Environmental Investing with Green Century

In this episode, I interview Jared Fernandez from Green Century. Jared Fernandez spent his professional life working to better our national food system. Conventional agriculture is carbon intensive and national food policy prioritizes feeding cattle over communities – he has worked to promote regional food systems that simultaneously build soils, economies, and communities.

Green Century is a mutual fund company – they combine a fossil fuel free sustainable investing strategy with award-winning shareholder advocacy and support of environmental non-profits to deliver.

Here is the transcript for this episode:

In this episode, I’m going to interview Jared Fernandez a shareholder advocate with Green century mutual funds.
This is the impact Financial Planners podcast with Bill holiday making sustainable
Responsible impact investing easy for socially conscious investors who want to make a positive change through their investments
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Thank you for joining me on this episode
I’m glad to have this interview with Jared Fernandez of Green century. He spent his professional
Life working to better the national food system
conventional agriculture is carbon intensive and
National Food Policy
prioritizes feeding cattle over communities
He has worked to promote regional food systems that simultaneously build soil
Economies and communities Green sentry is a mutual fund asset manager mutual fund company
they combine fossil fuel free sustainable investing with
Shareholder advocacy and they support environmental
Nonprofits. Alright, let’s go to the interview. Alright Jared. Thank you very much for joining me Jordan
Thank you for having me bill glad to be here today
Could you just start by describing what Green century authors George certainly?
So Green century is a environmentally responsible mutual fund company based here in Boston
You know we seek to invest in environmental leaders and innovators including companies involved with renewable energy
Water efficiency healthy food companies as well as just companies that are really leading their industry within
Environmental social and governance performance, you know, there’s a large and growing body of evidence
Which really demonstrates that choosing investments by incorporating ESG performance
may ultimately
reduce risk for investors and offer
Financial advantages and we believe that companies that are actively working to protect the environment and reduce their footprint
May be more profitable in the long run by avoiding risks and by being prepared for changing regulation
And growing through competitive advantages. So using this investment strategy Green sentry offers three mutual funds our
Balanced fund which is our flagship fund the Green century equity fund and the Green century international
index fund the
International index fund is a relatively newer fund
That was started in
2016 but has the distinction of being the very first
responsible and diversified fossil fuel free international index fund in the country
Oh, that’s great. And just to clarify those three international. It’s mostly developed international large companies
Precisely. Yep. So the our international index fund
invests in companies in 22 of the 23
Developed economies around the globe though the one omission obviously being the United States
yes, it is a
fund that is
Specifically targeting developed economies and the US equity would be large us
Generally, yeah, exactly. It’s predominantly all large cap companies
100% us-based
The balanced fund that we have as well
This is a mix of both equity as well as fixed income bonds
Historically, that fund has been at about 70 percent stock and 30 percent bonds
It’s it’s notable or bond exposure and that
About half of the bonds within the green century balance fund are actually green bonds that support environmental remediation
project projects around the globe
and that
Fund is predominantly u.s. There’s a little bit of
International exposure within that fund great and how big is shareholder advocacy and for green sentry?
How big of a component is that?
yeah, I mean we like to think of shareholder advocacy as being really one of the three main prongs within our
Our firms approach that enables our investors to make an impact
so
You know to a certain extent you could say it’s it’s a third of what we do here
The three prongs that we have one is the adjust the investment strategy and the fact that we are
Actively seeking solutions oriented companies through our investments to help enable our investors make an impact
Another prong is our unique
Nonprofit ownership as some may not know that Green century capital management was actually founded by a consortium of environmental
Nonprofits back in 1991 and we maintain that ownership to this day and what that really means
Is that every dollar that green Century Capital Management earns?
managing the Green century funds actually belongs back to those nonprofits and
Supports the environmental and social advocacy work that they do
And so in terms of shareholder. Advocacy, that would be the third prong of our impact approach
We currently have two full-time staff members working on shareholder. Advocacy at Green century myself and my colleague Jesse Waxman
That’s great. And what are the areas? You’re addressing with shareholder advocacy?
