Holly Testa – Director of Shareowner Engagement for First Affirmative Financial Network

In this podcast and video (see video here), I interview Holly Testa, AIF, the Director of Shareowner Engagement for First Affirmative Financial Network. First Affirmative is an SEC registered investment advisor. She has been affiliated with First Affirmative for over 20 years in several capacities.

Holly works with several coalitions of institutional investors who engage with companies on environmental, social, and corporate governance issues to positively influence the performance and impact of companies owned in First Affirmative client accounts. She participates in dialogues with companies, files shareholder resolutions, joins multi-stakeholder campaigns to influence related public policies, and directs the firm’s proxy voting activities. In addition, she works with First Affirmative’s network advisors and their clients, providing information and assistance on advocacy issues.

Here is a brief summary of some of our interview – listen to our podcast and video for the entire interview:

Could you briefly tell us about First Affirmative? What do they provide?

First Affirmative is part of the Folio Financial family of companies. Offers online financial investing services for advisors, investors and broker-dealers. First Affirmative offers asset management and consulting services for individual, advisors, institutions.  $1 billion under management. Seeking to align investors values with their investments through a network of investment advisors and considers Environmental, Social and Governance (ESG) issues in their investment decisions

First Affirmative is a certified B-corp – which means they need to consider social and environmental performance, public transparency, and legal accountability when doing business. They also put on a great ESG – Impact investing conference every year.  This year it will be held in Colorado Springs, Colorado from November 1-3.

Why does First Affirmative engage in Shareholder Advocacy?

Using our right as investors to improve corporate behavior. Most companies are imperfect.  They may excel in one area of ESG but be trailing in others. Communicating investor expectations to companies and pressing companies to meet them.

What is your shareholder advocacy process?

There are numerous methods to engage a company. Some are formal – through the SEC and others are less formal.

Proxy voting – shareholders vote on issues brought by management and shareholders. Common items include voting for board of directors, executive compensation, qualifying shareholders can bring up resolutions. Most First Affirmative clients give the voting rights to First Affirmative.

How are resolutions developed?

Mostly developed in partnership with other like-minded organizations. Extensive research is needed to determine what the impact will be. The goal of resolutions is not to just move one company but to make systemic change. By moving a few companies, more will follow.

We help companies focus on long-term issues not just quarterly performance.

How do you identify an issue?

Some long standing issues are always on the agenda: climate, human rights, diversity. Often times, they focus on a subset of the main categories. They need to make a strong business case on each resolutions.

This year they will follow up on their diversity campaign and dialog with banks about supporting renewable energies and less on fossil fuels. They will also look at extreme laggards in sustainability reporting.

Do you need to generate support from other shareholders?

There generally is a campaign to inform shareholders. When they lead file, they generate a memo to inform shareholders about the issue.

To get a gauge how active First Affirmative is – in 2017, First Affirmative filed 15 proposals and was lead filer on 3. Is that typical?

You can lead file or co-file. There is more responsibility in lead filing.

They often win getting just 30% of support. Most institutional investors do vote. Many are starting to vote on ESG issues.

Are there specific funds and organizations who you regularly partner with shareholder resolutions?

Generally co-file with other organizations. It can help to have the support of large mo

They often partner with Boston Common, Trillium, Calvert, Green Century and Domini.

Could you go over the process of shareholder advocacy?

To file a resolutions you have to be a qualifying shareholder – have at least $2,000 of shares, have held them for at least 1 year and hold them through the resolution process. There are deadlines to meet. The resolution needs to address an issue that is not considered ordinary business. It cannot be a personal grievance. Companies can challenge resolutions with the SEC.

Do you think shareholder advocacy will be changing – is there any pending legislation that you are concerned about?

There are resolutions out there to restrict shareholder advocacy. The Financial Choice Act passed the house and requires that you have a 1% stake in a company for 3 years.  This would greatly restrict the influence of shareholders.

How can people get in touch with you and get information about First Affirmative?

Email: htesta@firstaffirmative.com
Twitter: @htesta2
First Affirmative website: firstaffirmative.com
First Affirmative advocacy page: firstaffirmative.com/responsible-investing/shareowner-advocacy
Twitter: @first-affirm
Facebook: facebook.com/FirstAffirmative/
SRI Conference: https://www.sriconference.com/

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