Church of England to back Shell’s climate plan while CA100+ co-lead Robeco stays tight lipped

Round up: the latest on ESG-related resolutions

The Church of England Pension Board (CEPB) announced yesterday that it is “likely” to give its seal of approval to Shell’s new climate plan at its annual meeting next month, despite campaign groups including the Australian Centre for Corporate Responsibility and ShareAction urging the faith investor to reject it for its lack of ambition.

CEPB leads Climate Action 100+’s engagement on Shell in partnership with Dutch investment manager Robeco, but – notably – the statement of support came from CEPB alone. Previously, the pair have issued joint statements on the topic. A spokesperson for Robeco told RI that it does not disclose voting positions ahead of company meetings. 

Adam Matthews, Chief Responsible Investment Officer at CEPB, said in the release yesterday that the fund was likely to support the new plan given the “progress that Shell has made as a result of engagement” – although that support was “contingent” on shareholders being allowed to vote annually on progress. 

Shell is the first oil major to offer shareholders an advisory vote on its transition strategy, following the launch of the high profile ‘Say on Climate’ campaign by UK hedge fund manager Sir Chris Hohn and his firm The Children’s Investment Fund (TCI) late last year.

In its notice of annual meeting, which was published yesterday along with the Energy Transition Strategy to be put to the vote, Shell also urged shareholders not to support a resolution from climate activist Follow This, calling for Paris-aligned reduction targets covering all emissions (Scope 1,2 & 3). This is the second time the campaign group has filed the proposal at the oil giant.

In the text, Shell described Follow This’ proposal as “unnecessary” given that it is “now providing an advisory vote on its own resolution”.

Matthews agreed with Shell, saying: “In light of this opportunity to vote on the company’s own energy transition plan and the progress made, we do not see a need to vote in favour of the Follow This Resolution at the AGM. However, we expect to support Follow This resolutions at other companies where progress is not so obvious”.

‘Say on Climate’ votes have divided the responsible investment world. Last week, RI reported that representatives of US public pension giants CalPERS and the Office of New York City Comptroller had raised concerns that such votes could unintentionally take the heat off boards and rubber stamp inadequate climate plans.

Both CalPERS and the New York City public pension funds abstained from the advisory climate vote at Vinci last week, but the French construction firm’s strategy still passed with near unanimous approval (98.14%).

Last year, CEPB publicly announced that it would not support the Follow This proposal at Shell in response to the company’s 2050 net-zero “ambition”. Robeco, by contrast, abstained from that vote, as did Dutch investment heavyweight APG, which also supports the engagement with Shell as part of CA100+.

Since then, the credibility of such “ambitions” has been undermined, with CA100+’s own research concluding last month that they have not translated into serious net-zero strategies. 

The climate votes at Shell next month (18 May) will be an interesting and important litmus test of the level of ambition investors are setting for the biggest polluters. 

New guidance for asset owners published 

In a bid to encourage asset owners to push for better climate voting by their managers,  the UN Net-Zero Asset Owner Alliance published guidance this week. 

Among the recommendations in Diligence on Proxy Voting Approaches:A Foundation for Asset Owner Engagement of Asset Managers is that asset managers “should report their voting records in an accessible and timely manner” and “should provide specific explanations of key climate votes”. It emphasises the need for climate voting to go beyond simply voting on dedicated resolutions, and should also include addressing the role of directors and remuneration policies in managing climate risk, and tackling auditors that “have failed to play their role in ensuring the company’s accounts reflect climate risk”.

Amazon blocks proposal on pandemic worker safety 

Amazon has successfully dodged a shareholder proposal from New York City’s pension funds and Dutch manager APG, calling for disclosure on the effectiveness of measures it introduced to protect employees during the pandemic. The two investors spearheaded a campaign at the online retailer last year after fierce criticism over a perceived failure to introduce adequate social distancing rules and provide protective equipment to front-line employees. Since the pandemic was declared in March, Amazon’s shareprice has nearly doubled from $1,785 (12 March) to $3,379 (15 April 2021). 

