AGM Season: The latest on ESG-related resolutions

Half of shareholders back Paris-aligned lending proposal at JP Morgan but bid to axe oilman from the board fails

Half of JP Morgan shareholders (49.6%) backed a proposal this week asking the world’s largest fossil fuel financier to explain how it will align its lending with the Paris Agreement.  

The US financial heavyweight has reportedly channeled more than $268bn into fossil fuels since 2016.

But, despite support for that climate resolution, a high-profile shareholder bid to oust oilman Lee Raymond from JP Morgan’s board fell flat. 

Last month, New York City Comptroller Scott Stringer initiated a ‘vote no’ campaign against the former CEO and Chair of ExxonMobil, who has been a senior board member at JP Morgan for decades, criticising the octogenarian’s lack of climate competency and pointing to his past public record as a “climate change denier”.

JP Morgan subsequently said it would appoint a new Lead Independent Director to replace Raymond, but that he would remain a director. It did not cite the campaign as the reason for its decision. 

Stringer described the bank’s decision as “a tremendous victory for shareholders and for the planet” but reiterated the need for Raymond to step down completely. His efforts drew the support of US State Treasurers and public pension giants including CalPERS and the New York State Common Retirement Fund, but the big US proxy advisors were divided, with Glass Lewis recommending a vote against his re-election because of the “growing level of shareholder concern about his presence on the board”. ISS, by contrast, recommended “cautionary support” but emphasised the need for “new independent oversight”. 

Both advisors supported the Paris alignment proposal put forward by As You Sow and another calling for an independent chair, which was supported by 41% of investors. 

“Shareholders sent the message that it is past time for Chase to catch up with its peers, implement a strategy to decarbonise and de-risk its lending portfolio, and help build a more secure future for all”, said Danielle Fugere, President of As You Sow, on the back of the vote.

The US non-profit withdrew the same proposal at Wells Fargo, Morgan Stanley, Goldman Sachs and Bank of America this year, after the banks made commitments toward measuring the footprint of their finance emissions – something that Fugere told RI last month JP Morgan was not prepared to do. 

Support for Follow This climate proposal more than doubled at Shell

The second outing of Follow This’ 2020 climate proposal saw it more than double its support again, this time at Shell. 

This week, 14% of shareholders backed the resolution, which calls on the European oil major to set and disclose Paris-aligned climate targets, covering Scope 1,2 and 3 emissions. The same proposal was supported by just 5.5% when put to the vote in 2018.

The result follows a doubling of support for the same resolution at Norwegian state-backed oil giant Equinor (formerly Statoil) last week, with 27% of non-government votes favouring the proposal, up from 12% in 2019. 

Unlike the Equinor proposal, however, the one put to Shell was opposed by both big proxy advisors in their main advice. ISS supported the proposal at Equinor, for example, but said that Shell’s recently-announced “ambition” to become net-zero by 2050 was a “significant step forward”. RI understands that ISS supported the NGO’s proposal in its sustainable advice.  

The Church of England Pensions Board, which leads on Shell as part of the investor engagement initiative Climate Action 100+ (CA100+), also opposed the Follow This resolution in acknowledgement of the company’s recent climate commitments.

Last week, however, London-based asset manager Sarasin & Partners – also a CA100+ member – said it would back the proposal at Shell and a similar one at Total next week, describing the recent net-zero commitments by European oil majors as “empty promises” without capex commitments.

Both ISS and Glass Lewis are recommending a vote against the proposal at Total.

CA100+ investor showdown with Exxon looms but proxies back management

Last week, Legal & General Investment Management, the UK’s largest asset manager, announced its intention to oppose the re-election of Exxon’s chair – a position currently held by the US oil giant’s CEO, Darren Woods – over “significant concerns” about the company’s approach to “climate change, political lobbying and board independence”. 

It followed an open letter to Exxon’s shareholders by the New York State Common Retirement Fund and the Church Commissioners urging them to “implement a strong voting stance on director election” in response to what they describe as the board’s “inadequate” response to climate change.

Both asset owners, which lead on the oil giant as part of CA100+, also revealed their intention to vote against Exxon’s entire board in the SEC filing.

CalPERS – also a CA100+ member – has now revealed its intention to vote against three directors in response to the company’s failure to disclose scope three emissions. The US’ largest public pension fund is also withholding votes from members of Exxon’s Compensation Committee for “failing to properly align executive compensation with performance”. 

Glass Lewis and ISS, however, are recommending votes in favour of all of Exxon’s directors in their main advice. ISS is also recommending a vote against a proposal calling for an independent chair, pointing to Exxon’s creation of a Lead Director position in March, which it regards as “robust”. ISS adds that there “are currently no particular concerns with the company's governance practices or its performance”. 

LGIM, CalPERS, New York State and the Church Commissioners have all announced that they will support the independent chair proposal and another on lobbying disclosure. 

Speaking on a PRI webinar last week, LGIM’s Global ESG Manager, Maria Larsson Ortino, said the coronavirus crisis underlines the importance of “core tenets of corporate governance” such as having an independent chair. Given the chance, she said she would ask board members and combined Chair-CEOs at AGMs to explain how they were able to fulfil their various responsibilities effectively during the pandemic. 

Exxon’s annual meeting takes place on 27 May. 

Staying in the US

Last week, a lobbying disclosure proposal at Ford was backed by 20% of shareholders. It was filed by the New York City Comptroller’s Office and Unitarian Universalist Association (UUA). UUA’s Special Advisor Tim Brennan told RI that the vote was “up substantially from last year” and that when you account for distortion due to the dual share class structure the proposal received support of 48%. 

Earlier in the month, 54% of shareholders voted for a resolution at US oil & gas giant Phillips 66, asking the company to report on the public health risks of expanding petrochemical operations in areas increasingly prone to climate change-induced storms, flooding and sea level rise. That proposal was filed by As You Sow.