Church Commissioners to oppose entire Exxon board as investors lose patience with directors

Church Commissioners turns on Exxon directors including Engine No.1 picks; Amundi, HSBC AM, Man Group escalate at Japanese coal utility.

If the 10 percent opposition to BP’s chair was a “sizeable protest,” according to one market observer, then one can only wonder what adjective should be used to describe the 35 percent vote against Woodside’s director last month.    

But are these isolated votes or are investors losing patience with companies like never before when it comes to climate governance?  

Three announcements on Tuesday seem to suggest so.  

First, European investment heavyweights Amundi, HSBC Asset Management and Man Group signalled their intent to vote against the director responsible for climate strategy at J-Power – a response, in part, to the Japanese coal utility’s failure to respond to investor concerns.  

Then a few hours later, the Church of England Pension Board (CEPB) revealed in an op-ed in the UK’s Daily Telegraph that it would be voting against European oil major Shell’s directors and chair Andrew Mackenzie over climate. 

Finally, the Church Commissioners, which manages the Church of England’s £10 billion endowment fund ($13 billion; €12 billion), announced it would be voting against all directors at the upcoming annual meetings of ExxonMobil, Occidental Petroleum, Shell and Total, “in response to their failure to meet climate change objectives”. 

This includes the three “climate competent” directors that joined Exxon’s board in 2021 following the high-profile campaign by activist fund Engine No.1.  

CEPB loses faith in Shell 

The announcement by CEPB was particularly significant, given the fund’s recent history with Shell. 

The faith investor co-led engagement with the European oil major until May 2022 as part of Climate Action 100+ (CA100+), the multi-trillion-dollar investor engagement initiative launched in 2017. 

During its tenure, CEPB had been publicly supportive of Shell’s climate efforts. Its chief responsible investment officer, Adam Matthews, outlined in an op-ed in 2021 for Responsible Investor why the fund was backing the oil giant’s ‘Say on Climate’ plan.    

That year, CEPB also announced ahead of Shell’s annual general meeting that for the second year in a row it would not be supporting the shareholder proposal filed by Dutch climate activist Follow This, given that the company had offered a vote on its climate strategy, which was supported by 89 percent of shareholders.

But writing in the Daily Telegraph on Tuesday, Matthews said, “as we approach our July 2023 engagement deadline and the end of the first phase of Climate Action 100+ engagement, we have lost confidence in the direction of the company”.  

In 2018, the Church of England’s General Synod voted in favour of a non-binding amendment that would see its investment bodies, including CEPB, divest fossil fuel companies “not prepared to align with the goal of the Paris Agreement” by 2023.   

In addition to opposing Shell’s directors, Matthews wrote that CEPB will also be supporting Follow This’s proposal this year and will vote against Shell’s transition plan update. 

Last month, 10 percent of shareholders voted against the re-election of BP’s chair Helge Lund following the firm’s decision to roll back on its climate commitments amid record profits. Some UK funds felt that the decision was taken without consultation even though shareholders had signed off the oil major’s climate plan less than a year before.    

Referencing the recent move by BP, Matthews wrote that “the none too subtle hints from Shell being read by the market that it is likely to do something similar, signals that the lure of short-term profit maximisation is trumping the long-term sustainability of these companies and of our planet”.  

UK proxy adviser PIRC also upped the ante on Shell, recommending a vote against the company’s chair and opposition to its annual report “for failing to address climate risks by setting adequate targets”. 

Escalation at J-Power by big hitters 

Amundi, HSBC AM and Man Group’s escalation at J-Power follows the trio filing the first shareholder proposals to be put to a Japanese firm by institutional investors last year. That resolution was filed with the support of Aussie non-profit, the Australasian Centre for Corporate Responsibility (ACCR).   

One of those proposals, requesting that J-Power set a Paris-aligned strategy and emissions reduction targets, was supported by a substantial 26 percent of shareholders in June.   

The escalation this year against J-Power’s director, Hitoshi Kanno, is in part a response to the company’s failure to meaningfully respond to the 2022 votes. Kanno is responsible for J-Power’s flagship decarbonisation plan, Blue Mission 2050.  

Amundi, HSBC and ACCR have filed two proposals again this year at the utility, with one asking for Paris-aligned emission reduction targets again and another calling for disclosure of how remuneration policies incentivise progress against emissions targets.    

“Despite a number of meetings over two years, we remain disappointed by the Blue Mission strategy,” said Jason Mitchell, Man Group’s head of responsible investment research.  

“We do not have confidence that the company’s approach to the urgent challenge of decarbonisation will evolve under the current leadership, so we have decided to take voting action.”    

J-Power’s annual general meeting takes place on 28 June.  

CA100+ leads support Follow This at Shell 

Dutch investors PGGM and MN, which now lead engagement with Shell as part of CA100+, have both also pre-declared that they will support the Follow This proposal at the firm, which asks it to align its 2030 Scope 3 emissions reduction target with the Paris Climate Agreement.  

In its pre-declaration, PGGM acknowledged that Shell was a “front-runner” compared with peers but added that there is “insufficient evidence that the company’s current strategy is aligned with a 1.5C warming pathway, which requires a significant decrease in oil and gas production and increase in the supply of low-carbon solutions”.  

Follow This founder Mark van Baal thanked MN and PGGM for “their determination to achieve the Paris goals, as well as their recognition that engagement and voting are not mutually exclusive (as oil companies frequently claim), but rather, strengthen each other”.  

Last month, the same request secured 17 percent support at Shell’s rival BP. Follow This has refined its request from 2022 after support for it dropped last year. 

CA100+ member Legal & General Investment Management (LGIM) voted against Follow This’s resolution at BP last month. LGIM said that while it supports the principles of the request, the wording “imposes inflexibility on the company that is challenging to justify at the present time, and could lead to unintended consequences as we transition to a net-zero emissions economy”.    

Shell’s annual meeting takes place on 23 May.