Opinion – Leveraging shareholder proposals to address biodiversity and human rights
The outcome of our shareholder proposal with insurer Chubb clarified some of the challenges and opportunities as we work to protect the Arctic National Wildlife Refuge
By Mary Beth Gallagher, director of engagement at Domini Impact Investments and vice-chair of the Finance for Biodiversity Foundation’s Advisory Board
Protecting the Arctic National Wildlife Refuge (Arctic Refuge) and other biodiverse ecosystems—against oil and gas or other resource development—should be an undisputed priority. Indigenous Peoples have been clear and effective advocates for protecting these areas. What is our role as investors? To start, investors and companies alike can advance shared objectives when we partner with Indigenous Peoples. And as shareholders, we can encourage companies to have strong policies to protect Indigenous rights.
Earlier this month, investors in Chubb, a major global insurance company, voted on a shareholder proposal we filed from Domini Impact Investments, asking for a report on how human rights risks and impacts are evaluated and incorporated in the underwriting process, which laid out how the company can solidify its recent commitment to preserve the Arctic Refuge and respect the rights of Indigenous People that inhabit it. Results were mixed. It’s clear that this issue needs to be a higher, more urgent priority—but that’s not to say there are no signs of progress. We’ve already covered significant ground, and we’re ready to continue our efforts.
The Arctic Refuge stretches for tens of thousands of square miles in northeastern Alaska. In 2021, the U.S. government auctioned land for oil and gas development on the coastal plain of the Arctic Refuge. U.S. law mandates a second lease sale by the end of 2024.
Oil and gas development poses serious environmental, cultural, and food security threats to Indigenous Peoples. It would likely be detrimental to the migratory route of the Porcupine Caribou Herd, which the Gwich’in people have depended on for subsistence for thousands of years. Caribou are vital for food, clothing, and tools, and are a source of cultural traditions. The coastal plain of the Arctic Refuge is the calving ground of the Porcupine Caribou Herd, an area that Gwich’in people call Iizhik Gwats’an Gwandaii Goodlit—the Sacred Place Where Life Begins. Gwich’in people speak about the unique ecosystem—from the wind of the ocean to the other characteristics that make this location uniquely well suited for Caribou calving. Their intimate knowledge of this ecosystem and its benefits to biodiversity are unparalleled.
The U.S. Government’s decision to auction off Arctic Refuge lands is disappointing, but oil and gas development depends on many factors. Energy companies need to buy the leases. Banks need to finance the subsequent energy projects. And insurance companies must be willing to provide coverage to the companies involved.
That means advocates have several audiences, and progress can come in many different forms. ExxonMobil recently announced it will not drill in the region. And, already, eighteen international insurers and every major U.S. bank are in the process of creating—or have already adopted—policies to protect the Arctic Refuge. Among these insurers are Allianz, Axis Capital, and Swiss Re.
All this progress is a result of the work of the Gwich’in Steering Committee, and which has made enormous efforts to meet with financial institutions, insurance companies, and lawmakers to defend their land and way of life. One major victory came in March, when Chubb committed to no longer provide insurance coverage for oil and gas companies in conservation areas around the world covered by International Union for the Conservation of Nature (IUCN) management categories I, II, III, IV and V in the World Database on Protected Areas, including the Arctic Refuge.
Still, the insurance firm didn’t formalize a human rights commitment alongside this, and the pillars of responsible business—ecological sustainability and human dignity—must both be prioritized. We submitted a shareholder proposal asking the company to report on how human rights’ risks and biodiversity impacts are evaluated and incorporated into the company’s underwriting process. The proposal started an important conversation between us and insurers. It called attention to the extent to which Free, Prior and Informed Consent (FPIC), as articulated in the United Nations Declaration on the Rights of Indigenous Peoples, is considered by Chubb.
