Influential US proxy advisers ISS and Glass Lewis are divided on the merits of Woodside Petroleum’s climate plan, which goes to the vote next Thursday.
Glass Lewis is recommending that shareholders reject the Aussie oil and gas giant’s Say on Climate vote, whereas ISS – historically the more progressive of the two on climate – is backing it.
On 3 May, 37 percent of shareholders voted against the climate plan put forward by Woodside’s rival Santos, a result believed to be the largest opposition to a Say on Climate vote to date.
In its advice, Glass Lewis describes Woodside’s plan as lacking “substance and specificity” and highlights the oil major’s “apparent significant reliance on carbon offsets”.
“We are concerned that an overreliance on offsets could result in companies not making operational adjustments that would lower their environmental impact, instead obtaining emissions reduction targets via offsets alone,” it wrote.
ISS, however, gave the plan its “qualified” support, while “noting that concerns exist”. It described the oil giant’s climate plan as “comprehensive”, adding that it “includes a detailed strategy to manage the carbon transition and reinforces the company’s aspiration to reduce Scope 1 and 2 emissions and to be net zero by 2050 or sooner”.
The qualification for its support is based in part on the absence of Scope 3 targets in Woodside’s plan and the lack of a set timeframe for the submission of a plan to investors that addresses identified shortcomings.
The vote at Woodside is not the first time that the proxy firms have disagreed on an Aussie firm’s climate plan. The pair were also split on the credibility of miner BHP Group’s in October, with Glass Lewis opposing and ISS supporting.
Are investors shying away from more progressive climate proposals this year?
On Tuesday, a proposal at ConocoPhillips calling on the US upstream oil and gas giant to set Paris-aligned emission reduction goals was backed by 39 percent of shareholders. The tally is the highest support achieved by climate activist group Follow This for a proposal referencing the Paris Climate Agreement.
It is, however, more than 20 percentage points below the level of support achieved by a proposal put to the company last year by Follow This, which less demandingly asked for emissions reductions more broadly. That proposal was also put to Chevron last year and achieved an impressive 60 percent of support.
Since then, the US Securities and Exchange Commission (SEC) has put out new guidance, paving the way for more progressive shareholder proposals on ESG issues generally, and those calling for science-based climate targets more specifically, to be put to companies.
But this week, investment behemoth BlackRock published a memo warning it would oppose more climate proposals this year, arguing that they have become “more prescriptive or constraining on companies and may not promote long-term shareholder value”.
Following the shift at the SEC, BlackRock claimed it had seen “a marked increase in environmental and social shareholder proposals of varying quality coming to a vote”. It said its “early assessment is that many of the proposals coming to a vote are more prescriptive and constraining on management than those on which we voted in the past year”.
This year has seen a jump of around 20 percent in the number of ESG resolutions being filed, with more than 500 put forward. Moreover, of those proposals challenged by companies through the SEC’s ‘no action’ process, only 15 percent have been successful – a drop of 34 percentage points on last year.
Do other investors share BlackRock’s concerns? Well, on Friday, just 16 percent of investors backed a Paris-aligned emissions targets proposal filed by Follow This at US oil major Occidental Petroleum.
This proxy season has also seen climate proposals at US banking heavyweights Citi, Bank of America, Goldman Sachs and Wells Fargo – calling on them to align their fossil fuel financing policies with achieving net-zero emissions by 2050 – garner support of just over 10 percent.
By contrast, on average, climate-related proposals achieved 55 percent support last proxy season.
Countering this potential trend, however, 70 percent of investors in Costco supported a proposal in January calling on the US retail giant to set science-based targets to reduce its greenhouse gas emissions.
And more than 40 percent of shareholders in Valero supported a proposal calling for Paris-aligned emission reductions targets at the US oil firm’s annual meeting on 28 April – a decent tally buoyed by the backing of influential proxy adviser Glass Lewis.
Heidi Welsh, founding executive director of US non-profit the Sustainable Investments Institute, told Responsible Investor it was “a bit too soon for any definitive analysis” on whether support for climate proposals is tailing off this year because of more progressive asks being put to companies.
Support for Paris targets drops at BP this year
On Thursday, 15 percent of investors supported the Follow This proposal at UK-based oil major BP that called for Paris-consistent climate targets – a fall of six percentage points from last year. BlackRock was among the supporters of the proposal in 2021 but has not disclosed its voting this year.
“Investors’ short-termism, fuelled by the current windfall profits of BP, might have prevailed over the medium-term risk of value destruction caused by the climate crisis,” said Mark van Baal, founder of Follow This, after the annual meeting.
The vast majority of investors, however, did support the oil major’s Say on Climate vote, to the tune of 89 percent, which was a similar tally to that of its rival Shell last May.
Royal London Asset Management (RLAM) pre-disclosed its intention to abstain on BP’s plan, identifying “gaps” such as the oil major’s reliance on divestment to achieve emission reductions. Simonetta Spavieri, the London-based manager’s senior engagement analyst, said RLAM “strongly” believes in “a ‘close not sell’ approach”.
CalPERS also abstained, continuing its longstanding approach to Say on Climate votes. The giant Californian public pension fund, however, voted against the Follow This proposal again this year.
Norges Bank Investment Management, manager of Norway’s trillion-dollar sovereign wealth fund, supported BP’s plan and voted down the proposal from Follow This. Californian pension fund CalSTRS voted the same way.
The Office of the New York City Comptroller, Brad Lander, which oversees the city’s five pension pots, supported both BP’s plan and the Follow This proposal.
Last Wednesday, 28 percent of shareholders in US delivery firm UPS supported a proposal on setting emissions reduction goals and slightly more (29 percent) supported another proposal calling for greater disclosure of the company’s lobbying activities.
Another proposal on water risk at Kraft Heinz was supported by just 6 percent of investors on 5 May. The proposal asked the US food giant to disclose how it is identifying risks associated with “growing pressures on water supply quality and quantity posed by climate change”.
UK proxy adviser PIRC yesterday published a tax briefing, setting out the firm’s expectations for companies and outlining voting recommendations that can be adopted by asset owners and managers wanting to actively engage companies on the issue.
Publication of the report follows PIRC’s success in getting a shareholder resolution on tax transparency onto the ballot of online giant Amazon along with co-filers the Greater Manchester Pension Fund and the Oblate International Pastoral (OIP) Investment Trust.
“With economic hardship and larger government deficits, companies will come under increasing pressure to disclose and justify their tax policies,” said Katie Hepworth, PIRC’s responsible tax lead. “Shareholders have a vital role in holding these companies to account, in order to ensure that they contribute their fair share and realise the value of their holdings.”