ESG resolution round-up: Amundi and HESTA co-file on AMR at US meat giant

Heavyweights file at Tyson Foods on risks to diversified portfolios from antibiotic use in supply chains; As You Sow calls on Exxon and Chevron to undertake re-baselining exercise on emissions.

Europe’s largest asset manager Amundi and Australian super fund HESTA have co-filed a shareholder proposal at Tyson Foods calling on the US meat giant to align its business, including supply chains, with the World Health Organisation’s (WHO) guidance on antibiotic use. 

Both investors have addressed the topic previously. Last year, HESTA filed for the first time in the US, including a proposal at Hormel Foods asking the food giant to report on how its current business practices around antibiotics threaten the returns of diversified owners. 

The resolution quoted the World Bank, which found that antimicrobial resistance (AMR) could cut global GDP by 3 percent by 2030, and by almost 4 percent by 2050. It received 14 percent of non-insider votes in February 2022. Hormel, which opposed the resolution, is 47 percent owned by its namesake foundation. 

A year earlier, Amundi co-filed its first ever US shareholder proposal, also on the issue of AMR, asking fast food chain McDonald’s to improve its disclosure on the use of antibiotics in supply chains. That proposal achieved around 12 percent support. 

HESTA and Amundi collaborated on their respective proposals at Hormel and McDonalds with The Shareholder Commons and have teamed up to work with the US nonprofit again on the one at Tyson Foods.  

On Wednesday, The Shareholder Commons submitted a filing to the US Securities and Exchange Commission (SEC) urging shareholders to support the proposal. 

“When a company or industry prioritises growth and financial return, the long-run effect may be to lower global economic productivity, as well as human welfare,” it wrote. “This is often a bad trade for diversified shareholders, who rely on long-term economic productivity to buoy their portfolios.”

Given Tyson Food’s share structure, which gives the Tyson family a controlling stake, the proposal faces a challenge in attracting a high percentage of support. For instance, last year, a proposal on sustainable packaging was supported by 59 percent of independent shareholders but that equated to just 13 percent overall.    

Speaking about the proposal, Akaash Sachdeva, responsible investment manager at HESTA, tells Responsible Investor that the co-filing “is recognition that consistent industry change is needed in the use of antibiotics to raise livestock and this cannot be achieved in isolation at any one company alone”. 

He adds: “We’re pleased that our programme of filing shareholder resolutions at key companies, in collaboration with The Shareholder Commons, is gaining traction with investors.” 

Chevron and Exxon called on to re-baseline emissions 

US oil and gas giants Chevron and Exxon are being called upon by to recalculate their baseline emissions to discount reductions arising from divestment or transfer of assets, a process referred to as “re-baselining”. 

The pioneering proposal at Chevron and Exxon has been filed by As You Sow, the US-based non-profit and prolific filer of shareholder proposals.  

Danielle Fugere, president and chief counsel at As You Sow, tells RI that re-baselining is key in getting a real sense of a firm’s decarbonisation efforts. Essentially, it involves reweighting baseline emissions to avoid taking credit for reductions that come from simply ditching assets. 

“If you sell an asset that continues to be in operation, that is not an emission reduction and shouldn’t be accounted for as an emission reduction in your reporting,” says Fugere.  

She adds that adjusting a baseline on an annual basis to reflect transferred assets “is the best way to be clear around success in meeting an [emission reduction] target”. 

Exxon is seeking to exclude the proposal via the SEC’s “no action” process, the mechanism by which firms ask for the regulator’s blessing to omit a shareholder resolution by appealing to a set of rules governing the process.  

The Texas oil major, which is being asked to factor in divestitures occurring since it set its 2016 baseline, is seeking to exclude As You Sow’s proposal on a filing technicality. Chevron had not attempted to exclude it at the time of publication.  

As You Sow reports in its proposal that between 2017 and 2021, ExxonMobil “sold more assets than any other American oil and gas company except Chevron”. It noted, however, that it is “unclear” how ExxonMobil accounts for these divestitures in its emissions reporting. 

