AGM Season: The latest on ESG-related resolutions – June 26th 2020

Blackrock opposes CA100+ climate lobbying proposal at US airliner but rebukes Volvo over climate risk reporting

Investment behemoth Blackrock did not support the climate lobbying proposal at Delta Air Lines last week (18 June), despite it being filed by fellow Climate Action 100+ (CA100+) member BNP Paribas Asset Management, and the US airliner being a target company of the CA100+ investor engagement initiative.

A very healthy 45.9% of shareholders, however, did support BNP’s proposal, which asked the company to report on how its lobbying activities, both direct and indirect, align with the Paris Agreement.

Blackrock, which joined CA100+ in January, the same month its CEO, Larry Fink made a slew of sustainability commitments, revealed in its latest proxy disclosure that it voted against the lobbying proposal at Delta and another on political expenditure disclosure. 

Support for the resolution, it said, was not “warranted” given assurances made to it by the company’s management.  

“In our engagement with the company prior to the 2020 annual meeting, senior management reiterated their focus on increasing disclosure on political contributions and lobbying. We anticipate that this will provide greater clarity into their lobbying and political activities, particularly as it relates to climate risks and opportunities.”

Blackrock, however, took a much stronger stance at Volvo last week, voting against four directors, including the Chair, in response to the Swedish car maker’s failure to address climate risks and concerns over its remuneration policy. 

Volvo’s Chairman, Carl-Henric Svanberg was singled out in particular for the firm’s “current lack of adequate climate-related risks disclosures”. Blackrock added that it expects “more fulsome disclosure regarding the company’s long-term adaptation strategies in line with the TCFD by next year”. 

The investment giant also voted against Volvo’s remuneration policy and raised concerns about overboarding of directors. 

In spite of its opposition, however, the directors and chairman were reelected and the company’s remuneration policy was approved at the annual meeting (18 June).

More US lobbying proposals

Last week saw another well-supported lobbying proposal at a CA100+ target company, this time at General Motors. 

The resolution, which was filed by the Office of New York City Comptroller for the second year in a row, was supported by 33% of shareholders, up slightly on last year’s 29%.

Ahead of the vote, California public pension giant CalPERS, also a CA100+ member, urged shareholders to support the “important” lobbying proposal in an SEC filing.

Last year, speaking on a RI webinar, Millicent Budhai, Director of Corporate Governance at New York City spoke of the difficulty of engaging with General Motors and its rival Ford over their harmful lobbying activities, particularly in relation to the weakening of the Corporate Average Fuel Economy (CAFE) standards in the US.

30% of shareholders supported another proposal filed by US faith investors at General Motors last week calling on it to report on the effectiveness of its human rights due diligence processes, given the potential risks in its supply chains. 

Other lobbying proposals filed by CA100+ investors that have won significant support this year include ones at: Duke Power (42.4%), ExxonMobil (37.5%), Caterpillar (34%) and United Airlines (31.4%).

Diversity and inclusion

An impressive 70% of shareholders supported a workplace diversity and inclusion proposal at US cybersecurity specialist Fortinet. The proposal, which was filed by US women-led impact investing firm, Nia Impact Capital, called on the company to report annually on its efforts around diversity and inclusion and their effectiveness. 

Paris-alignment proposals at oil majors this year highlight influence of proxy advisors

The influence of the big US proxy advisors on shareholder votes has been nicely illustrated this proxy season in the diverging levels of support for Paris-aligned climate proposals at five different oil & gas firms.

Aussie majors Woodside and Santos and their European counterparts Shell, Equinor and Total all faced similar shareholder proposals this year calling on them to set and disclose emissions reductions targets (including Scope 3) that align with the Paris Agreement.

Shareholder support for these proposals, however, varied significantly, ranging between 50.16% to 14% – despite the similarities in the nature of the businesses and the requests being made. 

The record breaking votes at Woodside (50.16%) and Santos (43%) were undoubtedly buoyed by the unprecedented support of both Glass Lewis and ISS. 

Brynn O’Brien, Executive Director at the Australasian Centre for Corporate Responsibility, the influential shareholder advocacy non-profit behind the Aussie proposals, described the Backing of the big US proxy advisors at the time as a “really significant step”.

Support for the proposals at the European oil majors also appears to have tracked the advice of the big US proxy advisors – highlighting its importance to the success of a proposal. 

Around 27% of non-government held votes supported the Paris proposal at Norwegian state-backed oil giant Equinor (formerly Statoil).

ISS, but not Glass Lewis, backed that resolution, which was filed by Dutch climate activist Follow This. In doing so ISS became the first big proxy firm to support such a proposal at a European major, helping to double the votes from last year in the process.  

Neither ISS or Glass Lewis, however, supported the same proposal in their main advice when put to Equinor’s rival Shell, resulting in support of just 14%. 

Curiously, ISS did support the resolution at Shell in the “sustainable” version of its advice.

This situation was repeated at Total where the investor backed proposal was supported by close to 17% of shareholders. 

Like at Shell, the Total proposal was opposed by the big proxy advisors in their main advice but again ISS supported it in its sustainable recommendations. 

The importance of proxy advisors’ backing in the success of a shareholder proposal was evident in frustration expressed last year by Adam Matthews, Head of Ethics and Engagement at the Church of England Pensions Board, following ISS’ and Glass Lewis’ decision not to support the climate lobbying proposal at Aussie miner BHP.