Our investments make the McKnight Foundation a partial owner of many US and global companies, positioning us to influence corporate practices. This strategy for incremental change is called investor engagement—improving what you own. Across the globe there is a growing network of engaged, proactive investors using trillions of dollars to build a more transparent, sustainable economy.
Improving What We Own
Challenge: Undisclosed greenhouse emissions data
McKnight invests $100 million in an index fund that underweights companies producing more greenhouse gases than sector peers, the Carbon Efficiency Strategy. However, not all companies report, so we often rely on estimated data.
Solution: Demand better data
In 2015 we wrote to over 170 companies in carbon-intensive sectors to let them know we need better data for investment decision-making. In 2016 we were joined by two foundations that also support more transparent markets, the Rockefeller Brothers Fund and the Nathan Cummings Foundation.
In 2018, McKnight joined Climate Action 100+. One of only a handful of foundations among the 225 investor participants, we will engage in a dialogue with one of the 100 largest global emitters of greenhouse gas in order to drive change. To date, more than $26.3 trillion in assets under management have signed on to the initiative.
Challenge: Companies face environmental & social risks
Traditionally, market incentives may lead some corporate executives to focus on short-term financial returns and ignore long-term risks and opportunities related to the environment, their employees, or the communities in which they operate.
Solution: Vote as shareholders
Shareholders file proposals at companies’ annual meetings for action on business challenges such as setting targets for reducing greenhouse gas emissions or tying executive pay to environmental performance. McKnight generally votes in favor of shareholder proposals on Environmental, Social and Governance (ESG) issues to encourage longer-term thinking by companies. In all of our “separately managed accounts” (accounts whose voting we control), we rely on Institutional Shareholder Services and use its SRI Proxy Voting Guidelines.
In 2017, McKnight asked managers invested in Southern Company to override pro-management voting and oppose the compensation plan at massive US utility, Southern Company. Executives were unduly rewarded with big bonuses despite overruns and write downs of problematic non-strategic generation projects that were costing shareholders. At least one of our managers changed it position on the entire pooled fund.