Hi, I'm Luan Jenifer and I'm the Chief Operating Officer here at Miller/Howard Investments.
So we've had a record year: Our ESG team has elicited commitments for improvement from many of the companies we've contacted and from most of the companies with which we filed shareholder resolutions.
So what are our goals when we engage a company? Risk mitigation and promotion of shareholder value. It's really that simple. Each engagement represents an issue we've identified as material to the company, and a sign of either opportunity or risk—and sometimes both. We want to see the company takes actions to adequately address—or sometimes just begin to address—these concerns. Accordingly, the details of each engagement vary according to topic and company.
For Miller/Howard, the fact that each ESG engagement we're involved in can be boiled down to governance illustrates the true relevance our work has to protecting shareholder value and to helping the company remain a good long-term investment option for our clients. So one way to get at the governance aspect of each issue is to see it in terms of the business case—in other words, how the issue at hand could impact the company's bottom line.
Here's an example: gender diversity on the board and in top leadership appears to be primarily a social issue, given the context in which diversity is considered and evaluated. However, we see it as a critical governance question, speaking to the effectiveness of management's competitive talent acquisition, retention, and promotion.
A company that does not transparently and effectively address gender diversity in talent management can be exposed to a number of risks and missed opportunities, like:
- Falling behind competitors by recruiting from a smaller and potentially less competitive pool.
- Increasing HR costs through higher turnover rates.
- Losing key employees and high performers.
- Being exposed to litigation and reputational damage if gender discrimination is proven to be systemic.
- And just missing out on the benefits of diverse perspectives on teams.
How a company chooses to systematically address these factors, it speaks directly to the quality of management and its ability to mitigate risks and remain competitive. When we identify outliers—those companies whose leadership or policy profiles are substantially dissimilar to peer companies who are presumably competing for the same talent—we ask for additional reassurance that the company isn't suffering from either accidental or intentional biases in its recruitment and promotion processes.
This was just one example. We engaged companies on methane management and mitigation, on transparency around environmental management and impacts, and other topics.
So the report itself is due for release in June. You can find a copy on our website or by emailing esg@mhinvest.com.
