

No answer yet.*

The email hasbeen sent asecond time onthe 27.11.2019.

KfW (Banks,Germany)

FormaFutura InvestAG (incooperationwith Bankfür Kircheund Caritas)


KfW linked to WWFprojects in Africaand Asia associatedwith mass rape,torture, andmurder.

Additionalinformation wasprovided (Theymostly assure thatthey take the mattervery seriously).

The engagementprocess has beensuccessfullyclosed

Suez(Utilities,France)



Unfair contractterms with smallbusinesses.

Suez responded tothe second emailand explained thebackground of thecase and theprecautionary stepsthat were taken toavoid such incidentsin the future.



Drax (utility, UK)

FriendsProvidentFoundation(FPF)


Energy markettransition, coveringbusiness modelresilience and justtransition to adecarbonised,decentralised andincreasinglydemocratisedenergy system.Draxis the UK’s largestsingle source ofGHGs. It’sfeedstock is highcarbon biomassand it also recentlyaquired a portfolioof gas powerstations. It is veryhigh risk from astranded asset andjust transitionperspective.

Engagement has justcommenced. Draxfeatures as a casestudy in the latestFPF funded JustTransition investorguidance from theLondon School ofEconomics, which isbeing utilised incollectiveengagement.

Ongoing.



EDF (energy,France)

FriendsProvidentFoundation(incooperationwith EthosFoundation& EcoFiInvestisse-ments)

Severalmeetingswithmanagement.

Energy markettransition, coveringbusiness modelresilience and justtransition to adecarbonised,decentralised andincreasinglydemocratisedenergy system. EDFhas plans to closetwo UK coal plantsand several agingnuclear plants inthe next few years.

EDF has commencedlocal energy pilotsworking with community ownedenergy projects to trial 3D(decarbonised,decentralised,democratic) energydelivery.EDF hasstarted engagementwith unions regarding worker retraining andredeployment at acoal plant scheduledto close, and hascommitted to adhereto Just Transitionprinciples. Has alimited net-zeroemissions goal by2050.FPF was askedto input into EDF’s2020 SustainabilityPlan.

Ongoing.

Centrica(energy, UK)

FriendsProvidentFoundation

Meetingwithmanagement.

Energy markettransition, coveringbusiness modelresilience and justtransition to a decarbonised,decentralised and increasinglydemocratisedenergy system.

Centrica hasrevisited itsbusiness strategy tofocus on 3D energytransition and isexiting generation.Centrica hascommenced a localenergy pilot to trial3D energy deliveryand is innovating in R&D.

Ongoing.

RWE (energy,Germany)

FriendsProvidentFoundation(incooperationwith EthosFoundation)


Energy markettransition, coveringbusiness modelresilience and justtransition to adecarbonised,decentralised andincreasinglydemocratisedenergy system. RWE is to close itslast UK coal powerstation in March2020. It also has fivelarge gas powerstations that requireclosure orabatement by mid-2030s.

Has announced a net-zerodecarbonisationtarget of 2040.

Ongoing.



E.On (energy,Germany)

FriendsProvidentFoundation(incooperationwith EthosFoundation& EcofiInvestisse-ments)


Energy markettransition, coveringbusiness modelresilience and justtransition to adecarbonised,decentralised andincreasinglydemocratisedenergy system.

Has a limited net-zero emissionsgoal by 2050.

Ongoing.

ScottishPower/Iberdrola(utility,UK/Spain)

FriendsProvidentFoundation(incooperationwith EcofiInvestisse-ments)

Meetingwith CEO.

Energy markettransition, coveringbusiness modelresilience and justtransition to adecarbonised,decentralised andincreasinglydemocratisedenergysystem.Identified asexposed to highrisk rare earthmetals in supplychain.

Has a limited net-zero emissions goalby 2050.

Ongoing.

SSE(utility, UK)

FriendsProvidentFoundation(incooperationwith EcofiInvestisse-ments)


Energy markettransition, coveringbusiness modelresilience and justtransition to adecarbonised,decentralised andincreasinglydemocratisedenergy system.SSEis to close its lastUK coal powerstation in March2020. It also hasthree large gaspower stations thatrequire closure orabatement by mid-2030s.

SSE Networks hascommenced localenergy pilotsworking withcommunity ownedenergy projects totrial 3D energydelivery.

Ongoing.

Vodafone(telecommu-nication, UK)

FriendsProvidentFoundation


The SfC report“Bad Connection”evidencedshortcomings ofVodafone on taxpractices.

The company hasanswered to theletter. The answerswill be evaluated incooperation with anexpert ofinternationaltaxation and newquestions will besent to the company.

Ongoing.


BREAKDOWN OF SfC ENGAGEMENT

INITIATIVES IN 2019 BY ISSUE

(in %)Climate change,

workers/human rights andfiscal practices/tax justiceare the three main areas of engagement for SfC.

