Our investments make The McKnight Foundation a partial owner of many U.S. 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 have to rely on estimated data.
SOLUTION: Demand better data
In 2015 we wrote to over 170 companies in carbon-intensive sectors to let them know that 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. We also encouraged Mellon Capital Management to commit to similar outreach to improve the index.
Will our efforts transform the companies? Probably not directly. But it demonstrates to companies that investors want real data on greenhouse gas emissions and climate readiness. And, eventually, what the market demands, the market gets. In 2015, 12 of the companies we contacted reported their greenhouse gas emissions for the first time. 2016 responses are only now coming in.
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 & Governance (ESG) issues to encourage longer-term thinking by companies. In all of our "separately managed accounts" (accounts where we control the voting), we rely on Institutional Shareholder Services and use its SRI Proxy Voting Guidelines.