BHP mining leader or laggard? The climate lobbying vote clash that suggests CA100+ investors don’t agree which…

Close to 30% of shareholders supported a climate lobbying resolution earlier this month at BHP calling on the Anglo-Australian miner to suspend membership in trade groups acting in opposition to the Paris climate agreement – a decent result.

Among the co-filers of the resolution were an international coalition of investors, comprised of the Church of England Pension Board (CEPB), Actiam and MP Pensions, the Danish fund. All three are members of Climate Action 100+ (CA100+), the colossal engagement initiative attempting to steer the world’s dirtiest companies – including BHP – towards Paris aligned trajectories. 

Climate lobbying (direct and indirect) by target companies is high on the CA100+ agenda.

Climate lobbying (direct and indirect) by target companies is high on the CA100+ agenda. It regards management of trade bodies’ activities as part of good governance.

One of the major innovations of CA100+, which was launched in 2017, is its selection of lead investors to spearhead engagements with companies. Usually self-nominated, they are selected based on their historic engagement, geographic proximity and capacity. In the case of BHP, the European lead investor is HSBC Asset Management, a key figure in the founding of CA100+.

Its Director of Responsible Investment, Stephanie Maier currently sits on the initiative’s Steering Committee. However, HSBC Asset Management did not back the climate lobbying resolution at BHP.

A spokesperson for HSBC described the proposal as “unduly prescriptive” – a sentiment echoed by California’s giant public pension fund, CalSTRS, when asked by RI why it too didn’t support the resolution. BHP’s other lead investor, AMP Capital, which focuses on the Australian arm of the business, did not want to say which way it voted.It’s an incongruence that has raised eyebrows. 

Brynn O’Brien, Executive Director at the Australian Centre for Corporate Responsibility (ACCR), the shareholder advocacy group that filed the resolution, described HSBC’s position as “extraordinary”.

She said: “Suggesting that an explicitly advisory resolution is ‘unduly prescriptive demonstrates a basic misunderstanding of the mechanism of advisory resolutions. 

This excuse-making must stop. It is 2019, the Australian east coast has been on fire for two weeks, and lobbying against the Paris goals is simply intolerable”. 

What signal is sent to the company when the initiative’s lead engager rejects a proposal filed by other CA100+ investors on a topic very much within the initiative’s remit? Especially when the pernicious influence of anti-climate lobbying in Australia is widely known. 

The lack of joined-up thinking seems stranger when you note that last month both HSBC and CalSTRS supported a letter convened by the Institutional Investors Group on Climate Change (IIGCC), one of the partner organisations behind CA100+, calling on the Australian extractive sector to “ensure any engagement conducted on their behalf via industry bodies is aligned with the objectives of the Paris Agreement”.

Expanding on its decision to not support the lobbying proposal, HSBC told RI: “BHP is one of only a few CA100+ companies that have made substantive progress towards investors’ expectations for oversight and transparency of lobbying, with a review process for trade association memberships, published outcomes and consequent action”. 

HSBC clearly regards BHP as a leader on lobbying; praising the review the company undertook in 2017, which ultimately led it to quit the World Coal Association in April 2018. Interestingly, that review was itself precipitated by a previous shareholder resolution filed by the ACCR.

This year’s resolution, however, argued that despite BHP’s review “material differences” between the company’s position and the advocacy of its trade bodies on climate change “remain apparent and unresolved”.

It adds that the company’s “review and ‘inside the tent engagement’ or ‘dialogue’ strategies” have proved “ineffective” and that “suspension of memberships is now the preferable course of action”. 

Edward Collins, Project Lead at non-profit group Influence Map, a data provider to CA100+, told RI that BHP’s trade associations such as the Minerals Council of Australia (MCA) haven’t reformed since the review and continue to have “very significant and concerning impacts on climate policy and politics” in Australia. The issue, he adds, “has not gone away”.

In September, concerns about the company were heightened following reports that BHP’s outgoing CEO Andrew MacKenzie expressed support for the Australian government’s controversial plans to use Kyoto carryover credits to meet Paris emissions reduction targets – a policy pushed by many of the trade groups. BHP’s incoming CEO, Mike Henry currently sits on the board of the MCA, which was found to be in the top ten globally in terms of negatively influencing climate policy by Influence Map in a recent report.

ACCR’s O’Brien described BHP as “in many ways” “the carbon lobby” in Australia, adding that “investors need to take responsibility for that”.

What to make of such opposing views on BHP within CA100+? And what are the wider implications for the initiative? 

Neither the CEPB nor Dutch investor Actiam wished to comment on the voting practices of other investors. But in a LinkedIn post from September on the proposal Adam Matthews the Church’s Director of Ethics and Engagement said: “European Asset Owners are being let down and some funds are free riding on engagement of others through CA100 whilst undermining it by not voting for climate resolutions. The upcoming votes at BHP on corporate climate lobbying will be a test case for how committed fund managers are to addressing climate change.”

Matthews has also been highly critical of the lack of support from proxy advisors for the resolution.

Could HSBC be one of funds not voting for climate resolutions identified by Matthews? Well, according to a recent report by non-profit ShareAction, the London based manager is in the top five for voting on climate resolutions. HSBC also told RI that it has met with the company 12 times this year, including leading engagements on lobbying “alongside other members of the CA100+”.
Interestingly, another investor found to be in ShareAction’s top five, which also didn’t support the BHP resolution, was Allianz Global Investors. It too is a CA100+ supporter.

Echoing HSBC, a spokesperson for the German investor said that it felt that the company had “taken a number of positive steps historically” and was still in the middle of a further review. 

Of the other top five BHP investors, Legal & General supported the resolution, while UBS and Aviva opted not to say how they voted – all are CA100+ investors. We have a situation where one set of investors, including the lead on BHP, are praising the company’s efforts while at the same time another set of CA100+ investors are co-filing a resolution seriously calling into question the efficacy of BHP’s efforts to date. 

Indeed, a spokesperson for Church of England told RI that funds with over $11trn lined up behind the proposal, many of which would be CA100+ members. 

What should we make of an initiative with such diverging opinions on what is progressive? A spokesperson for CA100+ told RI: “Every investor will take their own voting decision on different resolutions… what is key is that all are working towards a shared agenda which supports a smooth transition to a net zero economy”. 

OK, but if they are working towards a shared agenda – in the case of BHP at least – it seems to be from a very different starting point and with a conflicting optic. It must be sending a confusing message to the company about what is regarded as acceptable governance of its relationship with trade bodies.