10 Questions for Green Century Capital Management’s Leslie Samuelrich

Green Century Capital Management has been a leader in climate-related shareholder advocacy, pressuring companies to grapple with the risks related to the warming planet. It’s pushed companies to publish plans to achieve net-zero emissions, address deforestation, and reduce single-use plastics packaging. Its Green Century Funds eschew fossil fuels, tobacco, nuclear and conventional weapons, genetically modified organisms, “and other industries whose core business threatens the environment and public health.” The firm, with about $1 billion under management, is owned by nine nonprofits.

Under Leslie Samuelrich’s leadership, Green Century is a regular, and successful, filer of shareholder resolutions addressing sustainability topics at U.S. companies. The 17 Green Century-filed resolutions in Morningstar’s proxy-voting database in the past four years gained 49% shareholder support, according to Lindsey Stewart, Morningstar’s director of investment stewardship research. Nine achieved an outright majority, and two were supported by more than 90% of shareholders. Green Century “has a track record of high ambition in sustainable investing and punches above its weight on active ownership,” Stewart says.

Morningstar chatted with Samuelrich about the recent proxy season, the perception that the influence of climate-focused activists is waning, and the trend of greenhushing, or the reluctance of companies to talk about their environmental goals for fear of inviting criticism amid the backlash against sustainable investing. Oh, and she told us why she thinks individual investors will finally vote their proxies. Read the following edited excerpts to learn what she said.

Norton: Green Century works on environment-related proposals. How is this proxy season shaping up?

Samuelrich: Our key objectives are to reduce a company’s climate risk by reducing their greenhouse gas emissions, through the purchase of renewable energy, through their use of energy elsewhere, or through the emissions generated through their products or in their supply chain.

We have purposely tried to make it clearer which of our activities are proxy voting, what’s engagement, and what’s advocacy.

We looked for new ways to address climate. We continued to ask for science-based targets, but we stepped up to ask for climate transition plans that detail the near- and medium-term strategies of companies to meet their greenhouse gas emissions reduction goals, including any necessary future actions. We also went deeper into the portfolio to get beyond the best-known names in our funds. For example, we worked with multiple semiconductor companies. After filing shareholder proposals with each company, we successfully secured commitments with Advanced Micro Devices AMD, Intel INTC, Nvidia NVDA, ON Semiconductor ON, and Texas Instruments TXN requesting they publish climate transition plans. We decided to work with those that can be really carbon intensive, subindustries that it takes a while to learn about, and then leverage that expertise with company after company.

Norton: What else?

Samuelrich: We do one-off things, too. For example, we filed a proposal with General Motors GM pressing the largest U.S. automaker to procure at least 10% fossil-free steel and aluminum by 2030 and to eliminate deforestation linked to its leather and rubber supply chains. GM has set an emissions reduction target for operations and emissions associated with its light-duty vehicles but hasn’t accounted for supply chain emissions or leather and rubber-associated tropical deforestation in prime sourcing areas such as Africa, Southeast Asia, or Brazil.

We think it’s most effective, when we decide on a theme, to lean into it. For example, we work on deforestation. We started with palm oil 10 years ago, expanded to secure agreements around soy in South America, and now are pressing beef companies. And in terms of emissions goals, we’ll keep science-based targets but pressure them to have climate transition plans.

Norton: Climate-focused shareholder activists are perceived to be winning fewer proxy votes. What does this mean, if anything, for Green Century and its initiatives?

Samuelrich: What’s most important about shareholder advocacy is getting a company to change its policy. When a company offers too little, then [going to] the proxy-vote process is the next step. The vote is nonbinding, but it is the expression of shareholders. If you’re an authentic shareholder advocacy team, you will follow through, press for implementation, and if needed, reopen the proxy process again.

Norton: You’ve also been nudging banks and insurance companies. How is that going?

Samuelrich: We’ve been working with banks to improve their lending to companies involved with deforestation. Citibank C followed through on its agreement with Green Century to adopt stronger deforestation policies, after we withdrew our 2022 shareholder proposal. In 2021, we secured an agreement with JPMorgan Chase JPM in which the bank requires its palm oil clients to adopt “No Deforestation, No Peat, No Exploitation” policies. Morgan Stanley MS also committed to strengthen its deforestation policies in response to a Green Century proposal.

Norton: How about with insurance companies?

Samuelrich: [The proxy season] went as expected. Insurance companies are still not adequately addressing their climate risk or taking enough steps to limit their exposure. If they stopped underwriting new fossil fuel products, it would give them a stronger start to limiting their climate risk. You probably saw that State Farm isn’t accepting new home insurance sales in California because of wildfire risks. On the one hand, insurance companies are losing out because of climate change, which they’re helping fuel, on the other hand.

Norton: We’ve had a backlash against environmental, social, and governance approaches.

Samuelrich: I think institutional investors are pulling back support. Institutional investors like State Street have rewritten its rules around supporting climate resolutions, so they are weaker. So some resolutions, including the ones proposed by the Sierra Club on banks financing fossil fuel companies, didn’t pass. [For example, only 4.8% of shareholders voted in favor of a resolution asking Morgan Stanley to adopt a time-limited phaseout of financing fossil fuel exploration and development. A similar proposal last year received 8.3% support.]

Institutional investors like BlackRock say [such proposals] are micromanagement, that you can’t get into the inner workings of companies.

Norton: What are some other effects of the backlash?

Samuelrich: Companies have been willing to make commitments, but less willing to publicize them themselves. And they’re much more nervous about us publicizing them. For obvious reasons, I can’t name them. Suddenly, they’re asking to review our press releases. Then they try to edit them to make it seem like the thing they’re doing now, they’ve really been doing all along, and it’s not a change. So no one should be nervous that they’re becoming too environmentally conscious. We’ve had to say that we weren’t accepting that edit or that we had no basis for them saying they’d been doing it already.

For example, we worked with a big bank on the issue of deforestation. The bank just absolutely did not want us to talk about what they agreed to do. I think they’re afraid of losing business. They’re afraid that as some Republicans have gone after investment firms, that it’s just a matter of time before they come after banks, after insurance companies. And they have contracts or agreements with state agencies or do business with the state.

Norton: How do you hold companies accountable if you can’t publicize this?

Samuelrich: When you file a resolution and you agree to withdraw the resolution from appearing on the ballot, you have what we call a withdrawal agreement. An integral part is to do follow-up on what’s in the withdrawal agreement and ensure implementation. If worse comes to worst, we’ll refile the proposal if they aren’t doing what they said. But if you just withdraw after a handshake and move on, you’re not doing your job.

Norton: Green Century recently decided to withdraw from the Net Zero Asset Managers initiative. Why?

Samuelrich: We’re committed to getting our companies to be net-zero, but for compliance reasons, we didn’t feel comfortable committing our funds. We’re fossil-fuel-free. We started so low that it was hard to figure out a path to go lower. We are still carrying the torch to get all companies to net zero.

Norton: Let’s talk about individual investors, who are infamous for never voting their proxies. Now we’re seeing more pass-through voting platforms, from State Street and others, which will soon allow retail investors to direct how shares owned by their index funds are voted. But will they start voting?

Samuelrich: As people learn more and care more about how to make their funds sustainable, they’re going to realize they have another lever to pull. If they own individual stocks, they will get more familiar on voting their proxies. The firms doing pass-through will publicize how to do it, and that might increase [the voting rate]. And there are entities bubbling up that teach you how to vote your proxies or how to tell your manager how to vote. I think that in the same way proxy voting has gotten so much more attention in the institutional space in the last five years, the retail space will follow.