In this piece:

Active Shareowner Update

Fourth Quarter 2024

I

Corporate Accountability on AI

IV

Board & Workplace Diversity

VII

Featured Events

II

Prioritizing Women’s Health

V

2025 Shareholder Resolutions

III

2024 High Emitters Engagement Update

VI

Urgent Policy Call – EU Deforestation-free Products

Enabling Global Corporate Accountability on AI

By Lauren Compere, Head of Stewardship and Engagement

In November, I had the unique opportunity to speak on a plenary panel at the 22nd Asia Pacific Association for Fiduciary Studies in Manila. During the panel discussion, “Harnessing AI For Sustainable Growth: Governance, Opportunities, and Unintended Consequences,” I shared the benefits that AI presents in collecting more real-time data assessing climate, water, and biodiversity impacts and accelerating access to education, finance, and healthcare with the need to balance potential risks such as privacy, discrimination, bias, and human rights. I highlighted the new UN Global Digital Compact, its potential to support a more inclusive digital access and inclusion environment, and the need for investors to be part of the corporate accountability ecosystem.

In October, I shared my reactions to the adoption of the UN Global Digital Compact (GDC) with Tech Policy Press. Adopted at the UN during the Summit for the Future, the Global Digital Compact establishes the first global governance framework for AI design, use, and governance for the benefit of all. It embeds human rights and international law, prioritizes online child safety, and has agreements for making data more open and accessible.

This quarter, Boston Common continued dialogue with companies—including Broadcom, SK Hynix (South Korea), and SK Telecom (South Korea)— under the WBA Ethical AI Collective Impact Coalition, which we co-lead. Our engagement aims to ensure companies assess risks and impacts across the value chain of AI development and deployment, mitigate risks through robust AI governance, human rights due diligence processes, and inclusive stakeholder engagement, and provide access to grievance and remedy mechanisms.

SK Telecom (South Korea) has advanced its approach since we first engaged in 2022. It established an AI governance framework, and in early 2024, it unveiled AI Governance Principles ‘T.H.E. AI,’ an abbreviation for ‘by Telco. for Humanity. with Ethics AI,’ which outline the characteristics, goals, and values of SK Telecom’s AI initiatives. The company continues to evolve this process, planning to integrate more human rights impact assessment into its AI approach and Code of Conduct in 2025.

We held a dialogue with Relx (UK) about how it implements AI policies and processes. While Relx has solid AI governance disclosure, overseen by its Chief Information Security Officer, we encouraged expanding disclosure on AI implementation using Salesforce as a model.

One area of increasing focus is how expanding AI infrastructure impacts technology companies’ ability to meet climate goals. It is estimated that between 51,773 MWh and 62,319 MWh were required to train Chat GPT-4’s Large Language Model (LLM). That’s 40 times Chat GPT-3 and the equivalent energy consumption of around 1,000 US homes over a 5-6-year period. With this in mind, we contacted Microsoft. The company’s Scope 1 and 2 emissions decreased by 6.3% in 2023, while its Scope 3 emissions increased by 30.9%, mainly from data center construction and the associated embodied carbon in building materials and hardware components such as semiconductors, servers, and racks. Microsoft launched a company-wide initiative to identify and develop added measures to reduce Scope 3 emissions, including 80 discrete measures with a requirement for select scale, high-volume suppliers to use 100% carbon-free electricity for Microsoft-delivered goods and services by 2030.

We will continue to examine AI’s holistic benefits while assessing its risks, especially given the energy, water, and transition minerals needed to fuel its expansion.

Prioritizing Women’s Health

By Khine Thant, ESG Analyst

This past year, we launched an initiative with pharma and medical equipment companies to prioritize women’s health across the value chain. All five companies, Astra Zeneca (UK), Hologic, Merck, Mindray (China), and Roche (Switzerland), engaged with us in substantive dialogue. Our primary objective: initiate discussion on assessing the unmet health needs of female end-patient populations and integrating a gender focus across business and product lines. We engaged each company to focus on women’s health throughout the drug development lifecycle in treatment and diagnostic tools for female-specific conditions and diseases with disproportionate and differentiated impacts on women. Click below for updates on company progress and our recommended next steps.

Roche

Roche has performed well versus peers on intentionality toward women’s health in strategy and product development outside of female-specific health conditions in areas such as oncology. We recommended Roche improve governance and oversight of women’s health to materialize its commitment.

Merck

Merck, the global marketer of the largest oncology drug, has committed to a follow-up dialogue focusing on integrating women’s health into its oncology product segment.