Yeah, certainly. So, you know, we work on a number of critical issue areas such as
preserving tropical forests promoting renewable energy
protecting pollinators and our food supply
keeping antibiotics effective within
the public health sphere
pollution and conserving ocean health
But we also work on a number of really nice topics that also have a tremendous impact on our environment such as reducing food waste
Within corporations and promoting plant-based proteins. Oh, yeah, that’s interesting
So it’s I mean environmental but a big focus sounds like well climate change. It imagines a big one and
Agriculture sounds like a big exactly
yeah, we try to sort of siphon our all the issue areas that we work on sort of in a
climate change bucket as well as a sustainable agriculture bucket, and you know for those who
you know are
Following these issues really closely in the issue of climate change sustainable agriculture really poses a tremendous opportunity
to significantly reduce the global carbon footprint and to
Mitigate some of the worst effects of climate change. So when working on things like preserving tropical forests, which is one of the preeminent
drivers of global climate change, you know
We feel like we’re both promoting sustainable agriculture and addressing climate change at the same time. Okay. Yeah, that makes sense
It’s a broader issue. I mean the environment touches many issues. What how do you engage with companies proxy voting?
Shareholder resolutions or what’s it? What’s your main strategy? Yeah, definitely
so
You know proxy voting is sort of the the baseline of what firms can do with regards to shareholder
advocacy and we certainly do vote our proxies and we you know do
Outline very clearly our proxy voting guidelines for the firm
publicly available on our websites that everybody is able to see you know, what sort of
Proposals brought before companies we will support and which sort of proposals we would not support
but Green century definitely seeks to take our
shareholder advocacy
many many many steps further
and so, you know
We we leverage the fact that we hold these publicly traded companies to really engage with corporate sustainability teams and c-suite executives
Directly we approach companies within our portfolios
detailing the potential environmental risk that they may be facing within their
operations and supply chains and we do a lot of work on our end to really try to lay out the business case for
Why these companies should be moving to address these issues? I
would say that really every engagement that we have with companies is
Some are extremely positive and we’re able to really have very productive conversations about these issues
sometimes we’re actually
Bringing new issues to a company’s sustainability team that they have not previously considered
And really giving them a different point of view
for some engagements that are not as productive and for
corporations that are
Not willing to really see eye-to-eye with us on some of these issues. We do utilize the shareholder proposal process
To be able to bring these issues that we believe are material not only to the company but to the greater public good
Before all shareholders for them to voice their concerns. What would be a good way for investors to?
You ate your engagement. I think it’s a couple of things
I think one would be looking at really the size and scope of the company that’s being engaged
But also the size and scope of the issue that’s being discussed with the company relative to to their operations
So, you know when we’re talking to some of the largest agricultural grain traders around the globe about tropical forest
protection and eliminating deforestation within their supply chain
this is obviously one of the largest components of what they do, its sourcing agricultural products that
historically have been tied and and to this day are still tied to
massive rates of deforestation
so but but past that it’s also looking at the specifics of
What we are talking to companies about and and what we may potentially be
Getting agreements on whether that be working with companies to ensure that their definition of deforestation
Includes not only illegal deforestation within the companies that they operate but also legal deforestation
That’s the size and scope of the company the materiality to the company and the specifics of any sort of engagement
You know, I think it’s also looking at some of the more unique
issue areas that a lot of firms might not be engaging on such as
Food waste or plant-based protein of where you know food waste
40% of the food produced in America is wasted and not ultimately consumed by people
and poses a huge
Huge problem for climate change as about 20 percent of methane emissions in the United States come from wasted food
decomposing in landfills and methane is a much stronger greenhouse gas than carbon, so
One of the really interesting things that I’ve learned in doing this work is that food waste is such an emerging issue that companies just
Aren’t even beginning to track it. So
A lot of the conversations that we have with companies are starting to get those food waste audits in place
Because we fundamentally believe that you cannot manage
What you don’t measure and so getting companies to begin to measure this problem
understand how big of an issue it is for them and to be able to translate that oftentimes when we are
securing
Agreements with companies
We ask them to really put it in tangible terms for us that we are able to understand the impact whether it be you know
Greenhouse gas emissions that are avoided through them that we can understand it
but then also convey that to our investors to get a sense of the size scope and impact of the advocacy that we’re doing so
An example of promoting plant-based protein or reducing food waste who would be a company and how would you engage them?
