Engagement:
AKI dialogues with companies in the real and financial economy in Germany
- The AKI has decided to thematically complement the engagement activities in the area of climate with important aspects of biodiversity in 2023. Both topics are closely related with regard to the integrity of creation and should not be considered independently of each other. The previous expert group on climate, which prepares, conducts and follows up on the business talks, has accordingly renamed itself the "expert group on environment". The topic of biodiversity is to be taken up in a first step with a focus on how companies deal with water and with reference to SDG 6. The project is explained in more detail in the exposé of the engagement project (opens in a new tab). For the engagement questions on climate, the very helpful tools of the project "Pathways to Paris"(opens in a new tab) will be used: cross-sectoral as well as sector-specific key performance indicators (KPI) and the guidance frameworks for the addressed sectors: road freight transport, automotive, commercial real estate and housing. "Pathways to Paris" aims at the cooperation between the real and financial economy and helps representatives of both sectors to comprehensively understand the transformation requirements for achieving greenhouse gas neutrality, to accept them as guiding principles for action and to translate them into concretely operationalisable investment and action plans.
The engagement with the major financial service providers Allianz Global Investors, Commerzbank, DekaBank, Deutsche Bank, DZ Bank, HSBC, PIMCO, Union Investment, Vontobel and Warburg grows out of the everyday life of church financial officers and bundles their activities in AKI. It is the implementation of the demand in the EKD guidelines for a regular dialogue with credit institutions and asset managers on ethical-sustainable concerns (p. 17 f.). The objectives of the engagement are sustainability policies for lending and investing and their implementation. The engagement is practised in the form of personal discussions between the AKI Finance Expert Group and representatives of the companies from the board, the investor relations, institutional clients and sustainability departments. As a rule, confidentiality is agreed for the discussions.
Typical questions are, for example:
What is the link between variable remuneration and sustainability targets (KPIs)?
How are the Data on “Principal Adverse (sustainability) Impact (PAI) for the EU transparency regulation (SFDR) calculated? Are these calculations externally audited?
How do the institutions assess global risks?
Is lending into nuclear weapons production only excluded in countries that have not signed the Nuclear Non-Proliferation Treaty?
Are the institutions members of Net Zero Banking Alliance and/or UNPRI?
How are the UNGPs implemented in the area of human rights?
What information can be provided on gender board diversity and gender pay gap?
Procedure:
The theme of the shareholder engagement had been deliberately chosen because of its distinctly church profile. For AKI, such a profile results from a combination of theological-ethical considerations ("a worker is worth his/her wages") and the developmental significance. Living wages are central to improving the lives of millions of women textile workers in developing and emerging countries. They are equally crucial for ensuring that the jobs created in the textile sector actually contribute to development in these countries. At the same time, it was clear from the outset that there is great resistance among textile companies to address this issue seriously because they fear that implementation will lead to higher prices and lower profit margins.
This specificity of the topic played a major role in all the interviews. Two companies remained evasive and defensive until the end of the second interview. Others took up the issue and made the first steps towards implementation. Here, AKI's involvement helped to give the issue of living wages a higher profile in corporate social responsibility. Two companies first agreed to calculate how high their purchase price would have to be in order to pay a living wage, but then did not submit this data. The most significant milestone was the decision of one company to join the alliance "ACT", which deals exclusively with the issue of living wages, because of AKI's commitment.
While the "living wage" shareholder engagement involved very intensive and in-depth discussions with individual companies, the AKI's climate shareholder engagement is more broadly targeted. It is about decarbonisation, which is currently a priority ethical-sustainability goal of church action, because without it, values such as human rights, justice, democracy and security are threatened, numerous habitats and biodiversity are destroyed and on the level of intergenerational justice, the basis of life is taken away from future generations. The Carbon disclosure projects (CDP) ratings are an internationally recognised climate rating method for companies. Companies can take action to improve their CDP rating and by this contribute to decarbonisation. For the engagement project, companies are selected that are listed in German indices and do not receive an A, (A-) or B rating from CDP. The aim is to motivate these companies to be advised by CDP and to take necessary measures to achieve at least a B rating. In addition, as of 2018, companies are to implement the recommendations of the international Task Force on Climate-related Financial Disclosure (TCFD) founded by Michael Bloomberg, as required by CDP. This project has already been practised in the form by the British AKI partner group, the Church Investors Group, with British companies since 2013. The effectiveness of the approach has been studied and confirmed by the University of Edinburgh. With this project, the AKI fills the partnership with the CIG with life and participates for the first time in an international engagement project of church investors.
2021 was the fifth year in which AKI addressed listed companies, mainly from the DAX and MDAX, with questions on climate responsibility. Fifteen company dialogues were conducted, bringing the total number of dialogues in the climate engagement project to 64. More on the procedure and the results here in the Climate Engagement Report 2021(opens in a new tab).
Church institutional investors from the two major denominations had joined forces in 2019-2021 for a time limited engagement project on the topic of "Ecological and human rights risks in the value chain of the automotive industry using the example of lithium, platinum and rubber". In addition to the church investors, "Brot für die Welt" (platinum(opens in a new tab), lithium(opens in a new tab)) and the Südwind Institute (natural rubber(opens in a new tab)) were involved. The aim of this engagement project was to address, in a first step, the three manufacturers Daimler, BMW and VW and, in a second step, the suppliers Continental and BASF on their respective responsibility to comply with human rights and environmental standards along their supply chains. In view of the change towards more electromobility, supply chain transparency was also demanded from the companies for so-called conflict minerals and the perspective of the people affected in countries, which in most cases are to be classified as high-risk countries, was clarified in the dialogues.
AKI has published an overview of the 44 engagement dialogues(opens in a new tab) conducted in 2021 and 2022 mainly on the topics of human rights risks, climate strategies and their implementation, and sustainability of financial service providers. An engagement report was also published for 2020.