Mindray

Mindray has a majority revenue exposure in emerging markets, and we highlighted its opportunities to enhance partnerships and alliances to improve women’s health in lower-middle-income countries and disclose women’s health KPIs.

Hologic

Hologic, a leading diagnostics products provider, improved governance in product R&D and commercialization in female-specific health conditions. It established a product feedback system to enhance women’s experiences post-commercialization. We recommended replicating its governance and oversight practices in diagnosing female-specific health conditions across its products.

As we wrapped up this initial phase, we suggested actionable next steps and recommendations for each company. In general, we encouraged companies to integrate sex as a biological variable in product development, clinical trials, and R&D to reflect the gender diversity of the end-patient population for diseases in scope and to explore partnerships with key stakeholders such as governments and health advocacy organizations. We also advocated for disclosure of women’s health KPIs (i.e., % of revenue focused on women’s health). While we found examples of specific programs or practices for female-specific health conditions, prioritizing women’s health in areas such as cardiovascular, diabetes, and oncology remains a critical gap.

glass ball

2024 High Emitters Engagement Update

By Calvin Bader, ESG Associate

In 2024, we engaged 32 companies that registered as the highest carbon emitters firm-wide and monitored an additional five. More than 80% of companies responded—almost double the 2023 rate—demonstrating that this multi-year, customized engagement approach is building salience.

We have prioritized engaging the highest relative contributors to Greenhouse Gas (GHG) emissions across portfolios on emissions reduction while focusing specifically on climate risk and transition among Emerging Markets companies.

Of the 32 companies engaged in 2024, nine had “non-ambitious” climate targets, and ten others had none. [1] Our goal was to continue evaluating corporate progress on aligning targets with a net zero by 2050 trajectory. Each company was provided with custom recommendations that accounted for its size, industry, sector, and relative challenges in meeting or establishing climate targets.

Response Rate by NZAM Initiative

75%

Firm Level High Emitters

80%

EM High Emitters

88.8%

Non-Ambitious Targets

80%

Non Climate Targets

[1] These companies were prioritized based on the 12/31/23 baseline assessment, which concluded that 75% of holdings had committed to a Science-Based Target (SBTi) or an ambitious target (aligned with a net-zero pathway).

The following chart displays firm-level high-emitter engagement activity and monitoring data. The 13 sustainability themes were applied to each company and reflect the Boston Common Engagement Framework implemented over the past three years.

Company Highlights

A new holding in 2024, Ajinomoto reduced its Scope 1 emissions by 21.2% from 2022 to 2023. It has set SBTi-approved short-term targets to reduce Scope 1 and 2 GHG emissions by 50% by 2030 from a 2018 baseline and Scope 3 emissions by 24% for the same period. Ajinomoto has committed to net zero by 2050 and RE100 by 2050. We recommended that Ajinomoto expand its biomass usage disclosure. The company requires GHG emission data from its suppliers with high purchasing volumes. We recommended it consider setting preferential terms for suppliers with climate targets.

In 2023, Boston Common recommended that SK Hynix commit to SBTi and set more robust climate targets. The company has retained its target to keep absolute Scope 1 and 2 emissions at 2020 levels through 2030. It reduced its Scope 1 and 2 emissions by 20.5% from 2022 to 2023. While SK Hynix lacks a Scope 3 emissions target, it reduced its Scope 3 emissions by 32.1% from 2022 to 2023. The company joined the RE100 initiative and used 30% renewable energy in 2023, with a target of 33% in 2030 and 100% by 2050.

In addition to a net zero 2050 target, Veolia has SBTi-approved targets to reduce Scope 1+2 GHG emissions by 50% and Scope 3 emissions by 30% by 2032. The company is focused on Scope 4 emissions and aims to increase avoided emissions by 50% by 2030. Veolia requires 30% of its top suppliers (by spending) to sign an SBTi commitment by 2032. We expect increased disclosure on Scope 4 and progress toward climate targets in 2025.

For more information, please review Boston Common’s high-emitting portfolio company data analysis, recently updated baseline assessment, and revised NZAM commitment engagement timeline through the end of 2028.

Promoting Board and Workforce Diversity Remains an Investor Focus

By: Amy Orr, Director of US Shareholder Engagement

In the US, “diversity hushing” dominates news headlines as several companies have publicly walked back diversity commitments. Against this backdrop, Boston Common requires boards to meet reasonable gender and racial/ethnic diversity standards. Why? Because we believe that diverse representation among board and senior management allows diverse perspectives, leaving management better positioned to attract talent and meet its workforce and customer needs. In an increasingly interconnected world, companies need diverse representation to thrive.

