By: Katie Hinkfuss; Andy Azinger
Transcript
MUSIC
[“Brighter Day”]
Chris
There’s ever more client interest. I think advisors are demonstrating that interest by increasingly asking us for materials. And seeking out what differentiates different funds on impact. And yeah, it’s definitely a positive trend.
Andy
That’s Chris Meyer, Manager of Stewardship Investing, Research and Advocacy for Praxis Mutual Funds® and Everence Financial. We’re continuing the conversation about their recent impact report with a deeper dive into the data. I’m Andy Azinger and this is the LoweDown Podcast.
MUSIC
Andy
Hello Katie.
Katie
Hi Andy.
Andy
Well, I want listeners know that this is the second part of a two-part series talking about Praxis’ Impact Report. And if advisors want that report, we’ll talk about how they can get it at the end. But we’re in part two of this conversation, Katie, and you talked to Chris Meyer. And tell us why you wanted to speak with him in part two and why are we spending so much time on this topic?
Katie
Yeah. So, this impact report tells the broader story of the Praxis Funds. As a communicator I think it is a great example of a bigger piece that can highlight a firm’s core distinctives. In this conversation with Chris, I wanted to turn to the subject at the heart of Praxis’s impact report: its shareholder and community engagement efforts. I really want to hear more about the stories of impact behind the report. What’s the ‘on-the-ground’ effect of all of Praxis’ work?
Andy
Well, let’s hear it.
MUSIC
Katie
Chris Meyer, welcome to the LoweDown podcast.
Chris
My pleasure to be here, Katie.
Katie
So, the title of the report is Real Impact, a phrase that Praxis uses a lot. What does real impact really mean to you, Chris?
Chris
I think it means real world change. So like what actually changes on the ground because of a particular action or a set of actions? And I think that is in somewhat of a contrast to just some symbolic change, which I do think has a very important role to play. But without practical, often behind the scenes work, I think that there’s not necessarily a lot of real impact. So, our goal at Praxis is to is to make a real-world difference. And our Impact Report is our attempt at telling the story.
Katie
Can you give us an example of one of Praxis’ real impact strategies?
Chris
Sure, we have basically four Real Impact strategies that we use. I’ll briefly mention them and then provide an example. We have values and ESG screening and optimization. We practice shareholder advocacy with equities, funds that we hold; we have impact bonds that in our bond fund that seek to provide capital to green initiatives or high social impact initiatives. And we also have community development investments, which are concessionary rate instruments that seek to have a major positive social impact on the world. Regarding shareholder advocacy, one story that I like to tell is shareholder dialogue that we lead with one of our holdings on NiSource, which is a major gas and electric utility. For a few years, we’ve led a dialogue with them, and we were able to it was on climate change and nice sources electric utility subsidiary is called NIPSCO, Northern Indiana Public Service Company. And they are coal heavy, historically, a coal heavy utility. And part of our climate change goal is to work with utilities to try and encourage them to follow the path toward renewable energy. And long story short, they committed to a whole plan phase out within 10 years, which will drop their carbon emissions by 90%. And lower bills, ultimately, for their customers. And they are offering, to this point, they’ve been able to offer all the employees at these retired coal plants, the option of continuing employment with the company. So, we think that has accomplished a number of goals, climate goals. Absolutely. And also, we are concerned about a just transition into a renewable energy future and which means to consider the livelihoods of the workers in the process. So, we’re very happy with the with the outcome of that so far, and we certainly were not the only force that contributed to this commitment. There were powerful market realities regarding the cost of energy from coal plants and cost, current and projected future cost of renewables. And usually utilities, when they transition away from coal, they go to natural gas is the next logical step. And NIPSCO is basically skipping that step and going from coal to wind and solar. So, we’re, yeah, we are pretty happy about that and glad for both community groups that have supported this kind of change at NIPSCO and the market conditions that made it favorable and the board directive at NiSource to help make it possible. So, we’re glad to be part of this story, too.
Katie
Thanks so much for sharing that story. I agree. That’s one of the most compelling stories in the report. And I love how it shows the 360 approach to impact and really all the E, the S and the G. So I love that story, too.
Chris
The NiSource example is one of many stories that are included in our Impact Report. And there are stories associated with each of our impact strategies. So definitely get the report.
Katie
So Chris, how do you select the most important factors to focus on? So you can’t possibly engage with every single holding you have? So how do you determine which are most pressing?