So for plant-based protein, I would cite Tyson Foods
Which we engaged with a few years ago. I will make the distinction that they’re not held in the green century funds
this was a engagement that we did outside of the holdings within the
Funds that our investors invest in and we engage with them on basically asking them to issue a report to shareholders on
Risks that their business faced with the growing demand for plant-based protein in the consumer market, you know
We have seen over the past five years that the demand for plant-based protein has been growing much faster than the sales of
conventional meat
You know plant-based foods are just more eco-friendly than their animal-based counterparts as they’re much more efficient to produce
They require less land less water or less fuel and other resources to grow
we we brought this to Tyson who had no exposure to any sort of plant-based protein within their portfolio and
Asked them to basically tell investors what they were doing to mitigate that risk
We filed a shareholder proposal with them
And soon afterwards the company actually announced that it had taken a 5% stake in beyond meat
Which is one of the leading plant-based protein producers in the country
and really demonstrated to us that they were
Beginning to recognize that yes, they are a protein company
They don’t necessarily have to be sole company and the hope is that their
Investments in these plant-based spaces grow at a much faster rate than their traditional meat
Production so that that will facilitate further investment and we’ve actually already seen that
Tyson started a hundred and fifty million dollar venture
capital fund a few years ago looking specifically at small plant based protein startups to invest in and
They actually have a new line of ready to eat plant-based meals that are going to be
Featured in grocery stores, very soon called Green Street
So that they have been rapidly expanding their exposure to two plant-based options
And I think it’s because they see that that’s where consumers are moving. Sure. It’ll help their bottom line as well precisely
I like that you engage
Outside of companies that you own in the portfolio because I could see that being a difficult situation
Where you want to make an impact, but you’re screening a lot of those
Harmful companies out of the portfolio to begin with exactly
I mean, you know
We understand a green century that even companies that weed and sustainability will still have room for improvement
And so we work with dozens of companies every single year across most sectors of the economy
To adopt stronger environmental practices and policies throughout their supply chains, but that being said every once in a while, you know
we will seek an engagement again outside of our funds for something really key that we think is a
Significant business for its risk that a company should be addressing that makes sense when investors are looking at different
mutual fund companies
What is a gauge they can look at to determine which companies are actually engaging and making a difference with their?
Advocacy that you can get some ETF that says their ESG esri and they do no engagement
They don’t even vote proxies
And what else would you recommend people look at to to determine that engagement sure, certainly?
So I would you know look to see what sort of
Associations or any sort of broader
collaborations that fund may be a part of
So for example, you know, I mean we work with a number of other investors that operate in the shareholder
advocacy space through
both network of investors with Ceres, which is a non-profit based here in Boston that
promotes business
Environmentally focused business solutions as well as a number of other investors through a group of IC CR
Which is the interfaith coalition for corporate responsibility?
