Often, the choice is simple; we do not invest in companies that are active in nuclear power, fossil fuels, weapons, tobacco, and other damaging industries, activities or practices.
Complying with our minimum standards
In most cases, however, a thorough and ongoing assessment of companies is required to ensure that their business practices and activities do not jeopardize market adoption of sustainable solutions and align with our minimum standards. This is an ongoing process, also because our minimum standards are dynamic and may change over time, prompted by legislation, public debate, best practice standards and company behaviour.
In this case study, we look at two companies that are a good fit with two of our transition themes, but which we divested from because they no longer complied with our minimum standards.
Based in Houston, Texas, Waste Management is a major player in comprehensive waste management and environmental services, including waste collection, transferring and recycling activities. With its large network of recycling facilities, transfer stations and landfills, the company provides services to more than 21 million customers including municipalities, construction sites, healthcare facilities, commercial buildings and many others in the U.S., Canada and Puerto Rico. It also produces renewable energy through more than 130 landfill-gas-to-energy projects, which recover the natural gas generated inside landfills to generate electricity. Given its activities, the company fits our Circular Economy transition theme.
The acquisition of Advanced Waste Disposal Services, still subject to approval by the US antitrust authorities, was the main reason to divest the company. Even though the company could not provide clarity on the share of these dedicated oil and gas services in corporate revenues, they would likely result in an increase to above 5% of Waste Management’s total revenues. As this would be a breach of our minimum standards, we have sold the stock.
Insufficient privacy protection
Verizon Communications (Verizon) provides communication, information and entertainment products and services to consumers, businesses and governmental agencies. Headquartered in New York City, the company is active across the globe. Verizon completed billion‐dollar acquisitions in 2017 (Yahoo!) and in 2015 (AOL and Straight Path).
Through its core business (providing telecommunication services) Verizon contributes to Social Inclusion & Empowerment, and also through its education programme. This programme helps around six million students at under-resourced schools to acquire the skills needed for good jobs and entrepreneurship.
On the negative side, Verizon has a long history of controversies and violations of legislation related to data security, data privacy and excessive collection of personal data. While other telecommunication companies are also regularly involved in such controversies, Verizon’s involvement exceeds that of its peers. Verizon subsidiary Yahoo! has been involved in and fined for serious data breaches, and for sharing private information with US security agencies. Even if these breaches occurred before Verizon acquired Yahoo!, the company is now responsible for them.
The company does not really take a proactive stance on these issues, preferring to settle rather than to prevent. The number of privacy controversies remains excessively high and there is no evidence of substantial improvement in control of privacy protection. Regarding this as a breach of our minimum standards, we sold the stock from our portfolios.
Our analysts deeply assess companies to ensure their business practices do not jeopardize market adoption of sustainable solutions. We apply our industry-leading process, product and precautionary minimum standards to confirm alignment.