Consumerrights

Controversialweapons

Governance/remuneration

Taxation

Human/workers rights

Climate/environment 35%

31%

15%

10%

5%

5%


INITIATIVES BY COUNTRY IN 2019

(absolute figures)

EU

Belgium

India

Sweden

Norway

Danemark

Canada

Finland

Switzerland

Japan

Spain

UK

Germany

USA

France

Italy 17

13

13

9

6

5

2

2

2

1

1

1

1

1

1

1

74companies

2institutions

engaged in 2019



INITIATIVES BY SECTOR IN 2019

(absolute figures)

76engagement

initiatives in total in 2019 Institutions

Pharma

Defence

Telecommunication

Automotive

Banking/Finance

Capital goods

Technology/IT

Consumer goods

Oil&Gas/energy 24119

77

8

4222

THE WORLD MAP OF SfC ENGAGEMENT

he AGM of the Swedish fast fashion giant H&M, heldin Stockholm on 7 May 2019, is a clear example of howa civil society campaign can become a shareholder

engagement initiative, also involving institutional investors. Everything starts with a campaign (Turn Around, H&M!)

launched by the Clean Clothes Campaign (CCC) in May2018, which asks the company to keep a promise made inNovember 2013: to pay a “living wage” to a total of 850,000workers, mainly in Asia.

According to CCC, the promise is not kept and the ac-tivists decide to take the field as shareholders, with the sup-port of Fondazione Finanza Etica (FFE). CCC and FFE itselfpurchase a symbolic number of shares in H&M and beginto study the Scandinavian group’s rules for shareholders’meetings and Swedish company law. They soon discoverthat, in Sweden, it is possible to submit shareholder pro-posals requiring the consultative vote of all shareholdersand there is no threshold for the submission, i.e. a proposalcan be submitted also by owning a single share. CCC andFondazione Finanza Etica draft two different proposals.

The Clean Clothes Campaign’s proposal asks that allprofits made in 2018 by the international fashion giant areallocated to a special fund, to be maintained “until thewages of H&M workers are at least equal to the living wage”.

Fondazione Finanza Etica submits its proposal togetherwith another SfC member: Meeschaert Asset Management,which holds 34,100 shares in H&M. The resolution has amore institutional approach than that of CCC.

We ask H&M to fully disclosesustainabilitytargets forvariableremuneration of executives

HIGHLIGHTS FROM SfC’S AGM SEASON 2019Fondazione Finanza Etica and Meeschaertsubmit a shareholder proposal at H&M’s Annual General Meeting

T


In their shareholder proposal, Fondazione Finanza Eticaand Meeschaert Asset Management focus on workers’rights but do so indirectly, calling for more transparency onthe sustainability targets to which the variable remunera-tion of senior executives is tied. Those targets are not dis-closed by the company. Further questions are sent to thecompany before the AGM, in cooperation with CCC and an-other SfC member: Forma Futura Invest.

A representative of Meeschaert Asset Management, Clé-mentine Chatelet, presents the proposal at the AGM, in Stock-holm. In the end, both proposals (CCC and FFE + Meeschaert)are rejected by the shareholders. In its responses, the com-pany doesn’t appear to be open to dialogue on this issue.

The engagement, however, continues: a call with thecompany after the meeting was held in September 2019 anda second call is scheduled for the end of December.


Whereas: as long-term shareholders, webelieve that compensation metrics shouldincentivise the creation of sustainable, longterm value. Furthermore, we believe thatdisclosing sustainability targets for the re-muneration of senior executives would in-crease company responsiveness to share-holders who are seeking information aboutthe company’s response to the current so-cial and environmental challenges in the ap-parel and footwear sector.

Be it resolved: we request that H&M fullydiscloses the sustainability targets that mustbe fulfilled to trigger variable remunerationof senior executives and annually reports theperformance of senior executives againstthose targets.

Supporting statement: we recommendthat the above mentioned sustainability tar-gets:• are disclosed in the board’s proposals to

the AGM for guidelines for remuneration

of senior executives or, in alternative, inthe H&M group sustainability report;

• include precise targets on the improve-ment of worker health, safety and wagepractices along the group’s supply chain.

SHAREHOLDER PROPOSALS FROM FONDAZIONE FINANZA ETICA AND MEESCHAERT ASSET MANAGEMENT

Clémentine Chatelet of Meeschaert AssetManagement is happy after having submittedthe first shareholder proposal of her life in Stockholm, at the AGM of H&M

atastrophe bonds, as asset class, transfer a part ofthe risk of natural catastrophes from governmentsand people directly to capital markets. It hence pro-

vides disaster risk capital to recover from major weatherevents and high-impact regional catastrophes. Althoughthese bonds can be a vehicle to tackle the effects of climatechange related weather catastrophes, very little trans-parency exists concerning climate related issues in CATbond contracts. This leads to the problem, that CAT bondsmight include insurances for coal power plants or militaryinfrastructure, just to make two examples. This is the rea-son why Bank für Kirche und Caritas, also on behalf of SfC,decided to engage the asset Management company of a CATBond Fund: Plenum Investment AG.

