Chris Hohn’s climate win at airport infra firm Aena is a game changer in government/investor activism in Spain and internationally

RI looks at how the activist hedge fund broke the mould of engagement with the Spanish government as ‘partner’.

Spain is an unusual jurisdiction in which to make climate-related stewardship experiments.

Compared to its Anglo–Saxon peers in corporate governance/climate terms, Spain can feel like a sleepy ole town; it could be Villar del Río, the fictional location of 1950s Spanish cinema masterpiece Bienvenido, Mister Marshall!

In the cult comedy, local bosses get a tip-off that a US delegation might make a stopover in the town. Villagers are told to organise a parade in an attempt to impress the American officials and access some of the post-WWII Marshall Plan funds. Despite their travails, Mr. Marshall never shows up. 

A reversed modern re-enactment might have just taken place in real life, featuring British billionaire and activist investor Sir Chris Hohn.

The Children’s Investment fund (TCI), Hohn’s hedge fund, has achieved something unprecedented in Spain, that could be also exported to other jurisdictions as a blueprint for climate engagement.

Hohn built a 3.86% stake in Aena, Spain’s airport infrastructure manager, since it IPO’d in 2015. He sits on the board and is the largest shareholder after the Spanish government which holds 51% of shares via a public entity called Enaire.

“Our resolution is compliant with the Paris Agreement, that Spain is endorsing. We are partners of the Spanish government” – Jonathan Amouyal, TCI

For about a year, TCI has been pushing a vigorous climate engagement at Aena that goes beyond asking for enhanced carbon disclosures. It seeks from Aena a leadership role in advocating with regulators and politicians for the necessary changes to decarbonise the aviation sector. 

Right until a week before last week’s AGM (October 29), Aena was reluctant to back Hohn’s proposals. TCI wanted to make Aena’s 2021 Climate Action Plan more ambitious and arrange an annual AGM item on successive climate plans from 2022 – amending the articles of association accordingly. 

In a letter dated July 2020, Hohn shared his concerns with Teresa Ribera, Spain’s Minister for the Ecological Transition and Demographic Challenge.

Hohn sought Ribera’s support, warning that Aena’s climate commitments were “vague” and lacked detail. He complained that its climate targets were “too long term to be meaningful” and that the company’s plan would fail to align with the Paris Agreement and the Spanish Government’s Declaration of Environmental Emergency.

“Aena, as a state owned company, should be a market leader in the fight against climate change,” Hohn wrote. 

Asked about Minister Ribera’s reaction to the letter, a Spanish government spokesperson had not replied at the time of writing. 

On the same question, Jonathan Amouyal, Partner at TCI Advisory Services LLP said: “We have had regular contacts with all stakeholders. Our resolution is compliant with the Paris Agreement that Spain is endorsing. We are partners of the Spanish government.”

Just hours before Aena’s AGM last week, Ribera pulled out of making a keynote speech at Spainsif’s annual event. 

However, a ministry official, Valvanera Ulargui, Director General of the Climate Change Office, told the conference that markets would not be able to make “the green revolution” by themselves.

Discussing the Spanish Climate Change Bill, Ulargui said that new alliances between the public and the private sectors were needed to provide “certainty” for investors.

In the event, Aena’s AGM was uneventful. TCI’s resolutions were rubber stamped following last week’s board shift to recommending shareholder support. The Chairman and CEO, Maurici Lucena, presented the resolutions and praised Hohn’s role in raising the company’s climate ambitions.  

TCI’s engagement goals include achieving A Grade CDP disclosures, for which “you really need to be at the forefront of your industry” according to Carole Ferguson, Head of Investor research at CDP.

Ferguson describes TCI’s shareholder proposals as well thought out: “The approach that has been taken is very specific, detailed, setting up what the expectation is as a shareholder and what they are looking for in terms of a decarbonisation strategy.”

Ferguson says the proposals ask for quite a high bar but “that’s something companies need to be thinking about, particularly the airline sector”. She highlights also the merits of TCI’s strategy about turning companies like Aena into enablers of decarbonisation in the aviation industry.

Proxy advisors Glass Lewis and ISS drafted their voting recommendations before Aena’s board changed their views on TCI’s shareholder proposals. All were supportive of Hohn’s challenge to management. 

Likewise, Corporance, the Iberian partner of the ECGS network of European proxy firms, recommended voting for the proposals. Its CEO and Founder, Juan Prieto, notes that if Aena’s board had not changed its advice, it would have been a test for domestic institutional investors, who tend to rely on and vote with management. 

Prieto says they are still “waking up” to a domestic stewardship market that is not mature yet, although the recent transposition of the EU Shareholders Right Directive II will change that. 

Prieto welcomes Hohn’s successful and unprecedented move and hopes it can be the first of many more meaningful engagements.

Aena is not the only company engaged by TCI, similar climate action has been requested from other holdings in its portfolio, from Airbus to Microsoft or French airport operator Vinci.

It is worth noting that Aena is the majority shareholder of London Luton Airport in the UK, with 51% of the share capital. In addition, Hohn is also a significant shareholder at Spanish construction firm Ferrovial, which owns 25% of Heathrow Airport. Ferrovial is also in the climate target list of TCI, although instead of the government, it is controlled by its founders, the Del Pino y Calvo-Sotelo family.

Asked whether the same resolution could be filed at other companies in Spain and beyond, TCI’s Amouyal declined to comment but said: 

“It's fair to assume that other companies that haven’t done it yet, should. A company not doing it or taking it seriously, has risks embedded, which can cause great financial losses for shareholders.”