During the 2023 proxy season, we voted against 36 companies that failed to meet our minimum board diversity standards. We directly engaged with 16 companies—a mix of US and international holdings—prioritizing those we had yet to engage or which were previously unresponsive. Here’s what we learned:

Insights from Engagements

Of the 39 companies voted against, 15 added at least one new diverse board member in the year following our vote. Eight companies now meet BCAM’s board diversity requirements. Management teams are also continuing to diversify. United Rentals, for example, now has 30% women and two racially diverse directors, and its sales and management teams are comprised of 34.7% diverse employees (up 30% since 2018).

Europe has led the way in demanding gender pay equity, as the European Commission’s Gender Equality strategy requires companies to report on gender pay gaps. Such disclosure has become an expectation of companies with operations in Europe like Netflix, which has risen to the challenge by improving transparency on pay disparity and has largely eliminated gender and racial pay gaps. Even companies with revenues concentrated outside of Europe are meeting this higher standard. For example, United States-based water utility, American Water Works, is working to reduce its gender pay gap across occupational levels after requesting and receiving a third-party pay equity audit.

Seventeen companies voted against noted levels of board and employee diversity training intended to promote diversity awareness in the workplace. Curricula range from basic anti-harassment training to more rigorous unconscious bias training. Companies continue to prioritize diversity programs from within, formed by Employee Resource Groups (ERGs) with increasingly centralized governance structures. Eversource, for example, now meets Boston Common’s board diversity expectations and recently formed its Pro-Equity Advisory Team (PEAT), which is charged with helping the company identify and address racial and environmental justice concerns in its service territories. Volvo (Sweden) created a DEI Global Think Tank, which prioritizes diversity at the group level and draws from diversity and inclusion forums in local markets intended to focus on local issues and underscore consumer and worker preferences. Examples of bottom-up and top-down training initiatives like these underscore Volvo’s commitment to implementing diversity goals.

Companies are continuing to commit to diverse and holistic recruitment tactics. Eighteen of the companies Boston Common voted against in 2023 now have diversity-focused recruitment tactics implemented in their hiring processes across all divisions. Atlas Copco (Sweden), for example, describes human-centric leadership as a key to its success and recently published a blog underscoring the importance of diverse hiring tactics in helping the company achieve its goal of a 30% female workplace by 2030 (up from 22% in 2024).

While few companies have published racial equity audits, many are soliciting independent expertise to identify ways to proactively close racial equity gaps. Five companies completed a racial equity or equity audit in recent years, and many are implementing audit findings. Morgan Stanley conducted a racial equity analysis and is putting forth more equitable and diverse investment products in its financial advisory business. Regeneron conducted an internal equity audit and continues to consider how diverse representation can inform the value chain of its pharmaceutical products – from R&D to clinical trials to enhanced product access. Snacking company, Mondelez, published the results of its racial equity audit in 2023 and is working to refine racial equity governance and improve responsible marketing practices, two of the recommendations proposed by the audit.

Summary of Votes Against the Board

We voted against 36 companies for failure to meet our minimum diversity standards. Companies contacted for direct dialogue are included in bold.

  • Agilent Technologies, Inc.
  • Alphabet, Inc.
  • American Express, Co.
  • American Water Works, Co.
  • Ameriprise Financial, Inc.
  • Amgen, Inc.
  • Carrier Global, Corp.
  • Charles Schwab, Corp.
  • CME Group Inc.
  • Costco Wholesale, Corp.
  • Danaher, Corp.
  • Emerson Electric, Co.
  • Enphase Energy, Inc.
  • Fifth Third Bancorp, Co.
  • First Solar, Inc.
  • Henry Schein, Inc.
  • International Flavors & Fragrance, Co.
  • KB Home, Co.
  • Kimco Realty, Corp.
  • LKQ Corporation
  • Morgan Stanley, Co.
  • Netflix, Inc.
  • Regeneron Pharmaceuticals, Inc.
  • Sprouts Farmers Market, Inc.
  • Steel Dynamics, Inc.
  • United Rentals, Inc
  • Weyerhaeuser, Co.

Europe:

  • Atlas Copco AB (Sweden)
  • Industrie de Nora (Italy)
  • Novartis AG (Switzerland)
  • OTP Bank (Hungary)
  • Volvo AB (Sweden)

Australia:

  • CSL Limited
  • Mirvac Group 

Rest of the World:

  • China Merchants Bank (China)
  • Voltas Limited (India)
BCAM Recommendation

While fewer companies may be as active in touting diversity programs as in years past, we expect companies to meet basic disclosure requirements and prioritize a diverse workforce that can meet the emerging expectations of consumers and workers. European disclosure standards set a high bar on gender pay gaps, and we will recommend that companies meet such global standards, especially those with European operations. In the U.S., businesses recognize that future customers and employees will demand diverse boards and management teams, and we will continue to ask companies to proactively address the wealth, pay, and opportunity gaps that dampen growth potential.