In July, RI covered some of the challenges for investors in undertaking re-baselining calculations for their portfolios, with commentators suggesting that it was too early to expect investors to have adopted the practice.  

Joy Williams, executive director of financial institution transition planning at GFANZ, said at the time: “A lot of financial institutions are still trying to figure out their first baseline, never mind going year-on-year and establishing whether there have been major shifts in the portfolio to warrant a re-baselining.”   

As You Sow’s Fugere tells RI that it is not fair to compare individual firms and investor portfolios when it comes to re-baselining.  

“Companies understand what assets are in their baseline and they understand what assets have been transferred, so it’s really an accounting issue,” she says. “We’re talking with the companies about where the difficulty is in doing this. Nothing is straightforward, but it is a very different process than when investors try to assess baselines.”   

There is also precedent. US energy giant Devon Energy, which is cited in the As You Sow proposal, reported in its 2022 sustainability report that its 2019 baseline “has been recalculated to reflect the divestiture of the Barnett Shale in 2020, divestiture of the Wind River Basin in 2021, and acquisition of Felix Energy in 2020”. 

US firms attempt novel arguments to evade racial justice audit proposals 

Racial justice audit shareholder proposals have been a success story in recent years, prompting a wave of commitments from companies and securing substantial shareholder support.  

But two firms are seeking to exclude requests calling for an independent, third-party assessment of their racial justice impacts, using novel – and, according to the proposals’ filers, bad faith – arguments.  

US cigarette manufacturer Altria has asked the SEC for permission to exclude a proposal filed by US faith investor Mercy Investment Services on the grounds that its own assessment will meet the substantial ask of the proposal. 

In its “no action” request, the company wrote: “We acknowledge that the proposal could be interpreted as requesting the use of a third party to conduct the assessment; however, it does not specifically require the use of a third party to lead the assessment. Instead, the proposal merely requires involvement by a third party.” 

It added: “We acknowledge that the press release refers to an ‘assessment,’ as opposed to an ‘audit’ as described in the proposal. Altria does not believe there is any meaningful difference in the use of the term ‘audit’ (as used in the proposal) and the use of the term ‘assessment’ (as used in the press release) in the context of the review requested by the proposal.” 

Commenting on Altria’s interpretation, Lydia Kuykendal, Mercy’s director of shareholder advocacy, tells RI: “Altria is very aware that what they are proposing does not meet the requests of the proposal. This is a blatant attempt to disguise an Altria-led and Altria-approved process as an independent audit, and shareholders should hold them to account for it.” 

Similarly, US telecoms giant AT&T is seeking to exclude a racial justice audit proposal on the grounds that one filed last year did not get sufficient support for refiling.  

That proposal, however, was an anti-ESG one filed by conservative think tank the National Centre for Public Policy Research (NCPPR). These proposals – a growing phenomenon in the US – mimic the titles of sustainability ones but use right-wing language in the supporting documentation, with the aim of getting the former excluded.

Laura Campos is director of corporate and political accountability at the Nathan Cummings Foundation, which filed this year’s proposal. She tells RI: “AT&T’s request for no-action relief makes it clear that the company recognises the divergent motivations driving the requests made by the two proposals.” 

She adds that NCPPR’s proposal received less than 4 percent support at AT&T in 2022, whereas genuine audit proposals “routinely receive more than 40 percent of the vote.” 

AT&T’s attempt to exclude is less likely to succeed given the shift at the SEC, which stated last year that it would take more account of the underlying objective behind a proposal when determining substantial duplication.   

Finally, this week the Financial Times reported that US proxy giants ISS and Glass Lewis are the latest firms to fall within the crosshairs of the anti-ESG campaign by Republican state attorneys general over their recommendations. 

The 21 attorneys general warned the duo that the “evidence regarding climate change advocacy and goals suggests potential violations of your contractual obligations and legal duties”.