LONDON / BOSTON (Reuters) – In the past, shareholder votes on the environment were rare and easily overlooked. Things can be different in the season of annual meetings that begins next month, when companies must face the greatest number of investor resolutions linked to climate change in years.
These votes are likely to receive more support than in previous years from large 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, compared with 72 last year and 67 in 2019, according to data compiled by the Sustainable Investments Institute and shared with Reuters. The institute estimated that the count could reach 90 this year.
Topics to be voted on at annual general assemblies (AGMs) include calls for emission limits, pollution reports and “climate audits” that show the financial impact of climate change on your business.
A broad theme is to pressure companies in all sectors, from oil and transport to food and beverages, to detailing how they plan to reduce their carbon footprints in the coming years, in line with the government’s pledges to reduce emissions to net zero by 2050 .
“Zero net targets for 2050 without a reliable plan, including short-term targets, is a green wash, and shareholders must hold them accountable,” said British billionaire hedge fund manager Chris Hohn, who is lobbying companies in around the world to hold a recurring shareholder vote on their climate plans.
Many companies claim that they already provide a lot of information on climate issues. Still, 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 major oil and gas company to offer such a vote, following similar announcements by Spanish airport operator Aena, the UK consumer goods company Unilever and the rating agency. American company Moody’s.
Although most resolutions are not binding, they generally encourage change with up to 30% or more support, as executives seek to satisfy as many investors as possible.
“The demands for greater disclosure and goal setting are much more punctual than they were in 2020,” said Daniele Vitale, head of governance at Georgeson in London, who advises corporations on shareholder opinions.
COMPANIES HEAT THE WORLD
Although more and more companies are issuing net zero targets for 2050, in line with the targets set out in the 2015 Paris climate agreement, few have published provisional targets. A study by the sustainability consultancy Pólo Sul showed that only 10% of the 120 companies surveyed, from different sectors, did so.
“There is a lot of ambiguity and lack of clarity about the exact journey and the route that companies will take and how quickly we can really expect the move,” said Mirza Baig, head of investment management at Aviva Investors.
Data analysis by Swiss bank J Safra Sarasin, shared with Reuters, shows the scale of the collective challenge.
Sarasin studied the emissions of about 1,500 companies on the MSCI World Index, a broad proxy for listed companies worldwide. He calculated that if companies globally did not control their emission rates, they would increase global temperatures by more than 3 degrees Celsius by 2050.
This is well below the goal of the Paris agreement to limit warming to “well below” 2C, preferably 1.5C.
At the industry level, there are big differences, the study concluded: If all companies emitted at the same level as the energy sector, for example, the temperature rise would be 5.8 ° C, with the materials sector – including metals and mining – ongoing for 5.5C and staple foods – including food and beverages – 4.7C.
The calculations are based primarily on the levels of emissions 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 electricity it buys and uses.
‘TAILWIND IN THE CLIMATE’
High-carbon sectors are likely to face increased pressure from investors for clarity.
In January, for example, ExxonMobil – a long-time laggard in the energy sector in setting climate targets – released its Scope 3 emissions, those related to the use of its products.
This caused the California Civil Servants Retirement System (Calpers) to revoke a shareholder resolution requesting the information.
Simiso Nzima of Calpers, head of corporate governance for the $ 444 billion pension fund, said he saw 2021 as a promising year for climate issues, with more likely for other companies to also reach deals with activist investors.
“You are seeing a favorable wind in terms of climate change.”
However, Exxon has asked the United States Securities and Exchange Commission for permission to skip voting on four other shareholder proposals, three related to climate issues, according to SEC files. They cite reasons why the company already has “substantially implemented” reforms.
An Exxon spokesman said he had ongoing discussions with his stakeholders, which led to the broadcast of the broadcasts. He declined to comment on requests to skip votes, as did the SEC, which had yet to comment on Exxon’s requests on Tuesday.
‘A CRUMB MAS 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 tougher approach to climate issues.
Last week, BlackRock asked councils to draw up a climate plan, release emissions data and make robust short-term reduction targets, or risked seeing directors be rejected at AGM.
He supported a resolution at Procter & Gamble’s AGM, held in an unusual way in October, which asked the company for a report on efforts to eliminate deforestation in its supply chains, helping it with 68% support.
“It’s a crumb, but we hope it’s a sign of what’s to come” from BlackRock, said Kyle Kempf, spokesman for the resolutions sponsor Green Century Capital Management in Boston.
Asked about more details about his plans for 2021, how could Hohn’s resolutions be supported, a BlackRock spokesman referred to the earlier guidance that “he would take a case by case approach in evaluating each proposal on its merits”.
Europe’s largest asset manager, Amundi, said last week that it would also support more resolutions.
Vanguard, the world’s second largest investor with $ 7.1 trillion under management, seemed less certain, however.
Lisa Harlow, leader of the Vanguard administration for Europe, the Middle East and Africa, said it is “really hard to say” whether her support for climate resolutions this year will be greater than her traditional one-in-ten support rate.
‘THERE WILL BE FIGHTS’
Britain’s Hohn, founder of the $ 30 billion TCI hedge fund, plans to establish a regular mechanism for judging climate progress through annual shareholder votes.
In a “Tell about the climate” resolution, investors ask a company to provide a detailed zero net plan, including short-term goals, and submit it to a non-binding annual vote. If investors are not satisfied, they will be in a stronger position to justify the rejection of directors, the plan says.
The first signs suggest that the momentum is gaining momentum.
Hohn has already submitted at least seven resolutions through TCI. The Children’s Investment Fund Foundation, founded by Hohn, is working with campaign groups and asset managers to file more than 100 resolutions over the next two seasons of AGM 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; Editing by Katy Daigle and Pravin Char