Big asset owners on either side of the Atlantic have ramped up their scrutiny of banks’ fossil fuel financing this week.
Three of New York City’s five public pension funds, led by the City’s comptroller Brad Lander, have filed shareholder proposals calling on four North American banking giants to set absolute 2030 emissions reduction targets.
Shareholder proposals at Goldman Sachs, JPMorgan Chase and Royal Bank of Canada state that targets should cover lending and underwriting for the “oil and gas and power generation sectors” and be aligned with “a science-based net-zero pathway”.
Another resolution at Bank of America, which was co-filed with the $233 billion New York State Common Retirement Fund, calls on the lender to do the same but for the energy sector.
It is the first time that New York City has filed a climate proposal at a bank.
Divestment warning
The announcement of the proposals came just one day after it was reported that Europe’s largest pension fund warned that banks which continue to finance new fossil-fuel projects face potential divestment.
Dominique Dijkhuis, head of investments at Dutch fund ABP, told Bloomberg that the €500 billion fund was in the process of setting performance indicators that financial firms must meet to avoid being divested in the next three years.
All four banks targeted by the New York funds are members of the Net-Zero Banking Alliance. None, however, has set absolute emission reduction targets, only intensity ones – which do not capture whether “total financed GHG emissions have decreased in the real world”, New York City wrote.
Peer banks such as Wells Fargo, HSBC, Société Generale, BBVA and Deutsche Bank have set absolute targets for the oil and gas sector, and Citigroup has set one for the energy sector.
“Shareholders applauded these banks when they set net-zero goals – but it can’t be all talk,” said Lander. “We expect them to take the steps needed now to reduce emissions on the timeline to which they have committed. Absent a concrete plan to reduce absolute emissions in the real world in the near term, any net-zero plan rings hollow.”
Credible transition plans
Bank of America, Goldman Sachs and JP Morgan Chase, along with Morgan Stanley and Wells Fargo, have also been hit with a proposal filed by US non-profit As You Sow, asking them to disclose credible transition plans for achieving near-term net zero emission reduction goals.
“As assertations of greenwashing become more commonplace, it is increasingly important that banks articulate to investors how they will make good on their net-zero commitments,” said Danielle Fugere, president of As You Sow.
Investor focus on banks has been ramping up in recent years. Last year, for example, Credit Suisse was hit with Switzerland’s first climate resolution, filed by Amundi and a raft of pension funds in the country in collaboration with campaign group ShareAction.
That proposal called on the Swiss lender to include climate disclosure and strategy in its articles of association – a move already made by Barclays and HSBC in response to shareholder pressure.
But investor support has so far been thin on the ground with regard to proposals calling on North American banking giants to align their fossil fuel financing with the IEA’s net-zero scenario last year.
None of the resolutions at Morgan Stanley, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Bank of America achieved more than 12 percent support, despite the cohort including the top three fossil fuel financiers, according to the most recent Banking on Climate Chaos report.
APG, the Dutch investment manager owned by ABP, was among the minority of shareholders that did support the climate proposal at the North American financial giants.
Proxy firms oppose AMR proposal
Influential proxy advisers ISS and Glass Lewis have recommended that shareholders oppose the proposal filed by Amundi and HESTA at Tyson Foods, which calls on the US meat giant to align its business, including supply chains, with the World Health Organisation’s (WHO) guidance on antibiotic use.
The proposal, like a similar one filed last year at US food giant Hormel Foods, focuses on the threat to the returns of diversified owners through the company’s use of antibiotics. The World Bank has estimated that antimicrobial resistance (AMR) could cut global GDP by as much as 3 percent by 2030, and by almost 4 percent by 2050.
In its advice, however, Glass Lewis said the new proposal’s proponents had not provided “a sufficiently compelling argument as to how adoption of [it] would benefit the company’s shareholders”.
The proxy firm continued: “[The proposal] appears to assume that all of [Tyson Food’s] shareholders are broadly diversified and provides the argument that such shareholders should sacrifice the company’s financial returns for broader economic and social goals that may or may not be realised elsewhere in their portfolios.”
Neither ISS nor Glass Lewis supported the proposal at Hormel Foods last year. That proposal received 14 percent of non-insider votes in February 2022. Hormel, which opposed the resolution, is 47 percent owned by its namesake foundation.
Responding to Glass Lewis’s recommendation on Tyson Foods, Sara Murphy, chief strategy officer at The Shareholder Commons, the US nonprofit which coordinated the proposals at the US firms with the investors, told Responsible Investor: “Confronted with a choice to be approximately right or precisely wrong, it has chosen the latter.”
She continued: “Any marginal returns the company might deliver to shareholders by cost-cutting measures that cram animals into disease-promoting conditions – a regime only possible in tandem with antimicrobials overuse – pales in comparison to the stark economic damage associated with the erosion of a vital pillar of modern medicine: effective antibiotics.
“In choosing to provide advice as though their clients hold only one stock, Glass Lewis makes a far more implausible assumption than broad diversification would be.”
Moving to Canada…
This week also saw one of the first climate votes of 2023 at Canadian supermarket Metro, which attracted decent support of 29 percent.
The proposal, which asked the company to set and meet 1.5C aligned near- and long-term emissions reduction targets covering its full value chain, was filed by Canada’s responsible investment association, SHARE.
Californian public pension giants CalSTRS and CalPERS, alongside the New York City funds and big Dutch funds APG and PGGM, supported the resolution. But it was opposed by Norges Bank Investment Management (NBIM), the manager of Norway’s trillion-dollar sovereign wealth fund.
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