Raising The Bar – 2017 Annual Sustainability Report

PennsylvaniaTreasurer

Letter from Illinois State Treasurer Michael Frerichs –

I am proud to present the people of Illinois with our first annual update on our sustainable investment activities, which are crucial in advancing our goals to maximize returns and safeguard long-term assets.

In 2017, the Treasurer’s Office engaged companies on a broad range of sustainability issues, including environmental, social, and governance (ESG) risks and opportunities, through direct outreach and proxy voting. We joined with investor coalitions to strengthen our impact and share resources for this important work.

This report highlights key initiatives summarized below:

  • Closing the Gender and Racial Divide: Board Diversity—The Illinois Treasury joined seven Midwest institutional investors to urge local companies to shake up their uniformly white male boards of directors by adding women and minorities. Nine firms adopted policies to create a pipeline for diverse candidates and six appointed female directors.
  • Human Capital Management— The Illinois Treasury submitted an argument to the Securities and E change Commission urging that companies be required to disclose data on human capital metrics. Most companies in our service-based economy cite their employee base as their most valuable asset, but investors have virtually no data on a companies’ workforce composition, stability, or health and safety.
  • Pay Parity— The Illinois Treasury voted for Alphabet, American Express, Bank of America, Citigroup, CVS Health, Express Scripts, Facebook, JPMorgan Chase, Mastercard and Wells Fargo to report and reduce the gender pay gap in their workforce.
  • Board Accountability— The Illinois Treasury used the power of the proxy to support a more accountable board of directors. The Treasury supported 16 proposals to appoint an independent chairman, five proposals to require directors receive a majority of support from shares outstanding to be seated on the board, and two proposals to require each director stand for election on an annual basis.
  • Opioid Epidemic: Issues in the Supply Chain—The opioid epidemic is a complex problem and its remedy requires action by all actors in the supply chain, including firms that manufacture and distribute opioids. The Illinois Treasury is engaging companies to discuss steps to help fight the epidemic and reduce their exposure to financial, legal, and reputational risks.
  • Sustainability Fully Integrated across the Treasurer’s Office Investment Programs— The Treasurer’s Office formalized additional policies and processes to better integrate sustainability factors in the review of debt issuers, fund managers, equity holdings, and all due diligence activities.
  • Restoring Integrity to Public Information: Cracking Down on Fake News at Facebook and Alphabet— The Illinois Treasury pressed the social media companies to report on the epidemic of fake news and their progress towards a solution.
  • Addressing Environmental Risks and Opportunities—The Illinois Treasury filed a shareholder proposal at KaiserAluminum to request the company issue a sustainability report. Following negotiations with the office, the companylaunched a website on sustainability and agreed to follow with a comprehensive report.
  • Purchased $70 million in Green and Social Impact Bonds—The Illinois Treasury purchased $70 million in green andsocial impact bonds, which provide an excellent return on investment while supporting important projects that aim tocreate a more sustainable, prosperous future.

For those keeping count, the Illinois Treasury voted on 4,060 proposals on corporate proxy ballots and engaged hundreds of companies on sustainability issues since it launched Raising The Bar in September 2016.

Why this matters. As a large, long-term investor in companies around the nation, we believe we can help raise the bar for the entire industry. That’s why we’re promoting an investment philosophy that fuses traditional investment objectives—safety of principal, optimal returns, and diversification—with a focus on corporate accountability, sustainability, and the common good. By doing so, not only do we position ourselves to protect shareholder value and maximize returns, but we can help foster a business culture that is more accountable and attentive to the environmental, social, and governance values of the community. And that benefits all of us in Illinois and beyond. For regular updates and more information on our responsible investing activities, visit www.IllinoisRaisingTheBar.com.

 

Onward,

MichaelHerlich

 

 

Illinois State Treasurer

 

The full report pdfarrrow

...we find that banks with more gender diversity on their board perform better once the composition of these boards reaches a critical level of gender diversity, corresponding to a board female share of around 13-17 percent.

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