Chris
Yeah, that’s a great point. At any given time, practice holds about 1,000 companies. And practically speaking, we can’t directly engage with each of those companies. So, we annually focus on about 20 companies, which we have, we directly engage, and how we determine the issues and the companies that we engage, we kind of go through a process. We try and determine what issues are most important to our shareholders and constituents and which ones do we have expertise in? It’s a lot easier to begin an engagement on climate change if we have the science background and are able to talk on a high level with the executives in the companies we engage with. What are critical topics that we think companies might be overlooking and are not addressing? And also, like what our advocacy colleagues are working on as well? We partner with colleagues at other organizations, in the vast majority of the shareholder advocacy we do–it helps all of us increase the breadth and the depth of engagement with companies. And if we want to pursue an area that no one else is doing, then it takes a lot more legwork for us. And we’re not able to, to engage in as many companies. So, partnerships are a key part of determining which companies and issues to engage. And I will say that while we engage about 20 companies directly each year, all the companies that we hold, we vote our values on with our shares. So, our proxy voting policy, covers all those companies. And we are voices heard at all of them. And we can support other shareholder advocates that are working on different issues at different companies through our efforts. If there are, for instance, shareholder proposals on environmental or social issues, we can support them through our votes, even if we’re not directly engaged with that company.
Katie
And why do you think this report is important to advisors? And how can they use it with their clients?
Chris
I think this Impact Report represents an added value for advisors and their clients. It’s a great document to share with clients. Because the impact of our funds is more than just financial. And that’s why many people invest with us. And this report highlights that real world impact–that’s the real world positive non-financial impact. We’ve never presented our impact strategies in one place like this before. So that’s what I think is so exciting about this report.
MUSIC
Andy
Well Katie, it was really interesting listening to Chris in this first part of the interview. And the key takeaway for me, really, is, kind of, know what you own. Do you have thoughts on that?
Katie
Yeah. So, I think it’s increasingly clear that investors want to know where their money is going and people are really waking up to the idea that their investments can make an impact – and beyond that, not just an impact but a POSITIVE impact. I think that advisors who don’t realize that and don’t become more educated themselves on what options exist for their clients will increasingly fall behind. So, I think it’s really great to have the opportunity for advisors to see, okay, this is where the money is going. This is the impact that it’s having.
Andy
And in fact, in the second half of this interview—if the first part was about knowing what you own, Chris offers some really interesting examples of exactly where they’re investing and how they are investing and where that money is going to work. So, let’s take a quick break here—chill out, listen to some groovy music.
Katie
[Laughs]
Andy
And we’ll come back for the second half of the program.
MUSIC
Katie
A new story I heard recently really struck me. So, the Arctic Wildlife Refuge was recently opened up to oil leases, and experts were very surprised when there was a notable lack of interest. Of course, there could be many reasons for this, but one that a former federal gas official for Alaska named when interviewed was, quote, all the grief you’re going to take from the public, from shareholders from investors. That’s a big gamble. End quote. So especially the part about shareholders and investors stuck out to me. Do you think shareholder advocacy is getting more respect, so to speak?
Chris
Yes, I do think shareholder advocacy is getting more respect and, and more results. I think more investors are speaking out on social issues than in the past. And companies are listening to shareholders on these issues more than they have in the past. And specifically, regarding Anwar, the Arctic National Wildlife Refuge. There have been shareholder advocates that have engaged oil companies on this specific issue for over a decade. And also, banks, lenders who would be providing the finance facilities in order to enable the development. Well, development in Anwar. And I think in part due to that engagement, a lot of you know, companies are having rethought their plans to do that, and certainly Praxis, we’ve participated in dialogues with some companies over the years on climate change in general, but also Anwar, specifically. And just in the past year, we’ve signed letters to oil companies, and lending institutions or larger banks, asking them to refrain from either developing the oil fields there or providing lending facilities to enable it. And I think that has contributed absolutely, to the reluctance of companies to drill there. And then I think, from the investor side, I mean, we, we, it’s, it’s not just that, you know, for the environment sake, we want it to not be drilled. That’s certainly an important piece of it. But we also think it’s a major risk for the company. There are legal and reputational risks that are associated with developing wilderness and especially in harsh conditions. And so, pointing those risks out is a part of what we do as shareholder advocates. And I think, you know, going back to shareholder advocacy more generally, it’s being taken more seriously by companies and more shareholders are doing it because it’s, it’s one way to mitigate risks going forward for the companies that, you know, shareholders own. And the level of support, for instance, for shareholder proposals has gone up significantly since when I started working at shareholder advocacy, almost 15 years ago. And so, there’s more shareholders voting in favor of shareholder proposals on environmental and social topics. I think more companies understand now, that environment, social and governance risks really do factor into company performance. And so yeah, it’s been a good positive cycle I think in awareness raising.
Katie
I knew I was right to think of Praxis that when I heard that story. Thank you for sharing that. So you’ve been a long time at Praxis speaking on impact issues. Are there topics that you think the media should be covering more than they currently are?
