Railway strike: Paid sick leave doesn’t affect investors ‘over the long term,’ ESG investor says

Trillium Asset Management Director Kate Monahan joins Yahoo Finance Live to discuss railroad investors advocating for paid sick leave for workers during their ongoing labor negotiations and Florida's decision to pull funding from BlackRock over an ESG dispute.

Video Transcript

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SEANA SMITH: All right, well, railroad shareholders at Norfolk Southern and Union Pacific filing proposals that call for an employee paid sick leave policy, after those benefits were left off recent legislation signed by President Biden last week to avoid a strike.

Here now is one of those Union Pacific shareholders behind that proposal. We want to bring in Kate Monahan, Trillium Asset Management's Director of Shareholder Advocacy. Kate, it's great to have you here. So the business case, explain to us the business case here for making more sick pay leave here available for the rail workers.

KATE MONAHAN: Yeah, thank you so much for having me. And I think there's a really clear business case. We have studies that show that paid sick leave reduces turnover, increases retention. It can help reduce hiring costs, and costs that are associated with turnover. And so there is a really clear business case.

Investors have been asking other companies, not just rail companies, to provide paid sick leave to their workers. And overall, I think also the pandemic showed us that it's not just an individual company issue, it's also a public health issue.

DAVE BRIGGS: In a recent note, November 30, Susquehanna says a 1.5% to 2% hit, if in fact, that legislation passed, that would have added those seven sick days. What's your reaction to that?

KATE MONAHAN: Yeah, I mean, I think from our perspective, we're really just focused on what companies can do themselves. I think, obviously, we believe that paid sick leave is important, and so any legislation that furthers paid sick leave, I think is good for the economy, is good for our portfolio companies.

DAVE BRIGGS: But, Kate, sorry to interrupt, but is it bad for investors? Because that's what the note is suggesting.

KATE MONAHAN: No, I mean, over the long term, no. And there's studies that back that up. I think if you're focused on the short term, if you're focused on short-term profits, then certainly, not investing in your stakeholders, not investing in your workers is probably a better bet. But over the long term, that's not the case. That's not true.

If you're disinvesting from your workforce, you'll see the effects of that later on. And I think we actually see that with the situation the rail companies are in right now, where they've cut their workforce by 30% in service of precision rail. But are now facing a labor shortage. And I think that's just kind of how the cookie crumbles over the longer term.

SEANA SMITH: Different take than what we heard from Susquehanna. Kate, what about the action of Congress stepping in? When both sides can't reach an agreement, Congress and steps in. The legislation that was passed wasn't really what many of the union workers, many of the rail workers have come out. Many of them very critical of what has played out over the last several days. Should Congress step in this case?

KATE MONAHAN: I mean, I think certainly like I said, as investors who believe in the value of paid sick leave for our companies over the long term, we would be happy to see Congress require paid sick leave. But I think ultimately, because that didn't happen, we're now trying to engage our portfolio companies to see what they can do independent of the public policy process.

DAVE BRIGGS: And in terms of a bigger picture, Kate, there is this war against ESG investing, and the face of it is probably Florida Governor Ron DeSantis, who calls it woke capitalism, stripping $2 billion from BlackRock. The Texas Governor clearly picking up on that mantle as well. What is your argument against what DeSantis and his CFO are currently saying?

KATE MONAHAN: I mean, I think ultimately for us as Trillium, Trillium is, we've been focused on ESG since we were founded in 1982. But we're also, we're not just doing ESG from an ESG perspective. It's also a values-based perspective. But at the end of the day, and we know that not all firms are like us, not all firms are values-based. But at the end of the day, ESG is just data. So it is just information that investors are taking in and using to make informed decisions.

DAVE BRIGGS: Is it intended, is it intended to maximize returns? Because that's what the Florida CFO argues it is not doing.

KATE MONAHAN: I think it's intended to maximize returns. I think it depends on who you ask, but I think ultimately, like I said, it's just, it's just data that investors are using. And we know that we're going to live in a world, a carbon-constrained world going forward. And so really, it's just investors reacting to that knowledge and looking for information that will help them invest in that world.

DAVE BRIGGS: OK, Kate Monahan, really appreciate you coming on today. Thanks so much.