LONDON / BOSTON (Reuters) – In the past, shareholder votes on the environment were low and easily sidelined. Things could look different in the annual meeting season starting next month, when companies will have to deal with more investment-related resolutions related to climate change in recent years.
These votes are likely to gain more support than in previous years from major asset managers seeking clarity on how executives plan to adapt and thrive in a low-carbon world, according to Reuters interviews in more than one dozen activist investors and fund managers.
In the United States, shareholders have so far filed 79 climate-related resolutions, compared to 72 last year and 67 in 2019, according to data collected by the Sustainable Investments Institute and shared with Reuters. The institute estimates the count could reach 90 this year.
Topics to be voted on at the annual general meetings (AGMs) include calls for emission limits, pollution reports and “climate audits” that show the financial impact of climate change on their companies.
A broad issue is pressuring companies 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 reduce emissions to zero by 2050.
“Net zero targets for 2050 without a credible plan that includes short-term targets is green and shareholders must hold them accountable,” said British billionaire hedge fund manager Chris Hohn, who pushes companies around the world to repeatedly vote its shareholders 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 have a state of agreement this year.
Royal Dutch Shell said on 11 February that it would become the first major oil and gas company to offer this vote, following similar announcements by Spanish operator Aena, consumer goods company Unilever and the company. American rating agency Moody’s.
While most resolutions are not binding, they often stimulate change even with 30% or more support, as executives seek to satisfy as many investors as possible.
“Demands to increase outreach and targeting are much more timely than in 2020,” said Daniele Vitale, the London-based head of government of Georgeson, who advises companies on shareholders ’views. .
COMPANIES WARM THE WORLD
While more and more companies are issuing net targets for 2050, in line with the targets set in the 2015 Paris climate agreement, few have published provisional targets. A study 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 in the exact route and trajectory that companies will take and how quickly we can expect a move,” said Mirza Baig, head of investment custody 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 nearly 1,500 companies from the MSCI World Index, a broad proxy for listed companies around the world. It is estimated that if companies around the world did not curb their emissions rate, global temperatures would rise 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, according to the study: if all companies emit at the same level as the energy sector, for example, the temperature rise would be 5.8C, with the materials sector ( including metals and mining) for 5.5C commodities and consumers, including food and beverages, for 4.7C.
The calculations are mostly based on the emission levels reported by companies in 2019, the last year analyzed, and cover emissions of scope 1 and 2, those caused directly by a company, plus the production of electricity it buys and uses.
“TAILWIND AL CLIMA”
High-carbon sectors are likely to face pressure from investors more clearly.
In January, for example, ExxonMobil, an energy industry that had long lagged behind in setting climate targets, unveiled its 3-scope emissions, those related to the use of its products.
This prompted the California Public Employees Retirement System (Calpers) to withdraw a resolution from shareholders seeking the information.
Simpers Nzima of Calpers, head of corporate governance at the $ 444 billion pension fund, said he saw 2021 as a promising year for climate concerns, with other companies more likely to reach agreements with activist investors.
“You see a tail wind in terms of climate change.”
However, Exxon has asked permission from the U.S. Securities and Exchange Commission to skip votes on four other shareholder proposals, three related to climate issues, according to statements filed with the SEC. They cite reasons such as that the company has implemented “substantially” reforms.
An Exxon spokesman said he had ongoing talks with his stakeholders, which led to the disclosure of the broadcasts. He declined to comment on requests to skip votes, as did the SEC, which had not yet ruled on Exxon’s requests by the end of Tuesday.
“A PERUT CRUMB A SIGN”
Given the influence of large shareholders, activists hope to reap more profits from BlackRock, the world’s largest investor with $ 8.7 trillion management, which has promised a tougher approach to climate issues.
Last week, BlackRock asked boards to work out a climate plan, post emissions data, and make robust short-term reduction targets, or risk seeing directors reject the AGA.
He supported a resolution at Procter & Gamble’s AGM, unusually held in October, calling on the company to report on efforts to eliminate deforestation in its supply chains, helping it approve it with 68% support.
“It’s a spring, but hopefully it’s a sign of things to come,” said BlackRock’s Kyle Kempf, a spokesman for sponsorship resolution Green Century Capital Management in Boston.
When asked for more details about his plans for 2021, as if he could support Hohn’s resolutions, a BlackRock spokesman referred to a prior guidance that “would follow a case-by-case approach to evaluating each proposal according to the 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 managed, seemed less secure.
Lisa Harlow, leader of Vanguard’s stewardship in Europe, the Middle East and Africa, said it was “really hard to say” whether her support for this year’s climate resolutions would be superior to her traditional pace of supporting a of every ten.
‘THERE WILL BE FIGHTS’
Britain’s Hohn, founder of the $ 30 billion TCI hedge fund, aims to establish a regular mechanism for judging climate progress through annual shareholder votes.
In a “Tell About the Climate” resolution, investors are asking a company to provide a detailed zero net plan, including short-term goals, and to submit it to a non-binding annual vote. If investors are not satisfied, they will be in a stronger position to justify the vote of directors, according to the plan.
Early signs suggest that the unit is gaining momentum.
Hohn has already filed at least seven resolutions through TCI. The Children’s Investment Foundation, founded by Hohn, works 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 reports 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