Michael Mandelos: Alright, Hello and thank you so much for joining us today. My name is Michael Mandelos, and I'm the Director of National Accounts here at Miller/Howard Investments. I’m so pleased today to be joined by one of my colleague, Nicole Lee, who is our Director of ESG Research. Nicole, how are you doing today?
Nicole Lee: Hi Mike. I’m excited to be here, thank you.
Michael Mandelos: Welcome! Happy to have you. So Nicole, at Miller/Howard we launched our first strategy back in 1991. Since then we’ve been an Environmental, Social, and Governance (or otherwise known as ESG), we’ve been an ESG-focused manager. On a daily basis, we strive to deliver Sustainable Income Opportunities® to financial advisors, and also to their clients. So, Nicole, can you briefly go through and explain what ESG means to us at Miller/Howard?
Nicole Lee: Sure Mike, I’ll be happy to. As you mentioned, we have been an ESG Manager for almost 30 years. As you can imagine, ESG practices have significantly evolved over that period of time. When we first started managing portfolios, ESG looked more like exclusionary screens just to keep certain sectors out of the portfolios. As our process evolved, it became much more important for us to actively engage with the companies that we own. We work with organizations on a wide variety of issues. We are active managers and want to be active owners as well. Our goals are to help companies with a wide variety of issues, and also to identify and mitigate risks. Over time, we have seen this as a way to help protect the sanctity of the dividend, which is important to our portfolio managers, as we try to provide and grow income for our clients.
Michael Mandelos: Thanks Nicole. That’s actually a pretty good segue to my next question. You mentioned our focus on engagement. Can you talk a little bit about our current Shareholder Advocacy Newsletter, which contains our 2019 to 2020 Engagement Report?
Nicole Lee: Absolutely! Over the course of the year, the Miller/Howard ESG Team publishes a number of value-add pieces. Annually, we produce the Shareholder Advocacy Newsletter. Those are generally our most popular pieces with financial advisors.
The Engagement Report comes out in the summer, and the focus of that is on our engagement activities for the prior year. In this report, we provide information to financial advisors about each of the four pillars of the Miller/Howard Shareholder Advocacy Program. These four pillars are: analysis, proxy voting, direct engagement, and collaboration. Through each of these efforts, we strive to create value, profit and sustainable returns for our clients and society.
Michael Mandelos: Thank you, Nicole. I think between the two of us, we could probably spend an hour talking about each one of the four pillars that you just mentioned. But in an effort to be succinct here, how about we discuss the direct engagement. After all, this is the Engagement Report. Can you talk about some of the key ESG themes that you and the team have worked on over the last year?
Nicole Lee: Sure Mike. Our team has been busy working on actually a variety of topics. For a number of the companies that we hold, we’ve been focusing on their disclosure around environmental management, which includes their policies, practices, and metrics. For some of our other holdings, we engaged with them about board gender diversity and improved governance. Finally, one of our major focuses over the last year was a joint effort with our portfolio managers where we looked at the disclosure, management, and structure of the companies’ executive compensation plans, then we partnered with those companies to improve them.
Michael Mandelos: Fantastic. That sounds like a ton of work. One of the key words you mentioned, you mentioned that you “partnered” with the companies. That stands out to me. Do you find that a lot of companies are receptive to our engagement activities and requests?
Note: Companies are categorized according to the primary engagement topic; however, we talked to many of them about multiple issues.
Nicole Lee: Actually, yes! As you’ll see in our report, there were a number of companies where we withdrew our shareholder resolution. While it may not sound like it, these are actually big wins. When we withdraw a resolution, it means that the company has been receptive to our inquiry, and that they have made a commitment to improve their practices that substantially satisfies what we’re looking for. This year, a number of companies that we own committed to provide better reporting on their lobbying and political spending activities. Another company that we engaged has agreed to publish a sustainability report.
It is important for us to partner with companies. As we encourage them to enhance their policies and procedures, and they take us up on our suggestions, we have seen a number of opportunities to increase the probability of long-term sustainable profitability and reduced risk.
Michael Mandelos: Alright, Nicole, thank you so much for briefly walking us through the Miller/Howard Shareholder Advocacy Newsletter, this one focusing on our engagement activities for the last year. I would encourage the financial advisors to visit our website where you can read the full report. You can also find a lot more information about our firm, our strategies, and our ESG Team and all other kinds of good stuff, and our activities on the website.
You can visit us at www.mhinvest.com. Should you have any questions, you can always reach out to our Sales Team. You can find them at (845) 679-9166. I would also encourage you to follow us on Twitter and LinkedIn as we're constantly providing and posting our value-add materials that come directly from the portfolio managers, and also from Nicole and her colleagues on the ESG Team.
So, Nicole, again, thanks so much for doing this today, and I look forward to speaking to you again on one of these Zoom meetings.
Nicole Lee: Of course! It’s been a pleasure. Thanks Mike.
Michael Mandelos: Alright, thank you Nicole.
