Show us the plan: Investors pressure companies to be clean on climate


LONDON / BOSTON (Reuters) – In the past, shareholder votes on the environment were rare and easy to ignore. Things could look different in the annual meeting season that begins next month, when companies will face the most investor resolutions tied to climate change in years.

FILE PHOTO: Swedish climate change activist Greta Thunberg takes part in a protest over the climate strike during the 50th annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, on January 24, 2020. REUTERS / Denis Balibouse / File Photo

Those votes are likely to garner more support than in previous years from big asset managers seeking clarity on 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, up from 72 for all of last year and 67 in 2019, according to data compiled by the Institute for Sustainable Investments and shared with Reuters. The institute estimated that the count could reach 90 this year.

Topics to be voted on at the annual general meetings (AGM) include calls for emission limits, pollution reports and “climate audits” that show the financial impact of climate change on your business.

A broad topic is to pressure corporations in all sectors, from oil and transportation to food and beverage, to detail how they plan to reduce their carbon footprints in the coming years, in line with government promises to cut emissions to zero. net by 2050.

“Net zero targets for 2050 without a credible plan that includes short-term targets is a green wash, and shareholders need to hold them accountable,” said billionaire British hedge fund manager Chris Hohn, who is pushing companies around the world for a recurring vote of shareholders climate plans.

Many companies say they already provide a lot of information on climate issues. However, some activists say they see signs that more executives are willing to negotiate this year.

Royal Dutch Shell said on February 11 that it would become the first oil and gas major to offer such a vote, following similar announcements by Spanish airport operator Aena, British consumer goods company Unilever and US rating agency Moody’s. .

While most resolutions are non-binding, they often trigger changes with support of 30% or more, as executives seek to satisfy as many investors as possible.

“The demands for increased disclosure and targeting are much more precise than in 2020,” said Daniele Vitale, head of government at London-based Georgeson, which advises corporations on shareholder views.

COMPANIES WARM THE WORLD

While more and more companies are issuing net zero targets for 2050, in line with the targets set in the 2015 Paris climate agreement, few have published intermediate targets. A study conducted here by sustainability consultancy South Pole showed that only 10% of the 120 companies surveyed, from various sectors, had done so.

“There is too much ambiguity and lack of clarity about the exact journey and route that companies are going to take, and how quickly we can expect a move,” said Mirza Baig, director of investment management at Aviva Investors.

Swiss bank J Safra Sarasin’s data analysis, shared with Reuters, shows the scale of the collective challenge.

Sarasin studied the emissions of the approximately 1,500 companies in the MSCI World Index, a broad indicator of the world’s listed companies. He calculated that if companies globally did not curb their rate of emissions, they would increase global temperatures by more than 3 degrees Celsius by 2050.

That’s well below the Paris agreement target of limiting warming to “well below” 2 ° C, preferably 1.5 ° C.

At the industry level, there are large differences, according to the study: if each company emitted at the same level as the energy sector, for example, the temperature increase would be 5.8 ° C, with the materials sector, including metals and mining, ongoing. for 5.5 ° C and consumer staples, including food and beverages, 4.7 ° C.

The calculations are mainly based on the emission levels reported by companies in 2019, the last full year analyzed, and cover Scope 1 and 2 emissions, those caused directly by a company, plus the production of the electricity it buys and uses. .

‘TAIL WIND OVER THE WEATHER’

High carbon sectors are likely to face the most investor pressure for clarity.

In January, for example, ExxonMobil, long a lagging energy industry in setting climate targets, disclosed its Scope 3 emissions, those related to the use of its products.

This prompted the California Public Employees Retirement System (Calpers) to withdraw a shareholder resolution seeking 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 other companies more likely to strike deals with activist investors as well.

“You are seeing a tailwind in terms of climate change.”

However, Exxon has requested permission from the US Securities and Exchange Commission to skip votes on four other shareholder proposals, three related to climate issues, according to documents filed with the SEC. They cite reasons such as that the company has already “substantially implemented” reforms.

An Exxon spokesperson 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 yet to rule on Exxon’s requests as of Tuesday night.

‘A CRUMB BUT A SIGN’

Given the influence of large shareholders, activists expect more from BlackRock, the world’s largest investor with $ 8.7 trillion under management, which has promised a stricter approach to climate issues.

Last week, BlackRock asked boards to come up with a climate plan, release emissions data and set robust short-term reduction targets, or risk having the directors vote against it at the AGM.

He backed a resolution at Procter & Gamble’s AGM, unusually held in October, that asked the company to report on efforts to eliminate deforestation in its supply chains, helping it pass with 68% support.

“It’s a crumb, but we hope it’s a sign of things to come” from BlackRock, said Kyle Kempf, a spokesman for the resolution sponsor Green Century Capital Management in Boston.

When asked for more details on its 2021 plans, as if it could support Hohn’s resolutions, a BlackRock spokesperson referred to previous guidance that it would “follow a case-by-case approach to assess each proposal on its merits.” .

Europe’s largest asset manager Amundi said last week that it would also support more resolutions.

However, Vanguard, the world’s second-largest investor with $ 7.1 trillion under management, seemed less confident.

Lisa Harlow, Vanguard’s managing leader for Europe, the Middle East and Africa, said it’s “really hard to say” whether her support for this year’s climate resolutions would be higher than her traditional support rate of one in ten.

‘THERE WILL BE STRUGGLES’

Britain’s Hohn, founder of the $ 30 billion hedge fund TCI, aims to establish a regular mechanism to judge climate progress through annual shareholder votes.

In a “Say on Climate” resolution, investors ask a company to provide a detailed net-zero plan, including short-term targets, and submit it to a non-binding annual vote. If investors are not satisfied, they will be in a stronger position to justify voting against the directors, according to the plan.

The first signs suggest that momentum is gaining momentum.

Hohn has already filed at least seven resolutions through TCI. The Children’s Investment Fund Foundation, which Hohn founded, is working with campaign groups and asset managers to present more than 100 resolutions over the next two AGM seasons in the United States, Europe, Canada, Japan and Australia.

“Of course, not all companies will support 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; Edited by Katy Daigle and Pravin Char

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