CLAP reflections on corporate lobbying: hitting rock bottom & 5 investor opportunities to create new narratives

Corporate political capture

With investor roundtables on healthcare, upstream fossil fuels, power utilities, and the transport and chemicals sectors under our belt this autumn, the Corporate Lobbying Alignment Project (CLAP) is thinking about investor responses to corporate lobbying and new opportunities for investors to enable robust public policy action that dampen systemic economic, social and governance risks. 

Since publicly launching in July, we have learned a great deal about corporate influence tactics across sectors and engaged with institutional investors in monthly online roundtables to better understand opportunities for engagement and forceful stewardship. Following the inaugural transport sector online roundtable which flagged new opportunities for investor engagement with energy transition laggards, our second session dug into corporate lobbying practices in the healthcare sector. Recent announcements from BlackRock in their 2021 Stewardship Priorities document and the ClimateAction100+ groups new focus on lobbying (mentioned over 50 times) in their 2020 annual review are two signals that investors are waking up to the risks of corporate capture.

In the worst instances, corporate influence and policy capture in the US healthcare sector has led to unnecessary deaths via the ongoing opioid crisis and the covid pandemic. Beyond specific business segments, guest presenter Wendell Potter from the Center for Health and Democracy pointed out that the structure of the US health insurance market is broken because the health insurance industry and their allies in the pharma sector have gamed public policy and blocked meaningful reform, leaving approximately 30 millions Americans without health insurance. The corruption around procurement of personal protective equipment through the Covid-19 period has further highlighted the lack of transparency in healthcare and pharma company influence practices, for example inthe United States and the United Kingdom

The opportunity for sector-wide shareholder resolutions to transform corporate conduct

In the face of these challenges, the CLAP investor roundtables have come up with a range of solutions, starting with sector-wide shareholder resolutions requesting transparent disclosure on lobbying and influence. Each of the sectors we have reviewed so far – healthcare, transport, power utilities, fossil fuels and mining, and chemicals – is concentrated, with the largest 10 companies controlling a significant share of the global market in their respective sectors. This means that investors who want to encourage better alignment between corporate sustainability commitments and their lobbying practices can focus engagement efforts on a handful of companies in each sector. 

The size of the incumbent companies in each sector means that changes to their lobbying and influence practices would have a large positive influence through the business value chain and on public policy outcomes across jurisdictions. 

In 2021 and beyond, investors have an opportunity to scale up engagement on lobbying with escalating actions to:

  1. Engage with corporate counsel to present clear expectations for lobbying alignment and disclosure of trade association and PR spending on climate change influence and other core public policy issues. 
  2. Communicate a clear policy on lobbying and influence disclosure and alignment and make a member of the board responsible for reporting on this issue.
  3. Prepare to bring shareholder resolutions at the largest companies in key sectors requesting lobbying disclosure.
  4. Move beyond disclosure requests to publicly support cost-effective climate policies in line with the Paris Agreement goals of keeping average global warming to well-below 2°C, with detailed metrics tracking progress. This would require board-level engagement at each company to set targets and integrate them into executive remuneration and long term capital planning decisions.
  5. Assess misalignment between company policies on climate change, biodiversity and human health with their policy engagement record via tools such as those provided by InfluenceMap. Following this assessment, investors should request that management take corrective action on alignment in time for COP26.

With a new US administration taking office in January 2021, large US asset managers and their asset owner clients have a unique opportunity to re-frame the narrative around corporate lobbying and to roll back the worst instances of policy capture across the global economy, starting in their home country. The recent election and its disputed results has shown what can happen when corporate policy capture undermines public policy and democracy. Investors interested in social and political stability and economic flourishing should step up and make their expectations for corporate policy alignment clear heading into this proxy season and beyond.

In the new year, we will be addressing lobbying and the capture of public policy by the financial services sector. Sign up below for all 2021 CLAP online investor roundtables.

Want to find out more about investor engagement to address corporate lobbying and influence across the financial system?

Join our upcoming Corporate Lobbying Alignment Project sector topics and online conversation dates (all running 15:00 – 16:30 GMT)

The Border Industrial Complex – private prison operators & tech companies (Thursday, 14 January 2021) 

Financial services (Thursday, 21 January 2021)

Financial regulators & policymakers (Thursday, 25 February 2021)

Big Tech (Thursday, 25 March 2021)

Final Online Dialogue & index launch (Week of 12 April 2021 – invitation only)

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