AP7: Climate lawsuit against VW could have Europe-wide implications

The climate lawsuit being brought against German car manufacturer Volkswagen by investors could have Europe-wide implications for shareholder engagement, according to Swedish government pension fund AP7. 

On Wednesday, six European pension funds, including AP7 and the Church of England Pensions Board (CEPB), announced they had started legal proceedings against Volkswagen over the firm’s repeated refusal to table a shareholder proposal calling for greater disclosure around its climate lobbying. 

The action, which will test whether the company has the right to exclude the item from its annual general meeting next year, is believed to be the first time investors have started litigation on a climate-related matter in Europe.  

It could also “plausibly” have implications beyond Volkswagen and for European markets more broadly, according to Emma Henningsson, head of responsible ownership at AP7.  

AP7 has pushed for the right to table a shareholder proposal at Volkswagen for several years. In 2019, Responsible Investor spoke to the fund’s head of ESG, Charlotta Dawidowski Sydstrand, who said AP7 was “open” to pursuing a legal route, following a refusal by five German firms – including Volkswagen – to table climate lobbying proposals.

This year, AP7, CEPB and several other funds involved in the legal action went to Volkswagen with a proposal that had been worded with the input of specialist German lawyers, who assured them that the approach – which sought to change the company’s articles of association – was allowable. Once again, however, the auto manufacturer “completely rejected it”, Henningsson said.  

Following the rejection, CEPB announced it would oppose Volkswagen’s management and supervisory board. Henningsson told RI that AP7 also voted against the company’s whole board this year, as it has done for the last several years – mainly in response to the firm’s management of the diesel-gate scandal. 

There could also be wider consequences of Volkswagen’s refusal, Henningsson said, reporting that she had heard from other investors that companies “might be implicitly referring to the Volkswagen case” when attempting to discourage them from attempting to file shareholder proposals.  

This year, French oil major TotalEnergies refused to table a climate proposal filed by 11 large institutional investors led by Netherlands-based asset manager MN, despite previously allowing it to go to the vote in 2020.  

Henningsson stressed that there is a principle “which is bigger than just climate” at stake when it comes to an investor’s right to file a proposal. “We need to take this case to court, not just for Volkswagen, but for all other German companies,” she said.  

The case might also have implications for other jurisdictions, she told RI. “The legislation, as I understand it, in Germany is very similar to in France, where we also don’t see a healthy abundance of shareholder resolutions. So it would also plausibly have implications for the European markets.” 

Besides AP7 and CEPB, the legal action is supported by Swedish public pension funds AP2, AP3 and AP4, and Denmark’s AkademikerPension.  

The investors are represented by German law firm Hausfeld Rechtsanwälte and supported by legal charity ClientEarth. 

AP7 has been using litigation to push companies on environmental, social and governance issues for nearly 15 years. In 2019, it sued Google-owner Alphabet over what it argued was an inadequate response to allegations of widespread sexual harassment at the firm, on the basis that the consequent media headlines hurt the share price.

Climate lobbying has been a focus area for both AP7 and CEPB. In March, along with BNP Paribas Asset Management, the duo launched the Global Standard on Responsible Climate Lobbying, a 14-point framework designed to ensure companies’ lobbying and political engagement activities are in line with the goal of restricting an rise in global temperatures to 1.5C above pre-industrial levels.