New York Common files its first cyber risk shareholder proposal

The $209bn New York State Common Retirement Fund filed its first shareholder proposal dealing with cybersecurity, calling on Express Scripts to publicly detail its cyber risk and security efforts.

While the proposal failed to gain the support of a majority of shareholders, the state pension system said that cyber risks will be an increasing concern for shareholders in the future.

“A significant number of shareholders spoke loudly at Express Scripts’ annual meeting supporting our call for the company to publicly detail its cyber risk and actions taken to ensure cyber security,” DiNapoli said in a statement. “Cyber security is one of the most critical issues facing businesses today and breaches can affect millions of people, but Express Scripts has provided shareholders with little reassurance or information on
what actions it has taken to mitigate cyber risk in its operations. Company executives should reassure investors that they have taken solid steps to mitigate the risk of a computer breach.”

The New York fund, which holds a $130m stake in the pharmacy benefits management company, requested that the Express Scripts board annually review and publicly report on its cyber risk, including risks related to outsourced business functions, a description of material cyber incidents, risks related to undetected cyber intrusions, and a description of relevant insurance coverage. The company disclosed in 2008 that a data breach affected the personal and medical information of more than 700,000 customers, and State Comptroller Thomas DiNapoli filed the shareholder proposal shortly after the Equifax data breach exposed the personal information of as many as 145 million Americans.

This is the first time the fund filed a shareholder proposal exclusively dealing with cyber security, spokesman Mark Johnson said. Express Scripts had sought to prevent DiNapoli’s proposal from going to a shareholders’ vote, but the Securities and Exchange Commission rejected the company’s request in March, according to the Comptroller’s Office.

Read the full story: New York Common files its first cyber risk shareholder proposal

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Religious endowments move to the forefront of ethical investing

Churches and their endowments have long been leaders in socially responsible investing, but those efforts are increasingly moving beyond divestment into more proactive approaches, including impact investing and corporate engagement.

In addition to negative screening and divestment, religious organizations are embracing shareholder engagement, thematic investments — choosing to invest in companies or industries that are aligned with their organization’s goals — and impact investing. The proactive turn has been encouraged by growing investor sophistication, better coalition building, and the Pope, who encouraged Catholic organizations to embrace impact
investing in a 2014 speech.

“I think that was a turning point for several of the clients that we work with, where they started thinking in a more proactive framework,” Kristine Pelletier, a member of NEPC’s endowment and foundation practice, told Foundation and Endowment Report. “A lot of institutions felt that call to action, and maybe that put more fire into some initiatives that were already going on.”

Read the full story: Religious endowments move to the forefront of ethical investing

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NYC pension funds seek advice on hiring a consultant for fossil fuel divestment

Three New York City pension funds, with $141.5bn in assets, have issued a request for information seeking advice on how to begin divestment from companies that own fossil fuel reserves.

The divestment plan, announced by the Mayor and Comptroller’s Office in January, would make the city pensions the first major U.S. pension plan to divest from fossil fuels (MMR, 1/10/2018). But not all of the pension plans are on board – the Police Pension Fund and the Fire Department Pension Fund, which control about $52bn in assets, or 27% of the city’s $193bn in pension assets, have declined to sign onto the divestment initiative.

But even without the support of the Police and Fire pension funds, the Teachers Retirement System, New York City Employees Retirement System and Board of Education Retirement System are moving ahead with a plan to divest from fossil fuel companies within five years.

Read the full story: NYC pension funds seek advice on hiring a consultant for fossil fuel divestment

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NY Common Fund will vote against all-male boards

The $209bn New York State Common Retirement Fund plans to vote against all board directors at companies without a single woman on their boards, according to State Comptroller Thomas DiNapoli.

The Comptroller’s office also announced agreements with four companies that agreed to formally include gender and racial diversity in their considerations of board candidates after engagement with the Common Retirement Fund. DiNapoli commended Bristol-Meyers Squibb, Leucadia National, Packaging Corp. of America and PulteGroup for their actions, saying that the Common Retirement Fund had withdrawn shareholder
proposals it had filed at the companies. While the retirement fund will continue to pressure companies to diversify their boards, its board votes will give additional force to those efforts, DiNapoli said.

“It is unconscionable that hundreds of publicly-held U.S. companies have no women directors,” DiNapoli said in a prepared statement. “We’re putting all-male boardrooms on notice – diversify your boards to improve your performance.”

Read the full story: NY Common will vote against all-male boards

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CalPERS blocks gun divestment proposal

The $335bn California Public Employees Retirement System rejected a proposal to begin divestment from retailers and wholesalers of firearms that are illegal in California but legal in other states.

The proposal, from California State Treasurer and CalPERS board member John Chiang, would have gone a step further than CalPERS’ previous divestment from manufacturers of military-style assault weapons. Many public commenters, including victims of mass shootings in San Bernardino and Las Vegas, spoke in support of the measure, and some opposed it.

Board members debated whether divestment was a more effective tactic than engagement with retailers and wholesalers, some of whom have already made moves to remove such weapons from their stores. Board member Theresa Taylor said she wasn’t sure if divestment was the best option, and said she’d prefer to stick the planned schedule rather than voting in April.

“We have a divestment policy that states that we generally don’t divest,” Taylor said. “If we are divesting, we lose our seat at the table. We wouldn’t have been able to get Dick’s or Walmart or the other companies to engage with us if we no longer own those stocks.”