So I think that looking at sort of broader
Networks that an investor is engaged with is really critical
but also looking at
You know sort of other mechanisms like the fact that we
sit on to a
responsible investment PRI advisory boards
You know what? We’re really deeply entrenched in this sort of work
And so, you know to answer your question at evaluating other firms and the scope of their advocacy work
I really think yes. It’s
doing a little bit of research and
Voting your proxies is great, but going a step further to actually not only physically engage one-on-one with companies
the filing of shareholder resolutions
I think does demonstrate that an investor is willing to go that extra step
because and to be completely Frank and every corporation in America is willing to discuss
Tangible business risks with investors every single investor that reaches out to them. So I do think that taking that shareholder
proposal approach is extremely important, but then seeing how the firm really operates in the broader sphere of
Shareholder. Advocacy looking at Co filings that they may have with other firms. I think really demonstrates a
firm commitment to the
idea of shareholder advocacy and
And and I think that’s a pretty pretty strong parameter by which to judge how firm how strongly a firm is
entrenched in this work sure and about how many
Shareholder resolutions was Green century a part of last year at our 2018
Yeah, sure. So in 2018, I
Having to think about this off the top of my head, you know, I think that we probably filed somewhere close to 10 shareholder resolutions
That the majority of which you know, we were able to withdraw
That’s great in agreement with a company, you know
The way the shareholder resolution process works. Is you file a resolution
And then you have a certain amount of time to really work with company behind the scenes to try to find a mutually acceptable solution
Whether that be the company adopting a policy that reflects what you’re asking for in the shareholder proposal
if the proposals simply asking for greater disclosure around an issue to be able to
enable investors to make more informed
You know decisions and analyses of a company’s exposure to risk
A lot of companies might be open to that. We did only go to a few
Annual meetings last year, which is, you know, if you’re not able to come to that
Mutually accepted agreement with a company
the proposal then goes forward to be featured on the company’s proxy statement at which all
Shareholders are able to vote on their support for or against the proposal
And the the lead investor is expected to then present the proposal at the company’s annual meeting
So this past year we went to two annual meetings at both General Mills as well as Darden Restaurants
one of the largest
Casual sit-down restaurant chains in the country
hold holding companies for casual restaurant chains, but you know our our aim and filing a resolution is the
best outcome for everybody is a withdrawal because ultimately companies don’t really want us on their proxy and have these
essential risks being exposed to all of their shareholders and ultimately we just want to see the companies make
positive progress towards addressing some of these environmental risks and so you’re thinking that
Agriculture’s is one of the biggest impacts to the environment right now
yeah, it’s it’s tremendous, you know everything from
you know are the world’s insatiable appetite for meat and the impact that
beef production has on the environment and the release of methane as well as all of the inputs that go into our
industrial
monoculture agricultural system, you know pesticides insecticides
Fertilizers these all are extremely input heavy and many of which are fossil fuel-based. So, you know
Taking an approach towards sustainable agriculture. Not only can have significant benefits. I’m an impact
but also can have significant benefits or
Regarding things like nutrient runoff water pollution worker and community health around farms
It’s all intertwined. Yeah, and I could see even just financially it would make sense
Investing in companies that are forward-thinking you’re thinking about the consequences impacts
They’re having yeah precisely, you know and not just from a cost of inputs point of view, but also from a potential
Regulatory point of view. Yeah, I think about our work on toxic pesticides like
Neonicotinoids and glyphosate the European Union earlier this year announced a permanent ban on new initiatives
within all European Union countries because of the
Well, established the link between the use of these pesticides and the decline and wild pollinators and we’ve seen some bills introduced in
states around the United States that seek to
limit the use of
neonicotinoids in
in certain agricultural practices if the United States were ever to adopt any sort of
legislation that mirrored that of the European Union
companies that are currently working to minimize their use of
Neonicotinoids within their supply chains are going to be able to adapt to that
Regulation if they have not already adapted are going to be able to adapt much more nimbly and perhaps not face the same sort of
Price shocks or gaps in supply that some of the current laggards might yeah that makes a lot of sense
How do you feel shareholder advocacy is making an impact?
Certainly. Yeah, I think that that’s really be they have the approach that we take. Is that in the absence a
strong governmental
push to address a lot of these waitin problems within our
agricultural world or within our energy world
Businesses really need to step up to address a lot of these problems
And I think the the one issue one of the issue is that we work on that really underscores the power
That shareholder advocacy can have in terms of making substantial and tangible change is within the use of antibiotics
and animal agriculture
You know a preface this by saying that a lot of people don’t know that about 70% of the medically important antibiotics
produced and they’re sold in the United States and medically important just meaning
antibiotics that we use every day for for human health and preserving our health
70% are actually sold for use and animal agriculture
and
It’s insane and what this is ultimately driving is the development of
antimicrobial resistant bacteria, which are
is a tremendous threat to public health and
can effectively render these antibiotics that we’ve been relying on for decades to keep us to keep us safe to save us from
infection
It can render them effectively useless
the Centers for Disease Control estimates that
23,000 Americans die every year from antibiotic resistant bacteria
And the number according to the World Health Organization is expected to grow to
Potentially be millions and millions by 2050 around the globe
So corners have been working on this issue for a few years now
Pressuring some of America’s largest fast food chains to actually eliminate the practice of providing
routine
antibiotics to farm animals
We’ve seen tremendous movement in the poultry industry, especially
Especially around companies like Starbucks
McDonald’s has made some huge steps with regards to this in their poultry industry and actually just recently baby the first
fast-food chain
major fast-food chain to announce a
Policy that would address their beef supply chain as well. We have not seen as much movement on beef but
today about
50% nearly 50% of the chicken raised in the United States is now raised without the routine use of medically important antibiotics
Which is a tremendous step forward from where we were just four or five years ago. Why is there so much?
