LONDON / BOSTON (Reuters) – In the past, shareholder votes on the environment were rare and easily cast aside. Things may look different in the annual meeting season starting next month, when companies face the most investor resolutions related to climate change in years.
Those votes are likely to receive more support than in previous years from major asset managers looking for clarity about how executives plan to adapt and thrive in a low-carbon world, according to Reuters interviews with more than a dozen activist investors and fund managers.
In the United States, shareholders have filed 79 climate-related resolutions so far, compared to 72 for the full year and 67 in 2019, according to data collected by the Sustainable Investments Institute and shared with Reuters. The institute estimated the census at 90 this year.
Topics to be voted on at annual general meetings (AGMs) include calls for emission limits, pollution reports and “climate audits” that demonstrate the financial impact of climate change on their businesses.
A broad theme is to pressure companies in all sectors, from oil and transportation to food and drink, to explain how they plan to reduce their carbon footprint in the coming years, in line with the government’s commitments to reduce emissions to zero by 2050.
“Net-zero targets for 2050 without a credible plan including short-term targets is greenwashing, and shareholders should hold them to account,” said British billionaire UK hedge fund manager Chris Hohn, urging companies worldwide to bring a recurring shareholder vote on their climate plans. .
Many companies say that they already provide a lot of information about climate issues. Still, some activists say they see signs that more executives are in the mood to make deals this year.
Royal Dutch Shell said on Feb. 11 that it would become the first oil and gas company to cast such a vote, following similar announcements from Spanish airport operator Aena, British consumer goods company Unilever and US rating agency Moody’s.
While most resolutions are not binding, they often lead to changes with as much as 30% or more support, as executives try to satisfy as many investors as possible.
“The demands for more disclosure and goal setting are much tighter than in 2020,” said Daniele Vitale, Georgeson’s London-based head of governance, who advises companies on shareholder views.
COMPANIES HEAT THE WORLD
While more and more companies are setting net zero targets for 2050, in line with the targets of the 2015 Paris climate agreement, few have published interim targets. A survey here from sustainability consultancy South Pole found that only 10% of the 120 firms surveyed from various industries had done so.
“There is too much confusion and confusion about the exact journey and route that companies will take and how quickly we can actually expect movement,” said Mirza Baig, head of investment stewardship at Aviva Investors.
Data analysis from Swiss bank J Safra Sarasin, shared with Reuters, shows the magnitude of the collective challenge.
Sarasin studied the issues of the approximately 1,500 companies in the MSCI World Index, a broad proxy for listed companies worldwide. It calculated that if companies didn’t cut their emissions, they would increase global temperatures by more than 3 degrees Celsius by 2050.
That is far behind the target of the Paris agreement to limit warming to “well below” 2C, preferably 1.5C.
At the industry level, there are big differences, the study shows: if every company were to emit at the same level as, say, the energy sector, the temperature increase would be 5.8 ° C, while the materials sector – including metals and mining – is on track for 5 , 5 ° C and basic consumer goods – including food and drinks – 4.7 ° C.
The calculations are usually based on companies’ reported emission levels in 2019, the last full year analyzed, and include Scopes 1 and 2 emissions – directly caused by a company, plus the production of the electricity it purchases and uses.
‘BACKWIND ON CLIMATE’
Sectors with high CO2 emissions will likely have the most pressure from investors to clarify things.
In January, for example, ExxonMobil – long behind in the energy sector in setting climate goals – announced its Scope 3 emissions associated with the use of its products.
This prompted the California Public Employees’ Retirement System (Calpers) to withdraw a shareholder resolution requesting the information.
Calpers’ Simiso Nzima, head of corporate governance for the $ 444 billion pension fund, said he saw 2021 as a promising year for climate concerns, with a greater likelihood that other companies will also sign deals with activist investors.
“You see a tailwind in terms of climate change.”
However, Exxon has asked the U.S. Securities and Exchange Commission for permission to skip votes on four other shareholder resolutions, three of which are related to climate issues, according to the documents filed with the SEC. They cite reasons such as the company that has already implemented “substantial” reforms.
An Exxon spokesman said it had ongoing discussions with its stakeholders, which led to the release of emissions. He declined to comment on the requests to skip votes, as did the SEC, which had not made a ruling on Exxon’s requests by the end of Tuesday.
‘A CRUMB BUT A SIGN’
Given the influence of major shareholders, activists are hoping for more from BlackRock, the world’s largest investor with $ 8.7 trillion under management, which has promised a tougher approach to climate issues.
Last week, BlackRock called on boards of directors to come up with a climate plan, release emissions data and set robust short-term reduction targets or risk directors being voted out at the AGM.
It backed a resolution at Procter & Gamble’s AGM, unusually held in October, asking the company to report on efforts to eliminate deforestation in its supply chains, helping it succeed with 68% support.
“It’s a crumb, but we hope it’s a sign of things to come,” said Kyle Kempf, spokesman for resolution sponsor Green Century Capital Management in Boston.
Asked for more details on its plans for 2021, such as whether it could support Hohn’s resolutions, a BlackRock spokesperson referred to previous guidelines that it would “take a case-by-case approach in assessing each proposal on its merits.”
Europe’s largest asset manager, Amundi, said last week it would also support more resolutions.
However, Vanguard, the world’s second largest investor with $ 7.1 trillion under management, seemed less certain.
Lisa Harlow, Vanguard’s stewardship leader for Europe, the Middle East and Africa, called it “very difficult to say” whether her support for climate resolutions this year would exceed the traditional rate to support one in ten.
‘THERE WILL BE FIGHTING’
U.K. Hohn, founder of the $ 30 billion hedge fund TCI, is aiming for a regular mechanism to assess climate progress through annual shareholder votes.
In a “Say on Climate” resolution, investors ask a company for a detailed net zero point plan, including short-term targets, and put it up in an annual non-binding vote on this. If investors are not satisfied, they will be in a stronger position to justify executive voting, the plan is.
Early signs suggest the ride is gaining momentum.
Hohn has already submitted at least seven resolutions through TCI. The Children’s Investment Fund Foundation, which Hohn founded, has partnered with campaign groups and asset managers to submit more than 100 resolutions in the next two AGM seasons in the United States, Europe, Canada, Japan and Australia.
“Of course not all companies will support the Say on Climate,” Hohn told pension funds and insurance companies in November. “There will be fights, but we can win the votes.”
Additional reporting by Sonali Paul in Sydney, Francesca Landini in Milan, Clara-Laeila Laudette in Madrid and Shadia Nasralla in London; Editing by Katy Daigle and Pravin Char