The Power of Shareholder Engagement in Enhancing Investor Value

Westmount’s Environmental, Social and Governance (ESG) Portfolio allocates client assets across a diverse selection of investment managers that directly support innovative companies driving positive social change. The managers featured in Westmount’s ESG portfolio have incorporated shareholder engagement strategies into their operations, including the Parnassus Core Equity Fund, which comprises the domestic large-cap sleeve of our portfolio.

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Portfolio Spotlight: Parnassus Core Equity Fund

Parnassus Investments has been at the forefront of responsible investing for nearly 40 years. Their actively managed funds seek out high-quality companies with strong fundamentals and demonstrable environmental, social, and governance (ESG) integration. The Parnassus team also engages directly with its portfolio companies to promote greater transparency and accountability when it comes to human rights and labor rights issues.

Below are a few recent examples of Parnassus’ shareholder engagement initiatives in action:

Apple

In recent years, Apple has faced a barrage of complaints about its labor practices and alleged anti-union activities. Employees and regulators alike have accused Apple of using intimidation tactics, retaliatory terminations, daily mandatory anti-union meetings, and threats to reduce or eliminate benefits.¹

In response, Parnassus, along with a coalition of other investors, filed a shareholder proposal in 2021 urging the company to—among other steps—complete a third party assessment of its compliance with its Human Rights Policy as it relates to workers’ unionization and collective bargaining rights.²

Shareholders ultimately approved the proposal at Apple’s 2022 annual meeting, and Apple has since committed to conducting an internal civil rights audit and issuing a report on its findings.³ The results of this assessment are due to be published later this year.

Waste Management

As one of the largest waste disposal companies in the U.S., Waste Management (WM) exerts enormous influence over the health and safety of residents living in communities where WM operates.

Beginning in 2021, Parnassus managers approached WM leadership about expanding the company’s environmental justice disclosures—information that can help ensure residents, particularly those living in historically marginalized communities, are represented and treated fairly when it comes to WM policymaking and operations.

As a result of these engagements, WM agreed to form an environmental justice advisory council and improve emissions disclosures by including more detailed environmental justice data in its annual sustainability report.⁴ WM also launched an online disclosure tool that residents can use to view nearby WM facilities, localized emissions and pollution data, and other demographic and environmental indicators. Parnassus notes that, in doing so, WM became the first commercial services company to publish such data to the general public.

Cerner Corporation

Artificial intelligence (AI) and machine learning (ML) technologies have the potential to transform how we live and do business. But as adoption continues to skyrocket, so too do ethical concerns about the way these innovations are being used.

In the healthcare industry, for example, certain algorithmic biases can exacerbate existing systemic issues that disproportionately affect marginalized communities, leading to misdiagnoses, decreased access to care, lower quality of care, and unfair prioritization of treatment and resources.

Parnassus recently engaged with Cerner Corporation, a leading medical records provider, over similar concerns with regard to Cerner’s use of AI/ML in its products. In response, Cerner has committed to publicly sharing a list of their guiding principles for using these technologies, along with more detailed information about its governance structures, internal processes, and monitoring efforts.⁵

Parnassus notes that Cerner is first among its peers to openly discuss governance for AI algorithmic bias. This commitment to fair and transparent AI disclosure is especially significant as Cerner was acquired by Oracle in 2022, allowing the company to scale its services even further. By taking proactive steps to address technology-related discrimination, pioneering companies like Cerner can positively influence emerging industries with lasting impacts on people's lives. Additionally, investors stand to benefit from reduced healthcare technology biases, mitigating risks related to potential lawsuits, compliance issues, and reputational harm.