Antibiotics being used on animals that that people are consuming is it because they’re just so many animals were consuming
Or is it they’re just getting sick a lot. It’s it is a product of
the
industrial animal agriculture system that we are now part of you know, ultimately
When when talking to companies about eliminating this practice from their supply chains what it ultimately means is that their suppliers
Have to improve animal welfare standards on the phone
these antibiotics are needed because animals are
Put in confined cages where they’re not able to move and are lying on their side and develop sores that become infected, etc
Etc. A lot of it has to do with the the living conditions the tight living conditions on these farms that
you know we have we have accepted as a society over the past few years for the prospect of
the cheapest meat protein that we can possibly produce and you know, ultimately what we’re seeing is that that has
Significant repercussions for human health in a way that we maybe did not predict 20 years ago
Ya know that makes a lot of sense. I guess just any other examples you wanna share of work that you’re doing
Yes, certainly. So, you know, I can talk a little bit about our our deforestation work
So, you know in our efforts to curb global climate change
Prevent loss of habitat for endangered species and to mitigate the potential financial risks for investors
Associated with companies being linked to deforestation and their supply chains
We engage with dozens of companies every single year on this specific topic
deforestation alone accounts for more than 10%
in house gas emissions
And as alluded to it contributes to endangered species habitat destruction
human rights violations water cycle disruptions
and agriculture really is the weeding driver of
Deforestation around the globe it accounts for about 70% of tropical forest deforestation a lot of which is used to produce
soy which feeds those cows that we were just talking about which
antibody
To a certain extent so so to tell curb climate change and to mitigate risk for investors, you know
we’ve been working to reduce deforestation caused by the production of palm oil soy
cattle timber and rubber
across the globe in Asia Latin America and Africa
And so, you know, we’ve had a lot of successes in this over the past five years
I think one of the ones that really were most proud of our efforts to secure a zero deforestation commitment from Willmar
international they are the world’s largest palm oil trader that
The securement that we were able to the agreement we were able to secure from them a few years ago
We have been able to calculate both weight of 1.5 gigatonnes of carbon pollution between 2015 and 2020
Oh, that’s great. So they’re just gonna get their palm oil from another source or not using their use a substitute
Actively working with the the growers that that they source from to ensure that
sustainable non deforested practices are
utilized you know and and to a certain extent if you know, there are some
Plantations or growers that are not in compliance then
You know that there may be the the need to move on and find different suppliers as well. No, that’s great, I guess
thank you very much Jared for for your time and explaining these issues this a without an
Administration pushing for these it’s it’s important to get companies engaged
How can people find out more about three century certainly? So I’ve welcome everybody to visit our website
It’s WW
Green century calm
There we you know detail most things that I talked about earlier on on this podcast, including our investment strategy
Our unique nonprofit ownership as well as the advocacy work that we do
So I welcome everybody to visit our site whenever we get any sort of wins on the shareholder
Advocacy side we make sure to put a little press release on our website. Maybe write a blog about it as well
and I also highly encourage people to sign up for our
e-newsletter
Just share some of the notable wins and exciting things that we have going on here at Green century. That’s great
I’ll put a link to the e-news into the website and
In the show notes, great. All right. Well, thank you. Thank you very much. Yes
Thank you so much both been a pleasure talking with you. Have a great day. As you can tell green century is very engaged
You’re very active with shareholder engagement
Which is a key component to sustainable responsible
Impact investing because engagement is actually what moves companies in a positive direction
Just buying and selling or holding and not holding certain companies does not move
companies
Well, thank you very much for listening to the impact financial planners podcast
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