ESG resolution round-up: Support drops for fossil fuel phase-out plans at US banks

Asset owners divided on climate proposals at US banks, as calls for fossil fuel phase-out policies see low support dwindle further this proxy season.

Investor support for proposals calling on US banks to develop fossil fuel phase-out plans has fallen even further from the low tallies seen last year, despite being less restrictive.

On Tuesday, shareholder resolutions calling on Bank of America and Citigroup to develop “time-bound” fossil fuel phase-out policies attracted just 7 percent and 10 percent support, respectively. The proposal also went to the vote at Wells Fargo, but the result has not been made public yet.  

This year’s proposals removed a requirement that phase-out plans be aligned with the International Energy Agency’s (IEA) 2050 net-zero scenario, a reframing designed to give companies more wiggle room and make the requests more palatable to investors.  

Despite this, support for the proposal at Bank of America fell 4 percentage points compared with 2022, while Citigroup saw a drop of 3 percentage points. It has yet to go to the vote at Goldman Sachs, Morgan Stanley and JPMorgan Chase.  

Bank of America and Citigroup are both ranked in the top five fossil fuel financiers according to the latest Banking on Climate Chaos report, which estimated that the world’s 60 largest banks financed fossil fuels to the tune of $673 billion in 2022. 

The IEA stated in 2021 that its net-zero scenario precludes any investment in new oil and gas. 

Disclosure demand

Notably, a less demanding resolution at Bank of America, calling for disclosure on how it intends to align its financing activities with its own 2030 sectoral emissions reduction targets, was backed by a substantial 28 percent of shareholders. 

A more prescriptive proposal calling on Bank of America to set absolute 2030 emission reduction targets for high-emitting sectors secured 12 percent support. 

The latter resolution, which will also be put to JPMorgan Chase and Goldman Sachs, was filed by the New York City and New York State comptrollers. Earlier this month, it attracted 17 percent support at Royal Bank of Canada (RBC). 

Anders Schelde, CIO at Danish fund AkademikerPension, told Responsible Investor that the lack of support for the proposals “is a very serious concern”.

Referencing pronouncements by the IEA and the UN secretary general that there is no room for new fossil fuel projects in a 1.5C scenario, he said: “Companies that fail to adhere to this simple notion and still claim to be Paris-aligned are at severe risk of greenwashing and reputational damage as civil society is increasingly losing faith in banks and their 2050 strategies.”

Jessye Waxman, senior campaign representative at US non-profit Sierra Club, which filed the fossil fuel phase-out proposal at Wells Fargo, said: “Investors sent the message that banks need to disclose transition plans for meeting their near-term targets, but it remains clear that banks’ current targets and policies are not sufficient and must be strengthened. 

“Investors must move beyond calls for disclosure only and demand companies take real steps to align their business practices with their stated climate commitments.” 

Big asset owners divided  

Earlier this month, Legal & General Investment Management (LGIM) revealed it would again support climate proposals at the US banking heavyweights. 

And Europe’s largest pension fund ABP, which earlier this year put banks on notice over their fossil fuel financing, supported all the climate proposals at Citigroup and Bank of America. 

However, Norges Bank Investment Management (NBIM), the manager of Norway’s trillion-dollar sovereign wealth fund, voted against the absolute emission reduction target proposal at Bank of America and the fossil fuel phase-out ones at Citigroup and Bank of America. The giant fund did, however, support the disclosure-based proposal at Bank of America. 

California public pension fund CalPERS and CalSTRS took opposing stances. CalPERS voted against the fossil fuel phase-out proposal at Bank of America and Citigroup, but for the absolute emission targets at Bank of America. CalSTRS voted the opposite way on the resolutions. It also opposed the disclosure proposal on fossil fuel financing alignment.  

Up next: BP  

On Thursday, BP will hold its annual general meeting, where it looks set to face a backlash from investors over its decision to roll back plans to reduce oil and gas production.    

The UK oil major’s announcement in February came less than a year after shareholders endorsed BP’s climate plan via a so-called Say on Climate vote that achieved 88 percent support.     

Last week, RI reported that UK pension pool LGPS Central plans to vote against the re-election of BP’s chair and support a climate proposal put forward by Dutch activist Follow This.  

The fund’s director of responsible investment and engagement, Patrick O’Hara, told RI: “We were disappointed with the company’s decision to scale back their plans to reduce oil and gas production.” He added that the fund would have “welcomed” an opportunity to express their views before BP made the decision.   

Echoing these concerns, fellow pension pool Brunel Pension Partnership also pre-declared that it would oppose BP’s chair. 

On Monday, UK proxy adviser PIRC further ramped up pressure, revealing that it too had recommended investors vote against the chair, as well as BP’s report and accounts, to address the firm’s “[failure] to address climate risks by setting adequate targets”. 

Last year, support for the Follow This proposal at BP, which called for Paris-consistent emissions reductions targets, fell to 15 percent from 21 percent in 2021.   

The group returned with a refined proposal for the 2023 proxy season, specifically asking BP to align its existing 2030 emission reduction targets with the goals of the Paris Climate Agreement.     

UK pension fund Universities Superannuation Scheme has said it will support the resolution, as have Dutch investors MN and PGGM. 

Lobbying proposals

Two lobbying proposals at Boeing attracted support from more than one-third of shareholders last week.

One asked for disclosure on how the aircraft maker’s lobbying activities align with the goals of the Paris Climate Agreement, attracting support of 35 percent. Another requested greater transparency around lobbying more generally and won the backing of 37 percent of shareholders.