Increasingly concerned with the climate crisis, investors focus on lobbying, governance this AGM season

Ceres’ Tracey Cameron looks at developments this proxy season

This year, proxy season looks a bit different. The COVID-19 pandemic has driven annual general meetings at publicly held companies to go virtual, forcing investors to join remotely and providing some companies an opportunity to stifle shareholders who would otherwise voice their views in person. But, despite the change of forum and the ways some are attempting to exploit it, the focus on the climate crisis and its impact on shareholder value remains. In fact, it has only intensified. 

As investors open their laptops and sign in to these critical, virtual annual general meetings, they’ll be using their voices and their votes to bring climate action to the forefront for the sake of their portfolios.

As we enter the home stretch of this year’s annual general meetings, we’ve seen investors concerned with the impact of climate on their holdings operate from a clear position of strength. Bolstered by the work of global investor initiatives like Climate Action 100+ and the warning shot BlackRock CEO Larry Fink issued in his annual letter to CEOs, investors have secured positive action at more than 45 companies so far, including behemoths like Chipotle, Shell, JLL, Total and General Electric. On climate-related proposals that have gone to a vote, we’ve seen majorities reached at major companies like Woodside Petroleum, Ovintiv and JB Hunt. 

But several crucial votes remain and we expect to see investors – particularly those like BlackRock, which has so vocally professed concern for climate risk in its portfolios – come down on the side of climate action at some of the largest and most influential companies. 

We’re already seeing investors go a step further this year, focusing on asking companies in their portfolios to disclose their lobbying practices. Some are concerned that companies are purporting a commitment to climate action in public, only to lobby in the opposite direction behind closed doors – either directly or through their trade associations. 

Investors know that this is risky in a couple of big ways. For one, anti-climate lobbying stunts the transition to a net-zero emissions future, which investors know puts the economy and, in turn, their portfolios, at risk. Additionally, they know that being caught saying one thing in public and doing the opposite behind closed doors exposes a company to significant reputational risk. Customers don’t like to see it, and investors don’t either. 

At General Motors, shareholders will vote at its annual general meeting on a proposal from New York City Comptroller Scott Stringer that asks the company to disclose its lobbying practices. This proposal follows a year in which the Trump Administration, after intense lobbying by automakers like GM, moved to significantly weaken federal clean vehicle standards and revoke the waiver granting California (and by extension, other states) the right to set its own more stringent standards. GM intervened on behalf of the Administration in the revocation litigation, and its policy positioning has put it at regulatory, legal and reputational risk, as well as competitive risk. Its peers Ford, Volkswagen, BMW, Honda, and Volvo have all agreed to a compromise agreement with California that sets nationwide emission standards and recognises California’s authority. 

BNP Paribas has led lobbying proposals at Chevron, Delta Airlines, United Airlines, asking that companies disclose the extent to which its lobbying practices are aligned with the goals of the Paris Agreement. Climate lobbying is of particular interest to investors with holdings in airlines, whose industry must reconcile its projections to  increase emissions 300% by 2050, all while the climate commitments of companies within the sector and the countries they operate in aim for net-zero emissions on that very same timeline. 

United has pointed to its support for the International Civil Aviation Organisation agreement, which aims for “carbon neutral growth after 2020”. This support is not a climate plan, and is wholly inadequate to meet the goals of the Paris Agreement. Increased scrutiny on United’s climate lobbying is particularly timely given the recent release of a federal rule governing aircraft greenhouse gas emissions. 

Investors are also looking at governance systems and the way they relate to climate change as well, particularly in the oil & gas sector and particularly at one company: ExxonMobil. 

While BP, Eni, Repsol, Total and others have recently announced climate commitments following dialogues with investors, Exxon has remained entrenched in its refusal to engage in real dialogue around the issue, giving investors no choice but to interpret the company’s failings on climate change as a failure of governance. 

Exxon’s CEO Darren Woods currently occupies the board chair position. That board chairperson is meant to have the utmost fiduciary duty to the company’s investors, and be tasked with acting as the agent of those shareowners who do not have a seat at the table to decide strategy and policy. At Exxon, that seat has been removed from the room, leading to an unresponsive board that has insulated the company from investor voices that are trying to steer the company away from the climate risk cliff. 

We expect many members of the Ceres Investor Network and many signatories of Climate Action 100+ to support a shareholder resolution to be voted on at Exxon’s annual general meeting tomorrow that proposes separating the role of board chair and CEO, asking instead for an Independent Chairperson when the next CEO is instated. Proxy advisory services Glass Lewis and Egan Jones have both issued guidance recommending a vote in favour of the resolution at Exxon, as well as a similar resolution at Chevron. 

As investors open their laptops and sign in to these critical, virtual annual general meetings, they’ll be using their voices and their votes to bring climate action to the forefront for the sake of their portfolios. They’ll be on the lookout for leadership, integrity, and courage from boards during these uncertain times. They know that companies must navigate these turbulent waters and move beyond the pandemic, through the energy transition, and into a future in which our capital markets reflect the imperative of climate change. And they know that it’s up to them to hold these companies accountable at every turn.

Tracey Cameron is a Senior Manager of Corporate Climate Engagement at US-based non-profit Ceres, which works with institutional investors and companies on responsible investment and ESG issues.