As we have worked with clients on their ESG portfolios over the years, we’ve discovered that there are a few specific companies that many of our clients want excluded by name from their portfolios. (I sometimes refer to these as "companies that people love to hate.") The names of these companies may not surprise you: ExxonMobil, Walmart, and Monsanto. We have other clients who think these companies are fine and have their own lists of objectionable companies. You certainly may have your own nominees for such a list.
But what should you do when there is a corporate action involving one of the companies you currently exclude from your portfolio?
In 2016, Bayer AG (BAYN) announced it would acquire Monsanto (MON) in an all-cash transaction. The merger requires a significant number of regulatory reviews and approvals, which have been ongoing since the announcement. In April of this year, the US Department of Justice approved the merger following reports indicating that Bayer has agreed to sell some assets to reduce antitrust concerns. The European Union has also blessed the merger, so it is getting closer to reality.
What does this mean for you if you specifically excluded Monsanto from your portfolio? At Aperio, if your portfolio includes issue-based rules related to GMOs (genetically modified organisms), Bayer was already excluded from your portfolio, and while the transaction is interesting news, it doesn’t affect you. If, however, you excluded Monsanto by name, whether because of its involvement in GMOs or based on beliefs about “shady” business practices, Bayer could be in your portfolio and could be problematic.
Here are some questions you might want to consider:
Was my motivation for excluding Monsanto based on its GMO involvement, and should I implement that exclusion more consistently by establishing an issue-based criteria related to GMOs?
Was my motivation based on other factors about how Monsanto conducted its business, and can I determine whether those practices will carry forward into Bayer as the basis for excluding (possibly selling or gifting) Bayer from my portfolio?
This merger, assuming it is completed, offers an opportunity to consider some of the structural approaches to implementing your values in your portfolio based on a very concrete example. As with any implementation of values criteria, there is no one right answer for all clients, just the answer that is most appropriate for you.
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Mark Bateman
Director of ESG/SRI Research (Salem, OR)
What are your key responsibilities? I work on the ESG/SRI team, performing two main functions: First, I collaborate with clients to develop a customized values policy document. This document serves as the road map for aligning their portfolios with their values on environmental, social, and governance (ESG) issues. Second, I stay on top of developments in the ESG research industry to understand what data are available to use in client portfolios.
Describe your key previous work experience. I have been in the ESG industry for more than 25 years. I started at the Investor Responsibility Research Center (IRRC) and held various roles—research analyst on military and political issues, director of the Environmental Information Service, and Vice President of Research and Operations. During that time, I served on the original steering committee of the Global Reporting Initiative (GRI), helping to develop standards for sustainability disclosure. More recently, I served as the Director of Research for IW Financial.
What is the most interesting aspect of the job to you? I enjoy working with our clients—to understand their values and worldviews and help create criteria that reflect those values in their investment portfolios. No two clients have exactly the same values, so every conversation is different.
Describe some noteworthy projects you have worked on that directly impact Aperio’s clients. I helped create the original SRI offerings available on the Aperio SRI/ESG Menu. These offerings can be an off-the-shelf solution for a client or the starting point for a more detailed conversation. I also helped create the online survey that we often use with clients to help identify the issues that matter most to them.
What do you like most about working at Aperio? I like talking with our clients about what matters most to them. These conversations can be incredibly personal. I often hear a cross section of world views that gives me a better understanding of humanity.
List any committees or organizations you are a member of outside Aperio. I serve on the board of directors for the Sustainable Investments Institute (Si2), a proxy research firm. I also serve in a number of church governance roles at the local, state, and regional levels.
What are some non-work-related things we should know about you? I’m a photographer, mostly nature and my kids’ sporting events. I also like to play—and create—board games.
What postsecondary degrees and/or professional certifications do you possess? BA from Johns Hopkins University; MA from George Washington University.
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