Asset owners send ‘clear signal’ to managers with Follow This co-filing at Shell

Europe’s largest manager, Amundi, joins big pension funds to file ‘advisory’ climate targets proposal at UK oil major.

dial with CO2 written on it is being turned all the way down

Asset owners have sent a “clear signal” to investment managers by getting behind the climate proposal filed at Shell by Dutch activist Follow This, a UK stewardship manager has told Responsible Investor

Daniel Jarman, stewardship manager at the Pension Protection Fund (PPF), said: “If asset managers are seeing large asset owners stepping up to co-file on resolutions, that’s a clear signal of what asset owners want to see and how they want their votes to be used.” 

He added that in his experience managers “strive to have a good relationship with clients and be aligned with their philosophies where possible”.    

PPF, the UK’s £33 billion pension lifeboat fund, is one of eight large asset owners to publicly reveal that they are a co-filer of the shareholder resolution at Shell.

The proposal calls on the oil major to “align its medium-term emissions reduction targets covering the greenhouse gas (GHG) emissions of the use of its energy products (Scope 3) with the goal of the Paris Climate Agreement”. 

Four of the co-filers on the Shell proposal – PPF, Brunel Pension Partnership, NEST and Scottish Widows – are also members of the UK Asset Owner Roundtable.

In May, the group announced that it would scrutinise the voting of large asset managers in response to concerns about a perceived misalignment between their own long-term interests and how managers were voting at key annual general meetings, such as those of European oil majors. 

Last year saw record profits for the oil and gas sector. It also saw BP and Shell roll back on their climate targets.  

A study commissioned by the Asset Owner Roundtable, which was published in November, revealed a growing misalignment with managers.  

Asked if the decision to co-file the proposal was linked to the work of the roundtable, PPF’s Jarman told RI that the decision did not come directly from that project. But he said: “All of these conversations and projects have led us to agreeing on this approach and tackling the same issues.”

He added: “It’s great to see other UK pension funds stepping up to co-file. But, as we understand from recent reports, such as the ShareAction report published last week, a very low level of shareholders support shareholder resolutions, and the views of some international investment managers are not always aligned with the views of UK pensions funds.”   

In 2023, proposals from Follow This attracted the support of 17 percent, 20 percent and 30 percent of shareholders respectively at BP, Shell and Total. 

That iteration of the proposal asked firms to set Paris-aligned medium-term Scope 3 emission reduction targets, including those linked to the use of firms’ products. 

Some asset managers raised concerns at the time about the “inflexibility” of the wording, especially given that the resolution was binding at BP and Shell.  

UK investment heavyweights Legal & General Investment Management (LGIM) and Abrdn were among those to vote against all Follow This proposals in 2023. 

Shift to advisory 

The 30 percent tally at Total last year equalled the highest level of backing for a Follow This climate resolution at a European major. Unlike previous Follow This proposals, however, the one at the French oil major was “consultative” – a response to the firm’s refusal to allow a similar but binding shareholder resolution to go to a vote in 2022. 

The text of the Shell proposal this year has also been revised to stress that the filers consider it “an advisory vote”. 

Follow This founder Mark van Baal told RI that the advisory nature of the Total proposal may have driven up support, but added that he believed it was more likely the influence of the number of co-filers behind it.

Seventeen European investors, including Man Group, PGGM and MN, co-filed the consultative proposal at Total last year. 

An even more impressive 27 investors, including Europe’s largest asset manager Amundi, are co-filing this year’s proposal at Shell. 

Amundi, unlike many of its peers, voted for all five Follow This proposals in 2023.  

PPF’s Jarman told RI that the wording of the Shell proposal “gives a clear direction of travel to the Shell board without being overly prescriptive” .

We were supportive that it’s advisory, so it doesn’t force them down one path,” he added. 

The co-filing at Shell is the first action of its kind for PPF, and Jarman described it as “a big step forward for the PPF in terms of stewardship”. 

List of public co-filers on the Follow This proposal at Shell

  • Amundi  
  • AP3 
  • AP4  
  • Brunel Pension Partnerships  
  • Candriam  
  • Degroof Petercam Asset Management  
  • Edmond de Rothschild Asset Management 
  • Emmi-Vorsorgestiftung  
  • Ethos Foundation  
  • Greater Manchester Pension Fund  
  • Groupama AM  
  • London CIV  
  • Mandarine Gestion  
  • NEST  
  • Pension Protection Fund  
  • Pro BTP Finance  
  • Rathbones Group 
  • Scottish Widows