AGM Season: ESG-related latest resolutions

Encouraging signs from Blackrock? Investment behemoth opposes Exxon directors over climate risk and backs climate lobbying proposal at Chevron in one day

This week saw the world’s largest asset manager Blackrock publicly rebuke Exxon Mobil over its poor governance of climate risks, revealing that it voted against two of the US oil giant’s directors and supported a shareholder proposal calling for an independent chair – a response to what Blackrock describes as “a gap in the company’s disclosure and action with regard to several components of its climate risk management”.

On the very same day (27 May), Blackrock was also among the majority of shareholders (53%) to support the proposal at Exxon’s rival Chevron, calling on the US oil major to disclose how its lobbying aligns with the goals of the Paris Agreement. The resolution was filed by BNP Paribas Asset Management.

Blackrock’s votes have been cautiously welcomed as a sign that the investment giant, which has been widely criticised for its lack of support for climate votes, is taking some steps towards fulfilling the commitments its CEO and Chair, Larry Fink made in January in his letters to clients and companies.

But there is a risk of getting carried away, warns Eli Kasargod-Staub, Executive Director of US shareholder advocacy group Majority Action:

“While these votes are important steps towards BlackRock fulfilling its new climate commitments, they do not constitute anywhere near the scale of overhaul BlackRock must undertake to systematically address climate risk across its outsized holdings.”

Indeed, just last month, Blackrock came down on the wrong side of record-breaking climate votes at Australian oil & gas giants Santos and Woodside and more recently voted against the investor-backed climate proposal at Barclays.

Despite its commitment to increase transparency on “key high-profile votes” – as it did with Exxon – Blackrock has not disclosed whether it supported the Paris-aligned lending proposal at JP Morgan Chase, which was supported by 49.6% of shareholders last week. Nor has it revealed if it supported the re-election of oilman Lee Raymond as a Director at the US banking heavyweight, which is thought to be the world’s largest fossil fuel financier.

Even with Blackrock’s heft behind it, the independent chair proposal at Exxon lost shareholder support compared with last year – numbers were down to 32% from 40% in 2019.

This may have been influenced by the fact that proxy advisor ISS did not support the proposal this year, describing Exxon’s creation of a new Lead Director position in March as sufficiently “robust” to allay its governance concerns.

Blackrock clearly doesn’t share this view, voting against the man who occupies that role, Kenneth Frazier, CEO of US pharmaceutical firm Merck.

The other Exxon director Blackrock voted against this year was Angela Braly, former CEO of US health insurer WellPoint (now Anthem). Both were deemed by Blackrock to be responsible for the “lack of progress in driving greater action on climate risk in line with TCFD guidance, SASB recommendations, and BIS’ [Blackrock Investment Stewardship] feedback over several years”.

Despite this, and the high-profile campaign by the New York State Common Retirement Fund and the Church Commissioners, average support for Exxon’s directors was 93.6% this year – last year Exxon reported over 93% support

New York State Common Retirement Fund and the Church Commissioners, which lead on Exxon as part of investor engagement group Climate Action 100+ (CA100+), voted against Exxon’s entire board – as did Californian public pension giant CalSTRS.

The UK’s Local Authority Pension Fund Forum (LAPFF) advised its members, which represent billions in public pension money, to follow suit.

Interestingly, the Office of the New York City Comptroller Scott Stringer, who led the unsuccessful campaign to axe former Exxon CEO and Chair Lee Raymond from the board of JP Morgan over climate concerns, supported the reelection of all Exxon’s directors – though it did support the independent chair and lobbying proposal.

The lobbying resolution at Exxon, which Blackrock did not support, was supported by a healthy 37.5% of shareholders, a similar result to last year.

Staying with US oil & gas giants

Another proposal filed at Chevron, calling for disclosure on the public health risks of expanding its operations in areas increasingly prone to climate change-induced storms, flooding and sea level rise, garnered 46% support. The same resolution at Exxon was supported by 25% of shareholders.

Moving to Europe

Today, just shy of 17% of shareholders have reportedly supported the investor-led proposal at Total, calling on the French oil giant to amend its articles of association so that it must report yearly on its efforts to align with the Paris Agreement, including disclosing “appropriate targets” for the “reduction of direct or indirect greenhouse gas emissions”. The resolution was filed by 11 European investors including Actiam, Candriam and Sycomore.

Similar proposals filed by Dutch climate activist Follow This more than doubled their support this year at European oil giants Equinor (27% of non-government votes) and Shell (14%).

All three European oil majors have set new climate commitments this year, with Shell and Total announcing their 2050 net-zero “ambitions” in the last month or so.

“For the third time this month, responsible investors have sent a clear signal to an oil major,’ said Mark van Baal, Founder of Follow This.  “They expect action from management – not just empty words about 2050.”

Earlier this month, London-based asset manager Sarasin & Partners said it would back the proposals at Shell and Total, describing the recent commitments by European oil majors as “empty promises” without capex commitments.

Business Roundtable proposals live to fight another day

Less than 4% of shareholders supported a proposal at Blackrock’s own annual meeting last week (21 May), which called on the investment behemoth to outline how it intends to make good on the commitments its CEO Fink put his name to by signing the Business Roundtable’s statement on the purpose of a corporation last year.

Despite the low support, the resolution, filed by As You Sow, passed the current 3% threshold needed for resubmission next year – though the US Securities and Exchange Commission (SEC) is considering raising these thresholds, to the chagrin of investors.

Support for similar proposals at US financial heavyweights CitiGroup (6.9%), GoldmanSachs (6%) and Bank of America (9%) mean they too can return next year.

Workers’ rights 

Last week, the majority of investors (51%) in Chipotle supported a resolution asking the US fast food chain to report on its use of contracts that require employees to have claims dealt with internally rather than through the courts – so called Employment-Related Arbitration.

“Mandatory arbitration effectively helps companies conceal information, discourage employees’ claims, and allow toxic work cultures to flourish”, said New York City Comptroller, Scott Stringer, whose office filed the resolution. “This rule will bring new transparency and disclosure, arming investors with the tools to institute real accountability.”

In April, Chipotle was hit with the largest ever food safety fine of $25m by the US Department of Justice.

Private Prisons

Another big result last week (19 May) was the 40% support for the lobbying proposal at US private prison firm Geo Group. The Florida-based firm, which recently announced a five-year contract with the US Immigration and Customs Enforcement, had unsuccessfully sought to exclude the resolution, arguing to the US securities regulator that it was the “latest effort in a multi-front campaign mounted by the Proponent against GEO”.

And in South Africa

South African banking group Nedbank will become the first company in the country required to report to shareholders on its approach to managing climate-related risks after two binding shareholder resolutions proposed by the bank itself were overwhelmingly supported at its annual meeting last week (22 May). Nedbank’s board had “proactively”  put forward the proposals following engagement with South African shareholder advocacy group Just Share.