PLANADVISER - January/February 2019 - 4

editor's letter
Activism at Work
E
The ESG
of today
generally refers
to rewarding
companies with
investments
because
of positive
behaviors.
arlier this year, my daughter and her classmates got quite the civics-and
investing activism-lesson. Just a few weeks into September, parents of children
attending her school were blindsided by the news that the landlord had not
reached an agreement with the New York City Department of Education to renew the
school's lease; the school would close at the end of the year to be co-located inside
another school on the other side of the city.
My daughter is lucky enough to attend the smallest city public school that is not a
charter school. It is one class per grade from pre-K through fifth. And it was her good
fortune to get a spot in this tiny school though a lottery program. Perhaps the fact that
the school has fewer than 200 children and an even smaller number of families-there
are many siblings in the school-made the landlord, a large real estate investment trust
(REIT), think there wouldn't be much pushback. But pushback there was.
A group of parent leaders at the school immediately mobilized the parent body to
convince the landlord to let the school stay for a few more years, until a new school
building-already under construction-can be finished. Leases were reviewed, old
documents were unearthed to look for any tax breaks given as a result of leasing to a
school. Additionally, local, state and federal politicians were approached and engaged to
urge the landlord to let " the little school up the steps " stay. A rally was held, and a photo
of my 2-year-old son-not yet a student at the school-holding a sign proclaiming " Save
our schools " was shown across a few lower Manhattan news outlets.
When that effort came up dry, out came the list of the landlord's shareholders and the
institutions that had backed the mortgage for this particular investment property. A letter
writing campaign was begun, with the children and parents sending letters to stakeholders.
Then protests at those New York office locations of shareholder/backer properties
were planned. A day before there was to be a gathering of 4- to 10-year-olds and their
parents outside one global investment banker's offices (can't imagine the firm would have
found those optics ideal), a deal was reached between the landlord and the education
department. The school was granted a reprieve until the new building is complete.
Cute story, you might say, but what does this have to do with advisers or retirement
plans?
My daughter was shown that, while elected officials can help, sometimes the best
way to effect change is to go to the financial backers. I recount this story because a day
doesn't go by that something related to environmental, social and governance (ESG)
investing or shareholder activism by retirement plans doesn't cross my radar, whether
it's an opinion piece in The New York Times calling out some of the largest investors in
a company damaging the rain forest in Brazil, a survey of advisers finding that many
of the younger ones are looking for fixed-income ESG investments, a survey of workers
suggesting that ESG investment options would increase interest in the retirement plan,
or a review of shareholder activism by the largest pension plans of 2018. I don't expect
those trends to die down. In fact, I'm sure interest will only continue to grow.
Many advisers I talk to are still skeptical about this topic. But let's be clear, this isn't
necessarily the divestment or exclusionary-investing of years past, which was often
criticized because so-called " sin stocks " did well. The ESG of today generally refers to
rewarding companies with investments because of positive behaviors: investing, for
example, in companies that have diversity on their boards or in management, or that
are taking steps to be carbon neutral, among other environmentally minded efforts.
Advisers should be prepared to, at the very least, answer plan sponsor or participant
questions about the topic and whether or not such investments are available to
be included in the plan lineup. To summarize comments by a panelist at last fall's
PLANADVISER National Conference (PANC), you may not believe in selecting ESG funds
over traditional non-ESG investments, but if your clients and potential plan participants
do, for you to remain competitive and be able to answer questions and add value, it's
time to get clued in to ESG. -Alison Cooke Mintzer, Editor-in-Chief, PLANADVISER
2 | planadviser.com January-February 2019
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PLANADVISER - January/February 2019

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