The Future of SRI

By Matthew Patsky, Chief Executive Officer, Trillium Asset Management

>> Back to July 2017

Eight years ago I received the call asking me to consider joining Trillium Asset Management as CEO. Since that time, we have seen more interest than ever in the field of sustainable investing from a wide variety of institutions, mainstream money managers, and families often driven by women and millennials, bringing assets over to impact. But we are also keenly aware that since the election, the new Administration is actively working to dismantle many of the key policy initiatives we have advocated over the last 35 years. So we are at an interesting crossroad. Looking out over the horizon, I see six emerging trends that I believe shed light on the future of sustainable investing.

•  CEO Accountability
•  Companies taking a stand on policy
•  Higher expectations for money managers
•  Higher votes for ESG proposals
•  Greater attacks on shareholder rights
•  Need for measuring impact of advocacy and policy

CEO Accountability

Historically many corporate CEOs led by decree with a certain imperiousness that shaped the thinking of the board and shareholders. As shareholders are increasingly influenced by a broader set of factors than a simple quarterly earnings announcement — understanding the long-term impact of key ESG issues, we expect the balance of power to shift. We believe shareholders will be leading the way, that the board will be more attentive to shareholder demands, and that ultimately CEOs will understand that they work on behalf of shareholders and other constituents who care about long-term sustainability. The successful CEO of the future will not be exclusively focused on short-term quarterly earnings but will have predominate interest in building long-term sustainable business models.

Companies Taking a Stand on Policy

For years Trillium has asked companies to be more transparent on involvement in industry associations, such as the Business Roundtable. These organizations have often advocated public positions that are in opposition to many of the core values espoused by these corporate members on climate change, gender diversity, and executive compensation. Some of these companies have responded by resigning from groups such as ALEC, or at the very least were transparent about their involvement. Now, in the face of the ever-growing threat from certain Trump-era policies, we find that these companies are taking a more active stand on policy issues; as in support of the Paris Climate Agreement. In fact over 1,500 business and investors signed a recent letter from CERES in support of reducing carbon emissions and adopting sound climate policies. Going forward there will be more pressure on companies to advocate for more progressive policies in support of the environmental, social, and governance (ESG) issues that matter. Silence will be viewed as complicity rather than neutrality.

Higher Expectations for Investment Firms Waving the Sustainability Flag

We have seen large money managers like State Street, Blackrock, and Pimco jump into the field of sustainable investing. Joining the Principles for Responsible Investment (PRI) is an easy first step. Gaining access to sustainability research for portfolio managers and analysts is another common early step. Reexamining proxy voting policies is often next. The 2016 US SIF Trends Report now shows that 1 out of 5 dollars invested in the U.S. follows some kind of ESG consideration[1]. However, US SIF also found that many of the larger managers do not communicate clear ESG criteria or use the criteria across all pools of assets at the firm[2]. Just this year we have seen Blackrock pledge to start supporting more ESG related shareholder proposals (in part in response to a shareholder proposal filed by Trillium). Managers who market themselves in this space will have an increasing expectation that they are going beyond proxy voting, and engaging more fully in shareholder advocacy and public policy initiatives.

Higher Votes for Shareholder Proposals

Just last month, 62 percent of Exxon shareholders supported a shareholder resolution filed by the New York State Common Retirement Fund and the Church of England calling on the company to explain how its business will be impacted by global efforts to mitigate climate change. Resolutions at Occidental Petroleum and PPL Corporation related to climate change also received majority votes this year, as did a proposal at Pioneer Natural Resources on creating an annual sustainability report. Trillium’s resolution during May of last year at J.B. Hunt received a 54.7 percent vote. Often, these strong results translate into significant changes. The fact that such large numbers of mainstream investors are supporting ESG shareholder proposals demonstrates that we are at a tipping point.

Greater Attacks on Shareholder Rights

As we see more success from efforts to engage companies through shareholder engagement, and stronger voting results, we expect to see more attacks on our rights as shareholders. Recently, we saw the Financial CHOICE Act pass in the U.S. House of Representatives, which among other things would require that shareholders own one percent of a company before they could file a shareholder proposal. We will work hard in coalition with other investors, such as US SIF, to fight this. But we believe that we need to clearly communicate the importance of this right to policymakers; to raise material ESG issues with companies and other investors. In fact, a shareholder proposal this year at Exxon asking for the company to restrict “precatory” proposals in the future only received a 1.6 percent vote of support. Clearly this right is something that shareholders value and should be protected.

Need for Measuring Impact of Advocacy and Policy

While impact measurements for private investments have improved, we have not yet seen a similar evolution for public equity investments. The range of policy work and shareholder engagement done by firms in this space is truly impressive and groundbreaking. It is difficult to communicate clearly to investors that they should expect both a “social return on investment” alongside a “financial return on investment.” We need to create a common framework to understand, prioritize, and measure the change we want to make. Individual resolutions at companies will continue to be important. But we expect that creating policy incentives that drive improvement in key ESG issues across industries will be more important. We are involved in some nascent efforts in this direction and hope they will bear fruit.


Today, we see more companies and investors integrating ESG issues into either their operations and/or investment approach. In the next 35 years, we believe the field of sustainable investing will move further into the mainstream market with the majority of investment dollars focused on generating long-term value. As we move towards this, we must harness the energy from reinvigorated investors, companies, and local policy makers who are standing up for the ideals we espouse but we must also help engage those who are entering our ranks and looking to take a stand. As we look to the future, we should recognize the current time as a critical turning point where a new consensus is forming that will transform the way investors and companies lead on the critical issues facing our planet. At Trillium, we look forward to being in the vanguard of this movement. We and our critical allies in the field have an extremely important role to play in demonstrating how a robust approach to advocacy and policy must be utilized in order to ensure a sustainable future.


Article by Matthew Patsky, CFA, Chief Executive Officer, Trillium Asset Management ( He leads Trillium’s Sustainable Opportunities strategy and has over three decades of experience in investment research. In 1994, he became the first sell side analyst in the U.S. to publish on the topic of socially responsible investment.

Article Notes:



DISCLOSURE: The views expressed are subject to change based on market or other conditions and are not a forecast of future events or a guarantee of future results. These views are not investment advice nor a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. The author selected the specific securities to illustrate views expressed and they do not represent all of the securities purchased, sold or recommended.

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