THE FRESHFIELDS REPORT
SUMMARY OF THE FRESHFIELDS REPORT FOR SYSTEM STEWARDS
The Freshfields Report is more than 500 pages long. TSC has summarized the findings that relate to system stewardship.
THE CAMBRIDGE PRINCIPLES
Including the stewardship philosophy articulated in the Cambridge Principles in an institution’s governance documents can provide a governing body with confidence that it is acting in the best interests of beneficiaries and provide clear guidance to staff and outside managers.
TSC has developed model language that can be adapted to use in an asset-management mandate to ensure that the manager is authorized to practice system stewardship.
INVESTMENT BELIEFS AND PROXY-VOTING GUIDELINES
Adoption of proxy voting guidelines along the lines set forth in this model will give staff and advisors the direction they need to act on systemic issues and ensure that trustees have accounted for the full effect of their stewardship choices.
For asset owners and managers interested in engaging directly with companies on a system-stewardship basis, TSC provides full-service assistance on shareholder resolutions. TSC fully covers the cost of this service.
Guardrails allow investors to establish limits on corporate behaviors that excessively externalize social and environmental costs. While guardrails do not replace engagement on specific issues, they can raise minimum performance expectations, providing investors and companies with confidence that financial success at a company must be built on efficiency and innovation, not externalization of social and environmental costs. To accomplish this purpose, guardrails should be universalizable, meaningful and measurable. Click here for more on the structure and cadence of a guardrail.
System stewardship involves engagement with companies that do not conform to the guardrails—not divestment, except in special circumstances. The primary implementation mechanism for companies that do not conform to a guardrail is engagement and voting against one or more directors. The ideas embodied in the Cambridge Principles suggest that investors could decline to provide new capital to such companies and engage in policy advocacy to support legal regimes that impose rules similar to the guardrails.
TSC and two Cambridge University institutions, the Center for the Study of Existential Risk and the Intellectual Forum at Jesus College, have worked with multiple experts to pilot a set of Guardrails. These are exemplary, illustrating the type of universalizable rule that could be promoted by shareholders. For example, one guardrail would prohibit the opening of new oil and gas fields (because a Paris-aligned carbon budget is completely covered by current fields). The example is not meant to suggest that shareholders should also not be advocating for the wind-down of some current production, only that the expert panel did not develop a sufficiently universalizable rule for such wind-downs.
We hope that the publication of these examples will accelerate investors to build consensus around specific limitations on corporate practices that investors can apply so that business becomes increasingly regenerative and decreasingly extractive.
For assistance using these resources, please contact us. TSC is a philanthropically funded organization and thereby covers the costs for this assistance. This information on this website does not constitute legal advice.
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