On May 17th, Chubb’s investors voted on our proposal. 16.5% of investors voted in support. Given the growing awareness of the importance of Indigenous Peoples and their territories, their role in protection of biodiversity, and the complexity of stakeholder engagement in the energy transition, we anticipate that investors will increasingly recognize why companies must commit to FPIC. Yet already, there are thousands of investors connecting the dots on environmental protection and Indigenous rights. There’s support for the Gwich’in people, who have long emphasized that efforts to stop oil and gas development are essential to biodiversity in the region, especially for preserving the migratory route of the Porcupine Caribou Herd.
Chubb’s engagement with the Gwich’in Steering Committee presents a model that other insurance companies can improve on to screen for underwriting risks regarding the rights of Indigenous Peoples. We believe that the ask laid out by our proposal and our dialogues on the topic will help Chubb better protect the rights and sacred lands of Indigenous Peoples—making this a formal policy across its business. Adopting an Indigenous Peoples and FPIC policy presents business opportunities for companies to partner with Indigenous communities, tribes, tribal corporations, Native-owned businesses, and Native entrepreneurs.
Although the investor vote was not an outright win for nature and Indigenous Peoples, it’s worth remembering that change is not easily implemented. It can take time and come in smaller steps. If we stay committed to progress, the domino pieces of our old and unsustainable world will fall, making way, little by little, for a new world where nature and humanity can live in harmony.
Compliance disclosure by Domini Impact Investments
Before investing, consider each Fund’s investment objectives, risks, charges and expenses. Contact us at 1.800.582.6757 for a prospectus containing this and other important information. Read it carefully.
An investment in the Domini Funds is not a bank deposit, is not insured, and is subject to certain risks, including loss of principal. An investment in the Domini Impact Equity Fund is subject to certain risks, including impact investing, portfolio management, information, market, mid- to large-cap companies, and small-cap companies risks. An investment in the Domini International Opportunities Fund is subject to certain risks, including foreign investing, geographic focus, country, currency, impact investing, portfolio management, and information risks. An investment in the Domini Sustainable Solutions Fund is subject to certain risks, including sustainable investing, portfolio management, information, market, mid- to large-cap companies, and small-cap companies risks. An investment in the Domini Impact International Equity Fund is subject to certain risks, including foreign investing and emerging markets, geographic focus, country, currency, impact investing, portfolio management, and quantitative investment approach risks. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity. These risks may be heightened in connection with investments in emerging market countries. An investment in the Domini Impact Bond Fund is subject to certain risks including impact investing, portfolio management, style, information, market, interest rate, and credit risks.
The Adviser’s evaluation of environmental and social factors in its investment selections and the timing of the Subadviser’s implementation of the Adviser’s investment selections will affect the Fund’s exposure to certain issuers, industries, sectors, regions, and countries and may impact the relative financial performance of the Fund depending on whether such investments are in or out of favor. The value of your investment may decrease if the Adviser’s or Subadviser’s judgment about Fund investments does not produce the desired results. There is a risk that information used by the Adviser to evaluate environmental and social factors, may not be readily available or complete, which could negatively impact the Adviser’s ability to evaluate such factors and Fund performance.
As of 03/31/23, this security represented the following percentages of the Domini Impact Equity Fund’s portfolio: Chubb Ltd [0.31%]. This security represented the following percentage of the Domini International Opportunities Fund: Swiss Re [0.42%]. The composition of the Fund’s portfolio is subject to change. As of 03/31/23, the following companies were not approved for investment and therefore not held by any of the Domini Funds: Exxon Mobil Corp. As of 03/31/23, the following companies were not held by any of the Domini Funds: Allianz, and Axis Capital.
Nothing herein is to be considered a recommendation concerning the merits of any noted company, or an offer of sale or solicitation of an offer to buy shares of any Fund or company referenced herein. Such offering is only made by prospectus, which includes details as to the offering price and other material information. The Domini Funds are only offered for sale in the United States. DSIL Investment Services LLC, Distributor, Member FINRA. Domini Impact Investments LLC is the Funds’ Adviser. The Funds are subadvised by unaffiliated entities.The Domini Funds are only offered for sale in the United States. DSIL Investment Services LLC, Distributor, Member FINRA. Domini Impact Investments LLC is the Funds’ Adviser. The Funds are subadvised by unaffiliated entities. 5/23