Alongside other issues, the dialogue focuses on support-ing the fund management in setting up a sustainability auditand an engagement process with the CAT Bond’s sponsors(reinsurers). Plenum Investment is very open to the dia-logue, that started in October 2018, and undertook some re-markable steps towards integrating ESG aspects. Thanks toBKC engagement, Plenum Investment has, among otherthings, expanded its set of exclusion criteria, for example toall methods of unconventional oil and gas production, whileimplementing a solid sustainability process that can be as-sessed as a best practice in the industry.

It is particularly encouraging that Plenum Investment isnow itself involved in engagement with almost 50 CAT Bond’ssponsors (reinsurers) in order to achieve more transparencyon their insured objects and introduce exclusion criteria.

Bank für Kircheund Caritas hasbeen successfullyengagingPlenumInvestment (CAT bonds) on behalf of SfC

BKC engagement on CAT bonds: an extraordinary case of “dominoengagement”

C


This development is remarkable, because BKC engagementhas triggered a further and multiple engagement: a“domino engagement”. It should also be underlined that theengagement letter from Plenum Investment to CAT Bond’ssponsors (reinsurers) was co-signed by BKC and SfC, sothat a joint commitment of the fund company with in-vestors took place. “Plenum Investment is a pioneer in in-tegrating sustainability aspects in the catastrophe fund in-dustry”, says Tommy Piemonte, Head of SustainabilityResearch at the Bank für Kirche und Caritas. “We will in-tensively continue the dialogue that has been initiated inorder to further advance the developments in this industrytowards greater transparency and the consideration of sus-tainability risks”.


Catastrophe bonds can helptackling the risks of climate

change, but only if there is transparency on climate

related issues. BKC and SfC are fighting for this

PlenumInvestment is

now involved inengagement

with almost 50CAT Bond’s

reinsurers itself

he Zurich based Forma Futura Invest, one of thethree Swiss members of Shareholders for Change,has sent letters to seven companies at the end of

August, asking for clarification on a number of controver-sial cases, on behalf of SfC. The targeted companies are:ABB, Cognizant, HPE, Nike, PSA, Toyota and Sanofi.

“We have asked ABB to explain its position on the $55mpaid in the US to settle a lawsuit on fee overcharging. Wewould like to know which precautionary steps will be takento avoid such incidents in the future”, said Doris Hauser,Head of Sustainability Research at Forma Futura. “Nike wastargeted due to a $14.2m fine by the European Commissionover cross-border market restrictions. Also PSA and Toyota

Forma Futura leads SfC engagement on ABB, Toyota, PSA, Nike and others

T


Doris Hauser, Balz Bänningerand Alice Balmer: the sustainability research team of Forma Futura Invest. In 2019 they have sent letters to 18 companies, also on behalfof SfC

run the risk to face fines for hundreds of millions of Eurosin the next months for failure to meet European CO2 emis-sions targets by 2021. We are very concerned about thesecontroversies, because they may hit the companies’ reputa-tion and bottom line and could lead to their exclusion fromour investing universe”.

A second tranche of letters has been sent by Forma Fu-tura, in cooperation with SfC, at the end of September to In-fosys (alleged human rights violations in Myanmar), Procter& Gamble (deforestation, plastic and product safety), UPM-Kymmene, Umicore (risks of rare metals supply chain),Stora Enso and Red Electrica (environmental accidents),Amgen, Oracle, Danone (alleged slave-labour abuses in sup-ply chain), KfW, Suez.

At the end of November 2019, when this report wasclosed, 11 out of 18 engagement processes had been alreadysuccessfully closed, since the companies provided the re-quested information in written answers or conferencecalls.

Although all letters have been sent also on behalf of SfC,a closer cooperation with single SfC members (Fair-Fi-nance, Ecofi Investissements, Friends Provident Founda-tion, ABS, Etica Sgr, Bank für Kirche und Caritas) wasreached on some of projects.


fC - Shareholders for Change is committed to pub-lish new research on potential controversies, inwhich some companies or entire sectors may be

involved, every year. In the last two years we have pub-lished two reports: one on the tax strategies and trans-parency of telecommunications companies and one onESG issues in the supply chain of rare metals, which are theessential raw materials for the transition to clean energysources. On the basis of these researches, seven engage-ment initiatives have already been launched and will con-tinue throughout 2020.

