Sustainable Investment Engagement on Campus: Shareholder Activism and the 2011 Proxy Season AASHE Annual Conference Pitt

1. Sustainable Investment Engagement on Campus: Shareholder Activism and the 2011 Proxy Season AASHE Annual Conference Pittsburgh October 10, 2011

2. Overview • Proxy voting as a corporate engagement strategy • Regulatory change affecting proxy season • Growing support for sustainability shareholder proposals • Hot topics raised by activists in 2011 • Does it make a difference?

3. Corporate Disclosure and the SEC: Regulatory Ferment • Proxy Plumbing • July 2010 concept release, Oct. 2010 comments under consideration • First revision of U.S. proxy voting system in three decades • New SEC Disclosure Requirements • Material climate risks/opportunities now in annual reports (Jan. 2010 guidance) • Board diversity considerations now in proxy statements (Dec. 2010 rule) • Dodd-Frank Financial Reform Act Mandates • New 10-K disclosure rules promised on pay disparity, conflict minerals, mine safety, resource extraction payments to host governments – but backlash/delays • EPA Greenhouse Gas Emissions Reporting • 2009 Clean Air Act rulemaking, but implementation delays extended in Aug. to 2013 & 2015 on corporate reporting; Agency actions remain political battleground • Political Spending Disclosure Proposed in July to SEC

4. Historical Context

5. Voting Trends

6. 2010 vs. 2011 Proxy Season Filings

7. Current Status 2011 Proposals Number up >50% from 2010

8. 2011 Season Hot Topics • Five Majority Votes (A Record) • Layne Christensen (mgt-supported), sustainability, 93% • KBR, sexual orientation/gender ID policy, 62% • Tesoro, refinery safety & accident prevention, 54% • Sprint Nextel: political spending, 53% • Ameren: coal risks, 53% • 20 Votes Above 40% (Unprecedented) • Most (9) on political spending disclosure • 5 on coal (Ameren) and fracking (Chevron, Carrizo Oil, Energen, Ultra Petroleum) • 2 on refinery safety & accident prevention (Tesoro, Valero) • Diversity (KBR, Leggett & Platt) & human rights (OM Group – conflict minerals)

9. New Issues & Results in 2011 (1) • Environment • Climate Change: New regulatory context for GHG disclosure and goals requests (but average support down from 2010) • Natural Resource Management: Coal, fracking with most support (note Energen49%) • Sustainability • Continued high votes for disclosure (34% avg) but less enthusiasm for links to pay (<8%) • Political Spending • Continued big Center for Political Accountability campaign (34% avg) • New proposal focused on reputational risks, e.g., Target & Best Buy (withdrawals) • “Say on spending” just one low vote so far at Home Depot (5%); P&G on Oct. 11 • Labor lobbying proposals newly approved at SEC (IBM decision precedent) – 5 mostly high votes • Increased intensity in campaign for disclosure of industry “secret spending”

10. New Issues & Results in 2011 (2) • Human and Labor Rights • New UN Framework on Business and Human Rights released March 21 by Prof. John Ruggie • Conflict minerals (cobalt) at OM Group (43%) • Process safety at oil refinery companies – AFL-CIO proposals (deal at Sunoco, moot at ExxonMobil. Varied votes: ConocoPhilips(8%), Marathon (7%), Tesoro (54%), Valero (43%) • Banking • NYC proposal votes at BoA(39%), Citi (29%), Wells Fargo (23%) on disclosure about loan modifications, foreclosures. SEC: not “ordinary business.” • Health Care • Religious group attempt to raise drug affordability issue, but little investor support – national legislative solution clearly needed and individual company action largely ineffectual. • Insurance premium affordability filed at 5 biggest insurers but excluded on “ordinary business.”

11. Does it make a difference – What more can you do? • Responsible investing started in the social protest politics of the 1960s and the anti-Apartheid movement. Students questioned the institutional status quo and changed it: • Schools used endowment money and institutional prestige to help create the opportunity for democracy in South Africa. • South Africa divestment, anti-sweatshop campaigns, Sudan divestment, pressure for action on climate change – all are about reshaping the capital markets for long-term sustainability. • “Occupy Wall Street” protests today tap into current widespread feeling that financial markets and large companies are responding inadequately to growing societal inequality. • Three questions to take home:

12. About Si2 • Organization • Non-profit membership association launched in 2010, funded by consortium of 14 of the largest-endowed U.S. colleges and universities and two large pension funds. • Tracks organized efforts to influence corporate behavior, shareholder proposals, related topics • Briefing Papers • In-depth analysis of hot topics: • Climate Change • Natural Resource Management • Sustainability Reporting • Corporate Political Spending • Equal Employment/Diversity • Human Rights • Labor Rights • Industrial Food System • Drug Pricing • Engagement Monitor • Searchable online tool - detailed prospective proposal identification and tracking of outcomes • Action Reports • Impartial company- and resolution-specific research and analysis for proxy voting decisions • Special Projects • October 2010/ November 2011 political spending governance studies, first to benchmark S&P 500 • Forthcoming: • Hydraulic Fracturing • Environmental & Human Rights Risks in the Niger Delta Contact Heidi Welsh, Executive Director heidi@siinstitute.org Tel. 301-432-4721 www.siinstitute.org