With BP’s April AGM now on the horizon the time is right to look again at why we launched ‘Aiming for A’ in 2012, review progress since then, outline the process for rolling voting declarations from Tuesday 24th March through to the Shell AGM, and start to think about how our capital stewardship initiative might evolve.
As Responsible Investor readers know, climate change is a complex collective action problem. One that calls on investors to work together, alongside policy makers, companies and NGOs. The oil and gas majors we’re engaging with recognise this too. Shell reported earlier this decade that: “[Our] own scenarios, updated in early 2011, describe the profound developments expected in the world’s energy system to 2050. They call for heightened collaboration between civil society, public and private sectors to address the economic, energy and environmental challenges the world is facing”.
Of course, different sectors will play different roles, but we can enable each other to take appropriate steps. Last month BP’s CEO Bob Dudley highlighted “the importance of policymakers taking steps that lead to a global price for carbon”, adding that this “would help to unleash market forces and provide the right incentives for everyone to play their part”. The World Bank now has a Carbon Pricing Leadership Coalition, as a result of over 1,000 investors and businesses (including BP) signalling their support for carbon pricing ahead of the UN Climate Leadership Summit last September. We’re hopeful that we’ll see key multi-nationals deepening their engagement with this important initiative in this critical year.
Different types of investors also have different roles to play. As in nature, diversity is critical to our investment ecosystem. When I was building the ‘Aiming for A’ coalition in 2011/12, I purposefully limited it to UK asset owners, the fund managers (like CCLA) that they own, and specialist UK wealth managers. I felt that this group was uniquely well placed to create a ‘new normal’ for shareholder resolutions in the UK: namely ‘supportive but stretching’ shareholder resolutions that help amplify the voice of long-term investors responding to the fiduciary duties associated with climate risk. As I noted in my ‘Aiming for A’ launch article for Responsible Investor, major long-term investors in the banks felt that their voice had ultimately been drowned out by short-term market signals in the years ahead of 2007/8 financial crisis. My 2011 hypothesis was that using shareholder resolutions differently was probably part of the solution to averting the systemic risk associated with climate change.Since 2012 the founding ‘Aiming for A’ coalition members (the Local Authority Pension Fund Forum (LAPFF), the largest members of Church Investors Group (CIG), CCLA, and Rathbone Greenbank Investments) have been carefully engaging with the ten largest extractives and utilities companies listed in the UK. Alongside others, we’ve been undertaking foundational stewardship work to help bring all these companies up to a CDP performance bands of B, A- and A. These bandings cover governance, risk management and strategy, as well as operational emissions management. The CDP team has done a great job in supporting us each year with in depth analysis of each of the ten companies.
Having finally moved all the ‘Cs’ forward, we decided last September that this was the AGM season to file our first ‘supportive but stretching’ shareholder resolutions at some of the ten companies’ AGMs. We chose BP and Shell because they have the largest carbon footprints in the FTSE100 and a critical role to play in the multi-decade low carbon transition.
It took two months to write the resolutions and supporting statements. This was because we were trying to find a sweet spot where the companies could support them, a large number of asset owners would co-file them, and major shareholders would vote for them. ‘Supportive but stretching’ was a critical yardstick, and I’d like to thank both the companies and some of their major investors for their thoughtful interaction with us last autumn. The fifty institutional co-filers and forty Rathbone clients also deserve huge credit for their leadership, and coping with the practical difficulties of co-filing in the UK. We’re all very grateful to ClientEarth and ShareAction for their support in that process, and to the individual co-filers who took us well above the 100 sets of forms required.
The BP and Shell AGMs in mid-April and mid-May are the next stage in the process. This is when the amplification of the long-term investor voice takes place. To help with this, asset owners and fund managers from around the world are going to pre-declare their votes ahead of the BP and Shell AGMs. Shareholders can do this by contacting Responsible Investor, LAPFF or CIG.
There will be four declaration dates for BP and four for Shell. The declaration dates for BP follow their investor webinar next week and are 24th March, 31st March, 7th April and 14th April. The declaration dates for Shell follow their RI investor day and are 21st April, 28th April, 5th May and 12th May.
We recognise that some major institutions can’t co-file, so we wanted them to have a period when they could be recognised for their leadership in actively supporting these resolutions.
As with co-filing, declaring voting intentions is an international effort. I would like to highlight CalPERS’ leadership in this latter process – they proactively volunteered on an Investor Network on Climate Risk (INCR) update call last month to help get the US votes and declarations flowing. They will also be joining other institutional investors and co-filers at both AGMs here in Europe. Our uniting engagement document is IIGCC, INCR et al’s “Investor Expectations: Oil & Gas Company Strategy – Supporting Investor Engagement on Carbon Asset Risk”. The ‘Aiming for A’ coalition has not endorsed any other investor or NGO briefings you might receive.
After the AGMs, we’ll be reflecting on what next above and beyond our ongoing constructive engagement with the ten UK listed extractives and utilities companies we’re focussing on.So far the ‘Aiming for A’ coalition knows that we’re being joined by other UK asset owners, fund managers they own, and UK wealth managers. These include co-filers like Sarasin & Partners LLP, but probably others who have been hugely supportive of ‘Aiming for A’ over the years. In addition, a few institutions are kindly helping us think about how we might expand and evolve the initiative to cover the major extractives and utilities companies listed in continental Europe. INCR, the Shareholder Association for Research & Engagement (SHARE), and the Interfaith Center on Corporate Responsibility (ICCR) in North America are doing great work focussing on US and Canadian companies (and CIG wishes the latter well for their ‘Raising the Bar’ activities).
In summary, our primary purpose is to encourage cross-sector collaboration by amplifying the voice of long-term investors. We look forward to receiving asset owner and fund manager voting declarations over the coming weeks. You’ll be able to find the updated lists here on Responsible Investor every Tuesday from 24th March through to 12th May.
Helen Wildsmith, Head of Ethical & Responsible Investment, CCLA Investment Management.