SfC haspublished newresearches on taxstrategies oftelco companiesand ESG issuesconcerning raremetals

OUR REPORTS

S



They are called Yttrium, Lanthanum,Praseodymium, Neodymium, Ter-bium, Cerium and the list doesnot end there. They are not infec-tious diseases but some of the 17 chemical elements known as“rare earths”, fundamental com-ponents, together with the mostfamous “rare metals” (cadmium,cobalt, chromium, lithium, mag-nesium, palladium, rhodium, etc.)of the energy transition to an eco -nomy with low greenhouse gas emissions.They are found in wind turbines, electric carbatteries, photovoltaic panels and energy-saving light bulbs.However, they have at least two main prob-lems: they are extracted and marketed mainlyby China, which operates in a quasi-mono -poly situation, or from countries at risk forhuman rights, such as the Democratic Re-public of Congo (cobalt). And they are exposedto a number of risks, both for the environment(groundwater pollution, soil erosion, toxicwastewater discharge) and for workers (lackof protection).

A guide for responsbile investorsThe report “Rare metals supply chains”,published by Meeschaert Asset Managementand the European network of active share-holders Shareholders for Change in July2019, denounces this in abundance of de-tails, tables and practical examples.“This is the first report of its kind for sociallyresponsible investors”, explains AurélieBaudhuin, president of SfC and deputy gen-eral manager of Meeschaert AM. “We want topromote new themes of engagement withcompanies that use rare metals and rareearths in their production processes, parti c-ularly in the field of renewable energy and

electric cars. Because there canbe no sustainable transition to alow-carbon economy withoutminimizing the social and envi-ronmental risks associated withthe extraction of key raw materi-als for new technologies”.

From Siemens to Renault to Solvay: these enterprisesare under the spotlightMeeschaert AM – SfC’s research

identifies twelve companies potentially ex-posed to risks related to the extraction anduse of rare metals and rare earths: Vestas,Siemens-Gamesa, Orsted, Iberdrola andNordex in the wind power sector; PSA, Re-nault, Daimler and BMW in the automotivesector; Johnson Mattey, Umicore and Solvayin the chemical sector (associated with elec-tric cars).For each company, the questions that activeshareholders may ask at annual general meet-ings, in closed meetings with the managementor in letters and appeals are also specified.BMW, for example, which intends to pro-duce 500,000 electric cars by 2020, could beasked what procedure is followed in theevent of non-conformity of suppliers, giventhat in 2018, the same company identified193 cases, which would not have led to thetermination of any supply contract.While the Spanish wind giant Iberdrola couldbe asked if rare metals are integrated into thecircular economy model of the group. “Wehave prepared about fifty questions”, Baud-huin continues, “which will be the basis forengagement activities with companies in theSfC network from the second half of 2019”.The first letters to companies (Vestas, Umi-core and Iberdrola) have been sent in No-vember 2019.

RARE METALS: 12 COMPANIES TARGETED BY SfC


In December 2018, SfC – Share-holders for Change has launchedthe report “Bad Connection”. Thereport exposes the general lack oftax transparency in the Europeantelecommunications sector.“Except for Vodafone, no majortelecommunications group inEurope publishes country-by-country data, as recommendedby the OECD in order to addressbase erosion and profit shiftingby multinational enterprises”, explains Au-rélie Baudhuin, Deputy Managing Directorof Meeschaert Asset Management. “WhilstVodafone should be applauded for being aleader in tax transparency, the largestshare of its profits (38%) are generated intwo conduit jurisdictions, Luxembourg andMalta, where the group has just 325 employ-ees, out of a total of 108,271 worldwide. ForVodafone’s peers Telecom Italia, DeutscheTelekom and Orange, a similar analysis wasnot possible because country-by-countrydata are missing”.For all of Vodafone’s peers the report iden-tified intra-group transactions, involving

conduit jurisdictions such asLuxembourg or Netherlands, thatcould result in profit shifting andtax avoidance. For each company,including Vodafone, a number ofquestions have been drafted tohelp investors engaging the com-panies on tax related issues.“Tax transparency is one of thecore issues for SfC engagementwith companies”, continues Au-rélie Baudhuin. “Lack of trans-

parency and profit shifting are a risk for allinvestors, because they expose companies tofines and proceedings by tax authorities.Moreover, they have profound ethical impli-cations, since they often dramatically re-duce tax revenues both for developing anddeveloped countries”.Based on the “Bad Connection” report, anumber of questions were sent to the fouranalysed companies by SfC. The engage-ment with Deutsche Telekom has beenclosed in June 2019 and was partly success-full. All other engagement projects withtelecommunication companies are still on-going.

BAD CONNECTION

Published on 12 December 2019by SfC - Shareholders for Change

engagement report - bkc-paderborn.de · vodafone all actions on behalf of sfc. closer coooperation...

Documents