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Companies face tug-of-war on lobbying agenda versus ESG values

Eight senators weigh in on lobbying disclosure rules

Sen. Sheldon Whitehouse, D-R.I., led eight senators in urging the SEC to incorporate disclosures on lobbying into an eventual final rule on climate risk disclosure.
Sen. Sheldon Whitehouse, D-R.I., led eight senators in urging the SEC to incorporate disclosures on lobbying into an eventual final rule on climate risk disclosure. (Tom Williams/CQ Roll Call file photo)

Corporations are reckoning with how decisions to advocate on issues on Capitol Hill and statehouses across the country will bear up under scrutiny from investors and consumers who are increasingly skeptical the companies are committed to their stated values.

Executives overseeing the implementation of environmental, social and governance strategies say companies must think through how their lobbying activities address all business risks, including strictly financial concerns, such as corporate taxes, and ESG ones, like reputation.

“There is a bit of rhetoric out there that you can either have the ‘E’ or you can have economic outcomes,” said Katherine Neebe, chief sustainability officer at Duke Energy Corp., which serves nearly 10 million electric utility and natural gas customers. “I don’t think that’s the case.”

Neebe spoke Tuesday at an event hosted by IKEA and the House of Sweden.

“I think with the vast majority of issues, when you bring everything together, you can find mutual wins for the environment, for society and for economies,” she said.

The scrutiny over companies’ lobbying and advocacy has sharpened in the past two years with the fallout from the pandemic, the Black Lives Matter movement, the Jan. 6 insurrection on Capitol Hill and climate change.

A growing number of investors and customers want corporations to explain disparities between publicly stated values and the financial support they give to lawmakers whose political activity undermines those principles. They also say companies should be more transparent about overall political spending.

Even lawmakers are weighing in. Eight senators, led by Sheldon Whitehouse, D-R.I., alluded to those concerns this year when, in a letter to the Securities and Exchange Commission, they called on the agency to incorporate disclosures on lobbying into an eventual final rule on climate risk disclosures. The senators were seven Democrats and Vermont independent Bernie Sanders

“An increasing number of companies tout their climate and other environmental commitments to both investors and the general public,” said the group, which included climate hawks Sanders and Sens. Edward J. Markey and Elizabeth Warren of Massachusetts. “These public statements are at odds with their lack of engagement in Congress on climate and their membership in and financial support of a number of anti-climate trade associations and other dark money groups.”

Shareholder resolutions on corporate political influence make up about 19 percent of the more than 500 proposals that will be voted on by the end of the 2022 proxy season, according to the Proxy Preview 2022 report. 

Investor support

Many of those proposals asking for more information on companies’ lobbying and political spending have had high levels of support this proxy season. A resolution from First Affirmative Financial Network calling for more lobbying disclosures from The Travelers Cos. Inc. garnered more than 52 percent of votes cast by investors. 

Similar resolutions received support of 40 percent or more of votes cast at other companies including Amazon.com, AT&T, Johnson & Johnson, Cigna Corp. and The Home Depot. And that pressure on companies is only expected to grow.

“It is a constant struggle in figuring out what makes sense to weigh in on behalf of our employers, our customers and our partners,” said Missy Owens, director of ESG policy and engagement at General Motors. 

“What’s the right thing to do?” she asked at a panel last week at the Social Innovation Summit in Washington. “It’s sometimes helpful to have a business case. You don’t always have a business case, and it’s the right thing to do. I think it’s a struggle for companies. The level of engagement and political engagement is and will continue to grow.”

Companies need to take a holistic approach in considering the concerns of investors, consumers, employees and others, Owens said.

Gathering information and data on ESG metrics and where lawmakers fall on policies that support their goals can help better inform companies’ government affairs teams and “make sure we’re putting our money where our mouth is,” she said.

However, executives caution that it is unrealistic for stakeholders to expect firms to always land perfectly on advocacy for ESG issues.

“There are other issues, there are business and tax issues, which are very relevant to the company that we have to pay attention to,” Owens said. “I can’t ignore that, nor can they ignore some of our human rights issues. It’s a constant push-pull and hopefully healthy dialogue.”

Corporations have a myriad of issues for which to advocate in Congress, said Ariel Meyerstein, senior vice president of community investing and development at Citibank. That can mean they have to pursue alliances with lawmakers who may support policies that would benefit corporations from a tax or financial perspective but not on other issues.

“When they donate to a candidate, they do it for lots of reasons. That candidate may have a wide record. Some aspects of the record, you might not really like,” Meyerstein said at the Social Innovation Summit. “But because they donated to that candidate, it’s not because they were for that aspect of their record. It’s that they happened to be aligned in other aspects.”

“It’s very hard to tease out sometimes when you just look at the donations and what people vote for,” he continued. “That’s challenging to draw a strong conclusion from. It’s also very hard for companies to say, ‘Well if someone is for X, then they’re off our list completely.’ Some of us did that with what happened with respect to what happened on Jan. 6.”

“But it is very hard to have a permanent list, especially if it’s a big part of who’s elected. It’s extremely challenging and messy,” Meyerstein added.

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