In yesterday’s article we at Preventable Surprises looked at those fund managers that voted against this year’s investor resolutions at Exxon, Chevron and Southern Company based on the historic Paris Agreement to reduce global greenhouse gas emissions. The resolutions asked the energy majors to stress test their portfolios against a scenario where the 2°C Paris goal is achieved. The resolutions gained almost 100% support at BP, Shell and Statoil, but only around 40% at Exxon, Chevron and Southern Company, including large fund managers that voted against. Our campaign – the Missing60 – has been asking why those 60% voted against the same resolutions passed at other oil majors.
The situation is far from bleak, however.
While many large investors are not judging climate change as a material, immediate risk to their portfolios, the fund managers listed below supported the disclosure resolutions at the energy majors based on their interpretation of a fiduciary duty to protect their beneficiaries. At the foot of the article, we have tallied up the main AGM votes against at Exxon, Chevron and Southern.
State Street Global Advisors was the largest Exxon shareholder to back the stress test proposal, State Street issued guidelines in the wake of the Paris accord to spell out its expectations of boards regarding how to assess climate risk. State Street makes case-by-case decisions when votingproxies but will support climate resolutions “if companies’ disclosure, practice and board governance structures were found to be inadequate or did not meet market practice,” said Rakhi Kumar, head of Corporate Governance at SSGA, when the SEC votes initially became public.
TIAA Global Asset Management: In a statement from TIAA, which manages approximately $890 billion, it noted a long history of supporting shareholder proposals that seek disclosure on the management of material environmental, social, and governance risks. It further stated: “TIAA values both voting and engagement as tools to help enhance and protect our participants’ long-term interests. We believe that December’s Paris Climate Agreement was instrumental in providing certainty on climate targets and serves as an important market signal on the risks as well as opportunities that investors face on these issues.”
RBC Global Asset Management: Judy Cotte, a Vice President at RBC and Head of its Corporate Governance & Responsible Investment division, disagreed with BlackRock’s position favouring engagement over public proxy votes. “Meaningful disclosure is often a pre-condition of an effective engagement process,” she said. “With large companies that are widely held with fewer significant shareholders, such as Exxon and Chevron, it can take longer to achieve meaningful change through engagement. In those circumstances, support for a shareholder proposal calling for additional disclosure, when warranted, can be an efficient and effective way to encourage companies to provide additional disclosure.”
RBC has approximately $370 billion (Canadian) under management. It is one of several large institutional investors—including AllianceBernstein, AXA IM, HSBC Global Asset Management and TD Asset Management—that lined up in favour of the 2°C stress test proposals, finding the related risks material and in need of increased disclosure. Unlike TIAA and State Street, these managers also supported a 2°C transition plan resolution at Southern Company that goes a step further, requiring Southern to explain how it would retool its business operations, R&D investment, remuneration and lobbying to align with the 2°C scenario put forward in Paris. The positions show that commercial fund managers and large asset owners are increasingly willing to challenge major corporations on their laggard behaviour.
Canadian Pension Plan Investment Board: With $264 billion (Canadian) under management, CPPIB is Canada’s largest pension plan. In its statement, it argued that the requested disclosure “enables investors to better understand and evaluate potential risk and return, including the impact of environmental and social factors on a company’s long-term performance. We believe companies that effectively manage risks associated with environmental and social factors are likely to achieve better long-term performance.”Florida State Board of Administration: According to its corporate governance principles, Florida SBA generally supports resolutions that address issues that could have a substantial impact on shareholder value. It supports disclosure requests “when there is a reasonable expectation that the information would help investors make better risk assessments.”
The fifth largest pension plan in the U.S. with $150 billion in assets, SBA is a passive investor in U.S. equity indexes—the largest weighting in its portfolio. It sees proxy voting as an important means of addressing risk, given its inability to exit a position, said Michael McCauley, Senior Officer, Investment Programs & Governance. SBA sees carbon-intensive companies as posing a high risk to its portfolio. “We want to see disclosure and demonstration that the company is planning” for a 2°C scenario. Unlike many in the Missing60, SBA takes an omnibus approach on ESG issues—applying its position across markets.
Click on page 3 to see the main AGM investor voters ‘against’ the climate resolutions at Exxon, Chevron and Southern.
Link to sign up for a free trial to Responsible Investor
h6. The largest voters ‘against’ the Exxon, Chevron and Southern resolutions. (List excludes: Sovereign wealth funds, asset managers not covered by SEC disclosure requirements).
All data from ProxyInsight
Exxon % shares
BNY Mellon 1.44
Geode Capital Management 0.84
Dimensional Fund Advisors 0.64
Capital Research Global Investors 0.41
American Century 0.21
Total: 17.44 % shares
Capital World 2.13
BNY Mellon 1.33
Franklin Resources 1.07
Geode Capital Management 0.83
Capital Research Global Investors 0.75
Wells Fargo & Co. 0.74
State Street 4.71
Franklin Resources 1.25
BNY Mellon 1.07
Geode Capital Management 0.8
Goldman Sachs Group 0.47
Duff & Phelps IM 0.23