Chris
Yeah, that’s a that’s a good question. And no one has a crystal ball, but I think our shareholder advocates have really been pressing on a number of topics. For instance, some of the folks that I’ve worked with were engaging Walmart and oil majors on climate change in 1990, before climate change was a household issue. And, or no one was really talking about it outside of a few select circles. And now it’s, you know, it’s a major issue that almost everyone at least knows a little bit about. So, I think there are a number of issues that could be the next big thing. And I think one of them might be, you know, chemicals and the proliferation of untested chemicals out in the marketplace. 1000s are developed every year. And we have a, we’ve had for decades a very deregulatory environment in Washington. And so rather than fully vetting a lot of these chemicals, they were basically using humans as guinea pigs, for many of them before their full effects are known. And so, there are certain classes of chemicals that are now found in the blood of virtually all humans that didn’t even exist, you know, 30-40 years ago. And they, I think there’s a lot of liability risk associated with that for certainly for companies that have produced them. I think lead paint is a good example of a long-term liability for companies. And I think the chemicals of concern that I mentioned are ones that are illegal to use, because there’s little regulation, but they’re not necessarily benign. And so, working with companies, and shareholder advocacy, we’ve been talking with companies for, you know, 10 years on trying to eliminate some of these from their supply chains, before it becomes a big deal. And while there’s chance to re-engineer to more benign chemicals, so and we’ve been joined by others in that. So I think that’s a major issue that will probably come to light down the road, in public consciousness with greater force. And another one that I think is, you know, very relevant now, and it is getting a lot more coverage is just the wealth inequality. I mean, we hear about that, maybe in generic terms quite a bit, but just the staggering, divergence of opportunity and, and wealth between those at the top and, and those everywhere else. And I think the Covid-19 pandemic has really shone light on that gap, and also kind of hyper charged that fissure between those who have means and those who don’t. So, I think that that’s kind of a growing edge of our work seeking to, you know, try and ameliorate some of the causes of that. And I do think it’ll become an even more prominent issue down the road.
Katie
Yeah, for sure. And how do you do outreach to financial advisors to educate them on these stories, and why Praxis makes sense for certain advisors?
Chris
Yeah, I think there are several ways in which we’re able to reach out to advisors. First off of the Praxis website, praxismutualfunds.com, has a lot of information on the various funds that we manage. And there are stories there on all the different impact strategies that we use. So, advisors can always go there to kind of find the latest impact news. And we also do a quarterly webinar in which we have some general information, sometimes performance related, but then there’s always kind of like a highlight, or an issue that is spoken to on that webinar. And there’s also outreach that our sales team is doing, and they can speak to a lot of the impact strategies that we’re doing as they speak to advisors. So, I think there’s a number of ways in which we’re doing that. And I think we’re also, you know, putting together more ways in which we can communicate what we’re doing, whether it’s with this Impact Report, which will be both a digital and a physical copy, and, and other types of handouts that we can provide. So, I think advisors should be able to feel like they can always reach out to Praxis to help them talk with clients or bring them up to speed on various aspects of our funds. And there’s also some things that they can attend, like the webinars, and they can always go to our website.
Katie
Yeah, and I know you’ll be at participating virtually at the Kingdom Advisors Conference in February. So, I think that could also be a great way for investors to reach out. So that’s, that’s really exciting. I’m excited to see what Praxis does there as well. So, one last question for you, Chris. Are you seeing an uptick at all in advisors adopting these approaches?
Chris
Absolutely. I think there’s ever more client interest in learning about impact strategies and what the funds are doing, what different funds are doing out there. And I think advisors are demonstrating that interest by increasingly asking us for materials. And so, I think, you know, 2020 was a landmark year for us and the number of advisors and clients seeking more information. That’s part of the impetus behind our Impact Report. And I think it’s great. So, the shareholders and clients are getting more interested and seeking out what differentiates different funds on impact. And yeah, I think it’s definitely a positive trend.
Katie
Chris Meyer, thank you so much, again for joining us. I really enjoyed this conversation.
Chris
You’re welcome, Katie. It was a pleasure to be here.
MUSIC
Andy
Alright Katie. This brings us to the end of this episode—part two of this two-part series talking about Praxis’ Impact Report. Why don’t you bring us home with a key takeaway?
Katie
It’s been such a pleasure getting a behind the scenes look at Praxis’ inaugural Impact Report. In part 1 we heard my colleague Jody in conversation with Mark and Stella of Praxis and I had the great opportunity to bring it home with Chris of Praxis to learn more about the stories of impact that are in the report. I really recommend that everyone takes the chance to dig into the report—there’s a lot of good stuff there—stories from all over the world. And in general, as a communicator, I’m excited about this report and excited to see this report as a great example of how a firm can really add a powerful narrative to numbers and show in a really compelling way the impact that their work is having.
Andy
And so, if an advisor or financial professional is listening to this podcast, how, exactly, would they be able to get ahold of this report?
Katie
Yeah, so, you can visit Praxis online at praxismutualfunds.com. The report is going to be released online very soon. And you can also check out Praxis on LinkedIn as Praxis Mutual Funds. And Praxis regularly hosts webinars for financial advisors—as Chris mentioned.
Andy
Alright. Well, as always, Katie, this has really been an interesting interview. The Lowe Group certainly brings great guests to the table every single time. I’ll just remind listeners that they can find out more great stories like these and others at the LoweDown Blog, or they can continue listening to the LoweDown Podcast, or, they can visit lowecom.com. And with that, Katie thank you.
Katie
Thank you, Andy.
Andy
I’m Andy Azinger, take care.