2025 Shareholder Resolutions

 Boston Common filed five shareholder proposals in the 2025 proxy season, holding dialogues with four companies and negotiating withdrawals with Costco and Emerson.

Company Topic BCAM-led or Co-filed Status
Costco Deforestation Risk Assessment Co-filed Filed/Withdrawn
Emerson Lobbying Alignment BCAM-led Filed/Withdrawn
Mondelez Nutrition Disclosure BCAM-led Filed/In Dialogue
Eli Lily Human Rights Impact Assessment Co-filed Filed/In Dialogue
Alphabet Child Online Safety BCAM-led Filed

Costco

Costco’s withdrawal agreement requested completion of the deforestation risk assessment for its private-label Kirkland Signature supply chain, with results expected in 2025.

Emerson

Emerson’s withdrawal agreement requested enhanced lobbying disclosure and additional details about aligning trade association dues with the company’s stated climate transition priorities.

Mondelez

Mondelez’s nutrition disclosure resolution requested that it meet internationally recognized nutrition reporting standards following the 2024 Access to Nutrition Index (ANTI) release and a report advocating for clearer Sector Alignment on the Use of Nutrient Profiling Models. Although investor expectations around nutrition reporting are evolving, Mondelez falls short of its peers.

2024 Shareholder Resolution Updates

Home Depot

Emissions Targets & Climate Transition Plan

After withdrawing our 2024 proposal requesting a climate transition action plan, we joined investors as part of CA100+ in requesting a clear, forward-looking climate transition plan. We advocated for more aligned incentive structures and clearer governance structures. While the company claims to have board oversight of climate targets through its Nominating and Governance Committee, we continue encouraging the company to clarify reporting lines and decision-making processes and align board accountability metrics more directly to its stated climate objectives.

TJX

Emissions Targets

We withdrew our 2023 proposal requesting science-based targets and transition planning since TJX’s Scope 3 emissions assessment was still underway. We held a dialogue in November, during which TJX underscored its work to assess and disclose Scope 3 emissions, including Scope 3 category 1 emissions, the company’s most challenging category. We did not see the disclosure we hoped for, but TJX underscored its work to comply with enhanced disclosure standards in California and Europe. We anticipate results in 2025.

Cummins

Lobbying Disclosure

Cummins released enhanced lobbying disclosure in the fourth quarter following our 2024 shareholder proposal. We will continue engaging the company to understand its policy priorities and assess the alignment of its indirect lobbying activities (through trade associations) with its stated climate targets.

EU Deforestation-free Products

Urgent Policy Call

In November, Boston Common joined 28 investors in urging the EU Council and EU Commission Representatives not to delay the implementation of the proposed European Union Regulation on Deforestation-free Products (EUDR) or add a new “no-risk country” category, which would greatly diminish its impact. On December 16th, the EU passed the EUDR with a one-year delay but did not include a “no-risk country” category.

Featured Events

PRI in Person

Due diligence: the EU CSDDD and the next generation of RI policy tools

Panelist: Lauren Compere, Head of Stewardship and Engagement

Responsible Investor USA 2024

Nature Investments in North America: Risks and Opportunities

Panelist: Amy Orr, Director of US Shareholder Engagement

2024 SFDR4AO Conference at the London Stock Exchange

Investing in Emerging Markets: Climate Change, Energy Transition and Human Talent

Panelist: Liz Su, Portfolio Manager

2024 Pacific Region Investment Conference

Harnessing AI for Sustainable Growth: Governance, Opportunities, and Unintended Consequences

Panelist: Lauren Compere, Head of Stewardship and Engagement

BizNGO 2024

Partnering with the Financial Sector to address the Triple Planetary Crisis

Panelist: Constantina Bichta, Associate Director of ESG Research

Prepare for your financial future by building a more sustainable economy today.

Published On: January 9, 2025

This piece is intended as an editorial review of a survey of risk considerations and does not constitute investment advice, a solicitation, or an offer to buy or sell any security. Past performance does not guarantee future results. All investments involve risk, including the risk of loss of principal.

Company developments described in this report occurred during the period of our engagement but should not be assumed to have resulted from Boston Common’s activities. Where we believe our engagement contributed to a development, we describe the basis for that assessment.

References to third-party research, publications, and data sources are provided for informational purposes only. Boston Common Asset Management does not warrant the accuracy or completeness of third-party information cited herein. Readers should consult original sources and qualified professional advisors before making any investment decision.