Blowin’ in the Wind

IMG_4193Believe it or not, Brown-Forman Corporation doesn’t spend all its time thinking up ways to make and sell booze.  It can’t.  As a publicly traded company, it has another – very pressing – concern: pleasing its shareholders.

Historically, pleasing shareholders only really meant generating profits and, for some companies, paying dividends.  But over the last few decades, many shareholders have begun demanding more than just economic benefit from their investments.  They have also begun demanding that the companies in which they invest be good corporate citizens – or otherwise contribute to social good in some fashion.

This kind of shareholder activism can be a good thing.  For example, pressure by shareholder activists helped to bring about change in South Africa – ending the oppressive regime of apartheid.  And lately more and more shareholders (and shareholders of larger and more notable stature) have been pushing for corporations to be similar forces for social good.

Three weeks ago, I suspect we saw the pace of this movement increase significantly, when Larry Fink – CEO of investment management firm BlackRock – sent his annual letter to CEOs of U.S. companies.  BlackRock is the world’s largest asset management business, currently overseeing somewhere in the neighborhood of $1.7 trillion in funds.  For the record, that is somewhere in the neighborhood of the combined gross domestic product of Venezuela, Chile, Peru, Ecuador, Bolivia, Uruguay, Paraguay, Suriname and Guyana (in other words – all of South America except Brazil, Argentina and Colombia).  BlackRock is – in simplistic terms – kind of a big deal.

So when the BlackRock CEO speaks, people listen.  And three weeks ago he spent most of his letter to CEOs telling them that corporations need to be forces for good – telling them that they need to focus on questions like:

“How are we managing our impact on the environment?”

This too, is a big deal.

So it won’t be much of a surprise if we begin to see public companies (i.e., companies in which asset managers like BlackRock own or otherwise control significant stakes) begin to examine their own behaviors and – just maybe – change them.

Two days ago, Brown-Forman made an announcement that confirms that they’ve been doing just that.  Although I don’t chalk it up to the specifics of the BlackRock letter, the friendly folks who make Jack Daniels announced that they’ve entered into a power purchase agreement – touted as the first in the context of a large US spirits company – which will significantly offset their carbon footprint.

Specifically, BF as agreed to purchase 30 megawatts of electricity annually from the Solomon Forks Wind Project in Kansas.  Previously, BF had adopted a series of environmental goals – including a target of a 15% reduction in its greenhouse gas emissions by 2023.  According to the Company’s statement, this power purchase agreement will allow it to meet that target.

Note that this doesn’t mean that your next bottle of Woodford Reserve will have been distilled using electricity generated by winds blowing across Kansas.  The specific energy generated by the wind farm will be sold into the market – but by agreeing to purchase 30 megawatts annually, Brown-Forman is helping to support renewable energy while offsetting its own carbon footprint.

I’ll drink to that.


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