“I think it's fair to say that Amazon has stepped up its approach on taking measures to protect its workers,” APG’s Head of Responsible Investment Americas, Anna Pot told RI. But what hasn’t been disclosed yet, and what APG wants to see, is “the outcome of the measures and initiatives that have been put in place on worker safety, what the return on investment is, so to speak", she said. 

But the US Securities and Exchange Commission (SEC) agreed with Amazon last week that that proposal fell foul of the micromanagement rule and could be excluded from the firm’s ballot. 

“The SEC ruling that Amazon can deny investors the right to vote on our proposal is a severely disappointing decision”, New York City Comptroller Scott Stringer told RI. “There is a massive disconnect between what Amazon management says it’s doing to keep workers safe and what those workers are reporting – and investors have a right to information concerning Amazon’s business practices and the success of the company’s efforts to protect its workforce”.

Private Prisons & Prison labour 

An unprecedented number of proposals on racial injustice will go to the vote this year, thanks in part to the dramatic shift at the SEC under President Biden. 

It is perhaps surprising, then, that the US regulator ruled last week that retailer TJX could exclude a proposal calling on it to report on whether it was “supporting systemic racism through undetected supply chain prison labor” on the grounds of micromanagement. Just last month, the SEC refused to allow US retailer Home Depot to exclude (on the same grounds) a proposal on tackling “systemic racism” by tightening policies around prison labour in supply chains. 

Both resolutions were filed by SRI investor Northstar Asset Management, which has engaged and filed on the topic for several years. 

Northstar’s CEO, Julie Goodridge told RI that the SEC’s decision was “surprising”, given its recent ruling at Home Depot. In 2019, 37.6% of shareholders supported Northstar’s prison labour proposal at TJX, but since then the regulator has allowed it to be excluded.

“If I were the CEO of TJX and had seen such interest from shareholders in favour of looking at prison labour, I would certainly work to take a harder look rather than spending my time and the company’s money defending their stance with the Securities and Exchange Commission,” Goodridge said. 

Staying with prisons, last week CtW Investment Group, the US investor behind the pioneering racial equity audit proposals this year, called on shareholders in private prison firm GEO Group to vote against five board members over their poor governance, particularly around human rights. “We believe the board’s composition and its failure to take human rights abuses seriously have led to GEO Group’s downward spiral,” wrote CtW’s Executive Director, Dieter Waizenegger in the letter. GEO Group’s share price is currently around $6, down from around $33 in April 2017.

ISS backs proposal on political spending at pharma giant 

Proxy advisor ISS has recommended that shareholders vote in favour of a proposal at pharmaceutical firm Pfizer, calling for an annual report on how its political donations are aligned with its “publicly stated values and policies”. ISS recommendations on two similar resolutions at retailer Home Depot, filed by the Tara Health Foundation (which also filed the resolution at Pfizer), and at JP Morgan Chase, filed by Rhia Ventures, are still pending.

AGM Results

Yesterday, a proposal calling on Australian oil & gas firm Woodside to explain how it will wind up its fossil fuel operations in a way that is consistent with the Paris Agreement was backed by around 20% of shareholders. BlackRock was not among those who backed the proposal, filed by NGO Market Forces, because it said the proposal was “overly prescriptive and unduly constraining”; but it did vote against Woodside’s longest standing director, Christopher Haynes, over climate risk disclosure. Haynes was reelected with 88% support.

Climate proposals at Canadian financial groups Bank of Montreal (BMO) and Royal Bank of Canada (RBC) also saw decent support last week. 31% of shareholders backed the greenhouse gas emission reduction target proposal at RBC – an impressive result, especially given that neither of the big proxy advisors, ISS or Glass Lewis, backed it in their advice. RBC was ranked fifth in the most recent Banking on Climate Chaos report, which estimated that the Canadian bank has pumped $160bn in fossil fuels since 2016.

Norway’s trillion dollar sovereign wealth fund, Norges Bank, and Californian pension fund CalPERS voted against the proposal at RBC, while New York City’s pension funds supported it. It was filed by US campaign group SumofUs. 

The proposal at BMO, which called for a “clear” decarbonisation plan for its lending portfolio, was supported by 18% of shareholders. That proposal was filed by California-based investor Harrington Investments.