Read the full story: CalPERS blocks gun divestment proposal

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SASB feeds institutional hunger for sustainability data

The founder of the Sustainability Accounting Standards Board (SASB), a nonprofit established in 2011 to develop sustainability accounting standards, told institutional investors that she remains laser-focused on creating better metrics for financially material sustainability concerns, despite investors’ hunger for data on ESG topics outside of that strict mission.

Jean Rogers, SASB’s chair and founder, spoke at the Council of Institutional Investors’ (CII) spring conference on Tuesday, Μarch 13, saying that companies’ current reporting on sustainability risks currently leaves a lot to be desired, as few use data and most rely on “boilerplate” risk disclosures. SASB plans to finalize and publish industry-specific
sustainability reporting standards for 79 industries later this year, and hopes that those standards will help investors better understand the financial risks related to a particular company or industry.

“Good investors try to look at material risks, but are hampered in the sustainability space by a lack of high-quality comparable data on financially material issues,” Rogers said. “We look for evidence that these sustainability issues are likely to affect financial or operating performance of a company or industry, so that investors have adequate information on those risks and can use that information accordingly.”

While companies are already addressing sustainability risks in their disclosures to investors, they are not specific enough to be useful for investors, Rogers said. Without better data, investors can’t put price on sustainability risks or differentiate between which companies are performing well and which companies are performing poorly, she added.

Read the full story: SASB feeds institutional hunger for sustainability data

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NYC urges smaller pension funds to follow its lead on ESG in real estate

Trustees for the New York City Pension Funds urged institutional investors around the country to take up policies that pressure real estate and infrastructure managers to pay more attention to ESG concerns like worker safety, wages and benefits, in a discussion at the Council of Institutional Investors’ spring conference in Washington, D.C., on March 12.

The city’s five pension funds, which collectively manage $193.5bn in assets, adopted responsible contractor policies (RCP) in May and June of 2017, and trustee representatives Susannah Vickers and David Katzman said that the policies provide a good pressure point for engaging managers on environmental, social and governance concerns.

Vickers, who is the Executive Director for Pensions at NYC’s Bureau of Asset Management, as well as the NYC Comptroller’s representative on four of the five pension boards, said that the city has invested in six or seven real estate projects since the policies went into effect. None of the managers had any problems agreeing to the city’s wage, safety, and benefits policies, she said.

“Many of the big managers are relying more and more on institutional investors to raise these huge funds, to do the mega deals that they’re doing in private real estate, private infrastructure, private equity,” Vickers said. “They really need us as clients, and I think it’s harder for them to put the deals together that they want to do and be the big players that they want to be without institutional dollars. So when we create a policy, they sort of have to listen.”

Read the full story: NYC urges smaller funds to follow its lead on ESG in real estate

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SEC chair not eager to take action on unequal stock schemes, IPO arbitration

The chair of the Securities and Exchange Commission expressed reluctance to take additional action on dual-class stock structures and arbitration clauses in companies’ initial public offerings.

Jay Clayton, speaking at the Council of Institutional Investors’ spring conference in Washington, D.C. on March 12, said that his agency has limited resources, and that he was hesitant to commit to game-changing actions on topics of interest to the institutional investors in attendance.

One topic which has discussed frequently at the conference was dual-class capitalization structures, in which some classes of stock carry more voting weight than others. The issue has been more hotly debated by investors since the 2017 IPO of Snap, the maker of SnapChat, which sold shares of common stock that conferred no voting rights at all. SEC commissioner Robert Jackson, Jr. said in February that such structures were undemocratic, and called for listing standards addressing the use of perpetual dual-class stock that can be passed down to heirs without any diminishing of voting power. Clayton, however, was more circumspect when asked about dual-class shares at the CII event.

“I’m not putting this at the front of the agenda for something we should weigh in on,” Clayton said.

Clayton said that the “one share, one vote” model is not the only model of governance for successful public companies, although extreme examples like Snap were cause for concern.

“Where you draw the lines, and whether that’s something that should be done by the SEC or by the stock exchanges or some other authority – or by people with a great deal of capital to put to work in the markets – is a question worthy of debate,” Clayton said. “But from my own perspective, I’m not an absolutist on either end.”

Read the full story: SEC chair not eager to take action on unequal stock schemes, IPO arbitration

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NYC police pension not on board with city’s fossil fuel divestment plan

The New York City Police Pension Fund, one of the five city pension plans overseen by the Comptroller’s Office, voted down a proposal to divest the city’s pension funds from companies that own fossil fuel reserves.

Mayor Bill de Blasio and Comptroller Scott Stringer announced the divestment proposal earlier this month, saying that the $189bn New York City Pension Funds should divest from companies that own fossil fuel reserves in the next five years, becoming the first major U.S. pension plan to do so (MMR, 1/10/2018). The comptroller introduced a resolution to begin the process at the common investment meeting last week, starting with a broad request for information from experts, stakeholders, industry, and members of the public and following with a request for proposals for a consultant to study divestment and guide the pension funds’ efforts.

One of the pension funds, the $63.2bn New York City Employees Retirement System has passed the resolution thus far, and the plan also has majority support from the Teachers Retirement System and the Board of Education Retirement System, which will vote soon. But the $39.8bn New York City Police Pension Fund did not sign on to the divestment effort, with one trustee saying that he felt that the board was being pressured to go along with a plan that was formed without its input.

“I don’t know what the sudden urge to do this was,” said trustee Joseph Alejandro, representing the Patrolmen’s Benevolent Association. “I see that a lot of work was done without us being involved in the very beginning of it…. I don’t think we need another resolution with another undefined process being pushed by someone who may or may not be here four, five years from now.”

Read the full story: NYC police pension not on board with city_s fossil fuel divestment plan

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